We find our report ‘Prayas (Energy Group). (2022, May). Expected Loss Ratings Scale: Unexpected outcomes. ’ relevant to below discussion questions mentioned in the ‘Discussion Paper on Introduction of Expected Credit Loss Framework for Provisioning by Banks’ by Reserve Bank of India (RBI). 

Discussion Question 10: Do you agree with the above proposal to permit the banks to develop customised approaches for expected credit losses subject to principles / expectations laid out by the RBI? Are the mitigants proposed to reduce the consequent inevitable variability between the entities, adequate?

Discussion Question 18: Are there any aspects that would be germane to the proposed transition that have not been discussed in this discussion paper? If so, please comment on the same and provide your views or preferences on such aspects which, in your opinion, should be part of the regulatory instructions that the RBI will issue regarding the proposed provisioning regime.

We believe that in perusing the aforementioned report, RBI may find some clarity on the inadequacies, pitfalls and some policy recommendations towards permitting self determination for measurement of expected credit loss for banks taking from the experience of Credit Rating Agencies’ (CRAs) self determination of Expected Loss for the infrastructure sector.