General Studies · Prudential Norms
The RBI directed banks to transition towards the Expected Credit Loss (ECL) framework for provisioning. What is its main advantage over the traditional system?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It accelerates the speed of monetary policy transmission
- 2It eliminates Non-Performing Assets (NPAs) from the balance sheet completely
- 3It anticipates credit losses early based on forward-looking data rather than after default occurs✓
- 4It completely reduces the Statutory Liquidity Ratio (SLR) requirement
Correct answer
It anticipates credit losses early based on forward-looking data rather than after default occurs
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