The Reserve Bank of India (RBI) has announced a significant overhaul of its loan loss provisioning framework, shifting to an expected credit loss (ECL) model effective April 1, 2027. This new approach aims to strengthen credit risk management and enhance transparency in the banking sector by aligning with international financial reporting standards. Under the new guidelines, banks will be required to set realistic repayment schedules based on borrowers' cash flows, promoting better recovery rates. The transition to the ECL framework allows banks to spread the increase in provisioning requirements over four years, concluding on March 31, 2031. The ECL framework introduces a three-stage classification system for credit risk, where standard assets will attract 12-month expected loss provisioning (Stage 1), while loans with heightened risk will require lifetime loss provisioning (Stage 2). Credit-impaired assets will fall under Stage 3, necessitating higher provisioning levels. The RBI emphasized the importance of robust governance, mandating oversight from senior management and dedicated committees to ensure effective implementation of the ECL framework. Additionally, banks must maintain sufficient historical loss data to inform their credit loss estimates. The RBI has also retained the existing 90-day delinquency norm for classifying non-performing assets, ensuring continuity during this transition period. These changes reflect the RBI's commitment to enhance the resilience and transparency of the banking sector in India.