FX.co ★ RBI Proposes Overhaul of Credit Risk Framework for Banks

The Reserve Bank of India (RBI) announced plans on Tuesday to revise how banks determine risk weightings for loans and implement the Expected Credit Loss (ECL) framework. This initiative is part of the RBI's efforts to align domestic banking regulations with international standards. Among the proposed changes, the central bank aims to modify capital requirements, or risk weightings, across various loan categories. Notable adjustments involve differentiated risk weights for corporate loans, loans to micro, small, and medium enterprises (MSMEs), and real estate exposures. Additionally, the RBI proposed classifying "transactors"—credit card users who regularly pay off their balances promptly—under the regulatory retail segment.