RBI Proposes Overhaul of Credit Risk Framework for Banks

The Reserve Bank of India (RBI) on Tuesday proposed changes to the way banks assign risk weightings to loans and implement the Expected Credit Loss (ECL) framework, in an effort to align domestic regulations with global standards.

The proposed reforms aim to ease the capital requirements—i.e., the risk weightings—for various categories of loans.

Key changes include differentiated risk weights for corporate loans, loans to micro, small, and medium enterprises (MSMEs), and real estate exposures.

The central bank also suggested including "transactors"—credit card users who consistently repay their dues on time—within the regulatory retail category.