Indian banks well-placed to transition to expected credit loss provisioning, Fitch says

(Reuters) - Indian banks are sufficiently capitalised to transition ​to the expected credit loss (ECL) ‌framework, which has now been finalised by the Reserve Bank of ​India, Fitch Ratings said ​on Thursday.

The new framework will ⁠come into force starting ​April 1, 2027.

The ratings agency ​expects the banking system's average common equity tier 1 (CET1) to decrease ​by 30 basis points ​in the financial year 2027-28.

The decline will ‌gradually ⁠extend to about 80 basis points by 2022-23 if banks use the RBI's ​four-year transition ​period, ⁠Fitch says.

Starting provisions of banks are higher ​than expected, lowering the ​impact ⁠of the new rules.

The framework supports Fitch's positive outlook ⁠on ​the BB+ operating ​environment score for Indian banks.