New Delhi, May 1 -- The Reserve Bank of India (RBI) has issued final guidelines on the Expected Credit Loss (ECL)-based provisioning and credit risk framework for commercial banks, marking a significant shift in how lenders assess and provide for credit risk. The new norms will come into effect from April 1, 2027.

Under the ECL framework, banks will transition from the traditional "incurred loss" approach to a forward-looking, risk-based provisioning model. Loans will be classified into three stages based on credit risk: Stage 1 (low risk), Stage 2 (significant increase in credit risk or SICR), and Stage 3 (credit impaired). This replaces the existing overdue ageing-based classification system.

The framework aligns Indian banking regula...