EconomyBanking
RBI meets bank chiefs today on new loan-loss rules as SBI puts the hit at ₹19,500 crore
Lenders are expected to press for more time before the expected credit loss framework takes effect on April 1, 2027. The Reserve Bank has so far kept the date.
Key points
- The Reserve Bank is due to meet bank CEOs on November 12 to review readiness for the new provisioning rules.
- SBI estimates a one-time, post-tax impact of ₹19,500 crore, or 40 to 50 basis points of CET1 capital.
- The framework starts on April 1, 2027, with the capital hit spread over four years.
The Reserve Bank of India is due to meet bank chief executives on November 12, 2026 to review how ready lenders are for the expected credit loss (ECL) framework, which replaces the way banks set aside money for bad loans from April 1, 2027, according to reports. Bankers are expected to ask for a gentler transition. The RBI had not publicly confirmed the meeting or its agenda at 8:40 am IST.
State Bank of India chairman C S Setty said on November 3 that the regulator wants feedback from bank CEOs on their preparedness. SBI puts its one-time impact at ₹19,500 crore, net of tax.
What the rules change
Indian banks now set aside money for a loan largely after it has gone bad. Under the RBI’s final directions, issued on April 27, 2026, they must estimate losses before a loan defaults and provide for them.
Loans are sorted into three stages. For a loan whose credit risk has not risen significantly, Stage 1 requires provision for expected losses over 12 months. Stage 2, where risk has risen significantly, and Stage 3, for credit-impaired loans, require provision for expected losses over the life of the loan. A loan 30 days overdue is presumed to have seen a significant rise in risk.
The 90-day test for classifying a loan as a non-performing asset is unchanged, according to the published analysis of the directions.
The RBI has also set minimum provisioning floors. As summarised in that analysis, the Stage 1 floor is 0.40% for corporate loans and 0.25% for home loans, and 1% for unsecured retail loans. Stage 2 is 5% for most categories.
The framework at a glance
- April 1, 2027start date, unchanged since the April 2026 directions
- 4 yearsphased capital relief, to March 31, 2031
- 1%Stage 1 floor on unsecured retail loans
- 0.25%Stage 1 floor on home loans
How the hit is spread
Banks need not take the whole one-time charge against capital at once. The extra provision needed on April 1, 2027, over what they held on March 31, 2027, is charged to retained earnings, and the capital impact is added back in four steps: four-fifths in 2027-28, three-fifths in 2028-29, two-fifths in 2029-30 and one-fifth in 2030-31. Banks with enough capital may choose a shorter period. Banks must report on the old and new systems in parallel until December 31, 2027, and the first quarterly ECL report is due on June 30, 2027.
SBI will use the four-year option. It estimates the effect on its common equity tier 1 (CET1) capital at 40 to 50 basis points. Its CET1 ratio stood at 13.34% and its capital adequacy ratio at 16.02% at the end of September.
What other banks expect
Other public sector lenders have given their own figures. Canara Bank has put the impact at ₹12,000 to 15,000 crore, and Bank of Baroda at about ₹12,500 crore. PNB expects about ₹8,000 crore, Union Bank of India ₹5,500 crore, Indian Bank about ₹3,500 crore and Indian Overseas Bank about ₹3,000 crore.
What banks want
Lenders have argued that recognising the full provisioning burden up front would hurt profit and capital adequacy. They want the provisioning percentages reviewed and the freedom to spread extra provisions over several years. A senior banker was quoted as saying most public and private lenders are not fully ready, apart from some with international reporting obligations.
The RBI has so far held the date even though banks asked for more time. Setty said the regulator remains open to discussion on some nuances of the guidelines and their implementation, and that a working group of banks is already working with the RBI to refine parts of them. The regulator is reported to want to understand banks’ technology readiness and how their models perform.
How we got here
The RBI first proposed the framework in a discussion paper in October 2024. It issued the final directions on April 27, 2026, replacing the existing income recognition and asset classification norms for scheduled commercial banks. Small finance banks, payments banks and regional rural banks are outside the directions.
Why it matters
The hit lands on bank capital, which is what supports lending. A bank that must hold more against future losses has less room to lend, or must raise capital. The four-year phase-in is meant to keep that effect gradual. The floors also set a price on risk: unsecured retail loans carry a higher Stage 1 floor than home loans or corporate loans.
What happens next
Any decision on timing or the floors would have to come from the RBI, which has not signalled one. Banks must begin parallel reporting from April 2027 and file the first quarterly ECL report by June 30, 2027. Lenders’ commentary with their next quarterly results will show how much of the provisioning they have already moved forward.