MUMBAI: Banks have requested this RBI for another year to implement the system Expected Credit Loss (ECL) to provide credit.
Currently, banks are putting money away after an asset has gone bad, and once the new system is in place, it is widely expected to have a one-off impact on banks’ profits.
“We have asked the regulator to give us a little more time to prepare for this,” the industry lobby said DIFFERENT‘s managing director Sunil Mehta told reporters on the sidelines of a fintech event here on Tuesday.
When asked specifically about the time requested, Mehta replied, “We have asked them (RBI) for another year.”
He also added that the banking system was preparing to migrate to the new system in a “worst-case scenario”.
“…the banking sector is already prepared, only a few banks have already developed their systems (and) have data on which to design their ECL-based risk models,” he said.
The Reserve Bank of India (RBI) has already presented its policy proposals for moving to ECL, but a concrete timeline is not yet set.
Meanwhile, Mehta said Russian investors have started investing in Indian government bonds after receiving a nod from the RBI.
He said the investment activity was due to the excess rupee liquidity the Russians were struggling with due to the trade deficit with India, which is among a few countries buying oil from Russia.
“You have a surplus of money. They have invested (in local bonds). They are Russian banks, they are all our members, we know that. The RBI has opened the window that no matter what trade surplus they have, you can invest in government bonds.” Mehta said.
The Russian investments are of shorter duration as it is still unclear how long the war and sanctions against Russia will last, Mehta said, adding that the bets have a maturity of less than a year.
When asked about the banks’ connections with fintechs and the problems with the latter, he replied that whenever fintechs work with the banking system, they don’t get into a problem.
Banks provided them with resources and a large customer base, he added.
According to him, the problems with fintechs stem from poor governance and non-compliance with regulations.
Currently, banks are putting money away after an asset has gone bad, and once the new system is in place, it is widely expected to have a one-off impact on banks’ profits.
“We have asked the regulator to give us a little more time to prepare for this,” the industry lobby said DIFFERENT‘s managing director Sunil Mehta told reporters on the sidelines of a fintech event here on Tuesday.
When asked specifically about the time requested, Mehta replied, “We have asked them (RBI) for another year.”
He also added that the banking system was preparing to migrate to the new system in a “worst-case scenario”.
“…the banking sector is already prepared, only a few banks have already developed their systems (and) have data on which to design their ECL-based risk models,” he said.
The Reserve Bank of India (RBI) has already presented its policy proposals for moving to ECL, but a concrete timeline is not yet set.
Meanwhile, Mehta said Russian investors have started investing in Indian government bonds after receiving a nod from the RBI.
He said the investment activity was due to the excess rupee liquidity the Russians were struggling with due to the trade deficit with India, which is among a few countries buying oil from Russia.
“You have a surplus of money. They have invested (in local bonds). They are Russian banks, they are all our members, we know that. The RBI has opened the window that no matter what trade surplus they have, you can invest in government bonds.” Mehta said.
The Russian investments are of shorter duration as it is still unclear how long the war and sanctions against Russia will last, Mehta said, adding that the bets have a maturity of less than a year.
When asked about the banks’ connections with fintechs and the problems with the latter, he replied that whenever fintechs work with the banking system, they don’t get into a problem.
Banks provided them with resources and a large customer base, he added.
According to him, the problems with fintechs stem from poor governance and non-compliance with regulations.
