New Delhi, May 15 -- India's banking sector is heading into a structural recalibration as the Reserve Bank of India's dual shift to Expected Credit Loss (ECL) and risk-weighted asset (RWA) norms reshapes provisioning and capital dynamics, Ambit Institutional Equities said in its latest report. While the ECL transition will front-load credit costs and weigh on near-term earnings, the brokerage believes the concurrent RWA rationalization will act as a "significant capital release mechanism" to support non-dilutive credit growth.

"We view the RBI's timing as strategic, with the banking sector currently boasting decade-best asset quality and robust recoveries," Ambit said, adding that the capital charge amendments provide a "crucial buffer" ...