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Informist, Thursday, May 29, 2025

MUMBAI – The Reserve Bank of India plans to roll out several key regulatory frameworks, including draft guidelines on the expected credit loss framework, in 2025-26 (Apr-Mar) as part of its ongoing efforts to strengthen the financial system. The central bank will also issue guidelines on co-lending arrangements, securitisation of stressed assets, harmonised norms on income recognition and asset classification and climate-related prudential and disclosure standards for banks and the last leg of Basel III norms, the RBI said in its annual report on Thursday.

The RBI will issue the final framework on the expected credit loss norms in FY26. RBI Governor Sanjay Malhotra had earlier said the central bank is reviewing stakeholder comments on the discussion paper on expected credit loss norms and will provide enough time for implementation. The new expected credit loss framework aims to improve the provisioning process by aligning it with international practices and forward-looking assessments, the annual report said.

In line with its objective to enhance credit risk management, the RBI will also issue final guidelines on income recognition, asset classification, and provisioning for all regulated entities. These harmonised norms are expected to reduce discrepancies in reporting and improve transparency in asset quality, the report said.

The central bank also plans to release the final version of its co-lending guidelines in FY26, following public consultation. The revised norms aim to cover all categories of co-lending and apply to all regulated entities except large syndicated loans above INR 1 billion. The rules mandate clear disclosure of roles and risk-sharing terms between lenders, aiming to strengthen consumer protection and operational clarity.

The final norms securitisation of stressed assets, expected in FY26, are designed to allow the distribution of recovery risk in stressed loans across different investor classes via structured tradeable instruments. The RBI had earlier proposed a market-based securitisation framework to complement the asset reconstruction route under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

The RBI is set to implement the final phase of the Basel III framework in FY26. This includes guidelines on the standardised approach for credit and counterparty risk, final market risk rules, and updated Pillar 3 disclosures. These updates aim to bring Indian banks' capital and risk management practices in line with global standards.

Climate risk will also be a priority for the central bank in the current financial year. The RBI will issue prudential norms and disclosure guidelines on climate-related financial risks. It will provide guidance on scenario analysis and stress testing, and launch the Reserve Bank Climate Risk Information System, RB-CRIS. The central bank will also issue principles for managing and supervising climate risks, review green deposit frameworks, and issue norms for sustainability-linked loans.

With these measures, the RBI aims to deepen financial stability, improve regulatory convergence, and ensure the banking system is prepared to handle both emerging financial risks and climate-induced uncertainties, which the central bank sees as a growing risk to growth and inflation.  End

Reported by Sachi Pandey

Edited by Saji George Titus

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