“Total requirement will be Rs 10,000 crore. And it can be staggered to four years. And our profit is in the range of Rs 19,000 to 20,000 crores. The bank is well positioned to absorb the provisions and adequately capitalised,” he said in the post earnings call with analysts.
The ECL framework will classify assets into three buckets – stage 1, stage 2, stage 3. Stage 1 assets are those where there is no significant increase in credit risk. Stage 2 assets are those that may have seen an increase in credit risk but are not “credit impaired”. Stage 3 assets are those that are credit impaired, as per the Reserve Bank of India’s final rules.
“We see that in stage two the regulatory floor has been moved from 0.4 per cent to 5 per cent. So some additional provision will be required in and we presume it will be Rs 2,500 crores. And the probability of default in stage one, stage two and stage three will be additional Rs 2,500 crore or maybe it may range up to Rs 5,000 crore also and additional non-fund requirement will be Rs 2,005 crore,” Ahluwalia said.
“We can also absorb it in one go itself, then our Capital to Risk-Weighted Assets Ratio CRAR) will drop by 1 per cent. The bank capital adequacy ratio is 17.04 per cent, much above the regulatory level. So we are well prepared,” he said.
Ahluwalia said the bank has roped in knowledge partner E&Y and the system level implementation for ECL will take place in September.
Banks are well positioned to absorb the overall impact of the transition to the ECL regime, Crisil said.
The ECL regime could lead to a one-time net impact of up to 120 basis points (bps) on their Common Equity Tier 1 (CET-1) ratio, it said.
On the guidance for lower credit growth for FY 2027, Ahluwalia said the guidance in accordance with the projected GDP growth of 6.9 per cent.
“In the past we have surpassed our guidance numbers and we are confident we will surpass the numbers again,” he said.