New Credit Loss Norm Could Hurt

As banks transition to the Expected Credit Loss (ECL) framework, they are being required to identify and account for potential credit losses much earlier than before. While the new approach is designed to strengthen financial stability and make lending more resilient, it may also have unintended consequences for borrowers.

In the op-ed ‘New Credit Loss Norm Could Hurt’ published in The Hindu BusinessLine, Dr. Sankarshan Basu, Finance & Accounting area, IIM Bangalore, along with Prof. Soumik Bhusan of TAPMI Bengaluru and Satya Jeet, PhD scholar at IIM Ranchi, examine the implications of the proposed framework. The authors argue that when banks are required to recognise risk upfront, lending to certain categories of borrowers could become less attractive, potentially restricting access to credit for those who need it most.

The article explores the delicate balance between strengthening the banking system and ensuring that credit remains accessible across the economy.

Read the full article in the attached PDF.