PNB sees $1 billion hit from RBI's new credit-loss rules

Punjab National Bank

(PNB) CEO Ashok Chandra expects an estimated ₹90 billion (around $1 billion) impact as it transitions to the Reserve Bank of India’s new Expected Credit Loss (ECL) framework, Reuters reported.

The RBI's draft rules, issued earlier this month, require banks to move from the current incurred-loss model—where provisions are made after defaults occur—to a forward-looking system that anticipates potential future losses.

Under ECL, banks must classify loans into three stages of credit risk and provide for 12-month or lifetime expected losses depending on exposure quality. The shift, effective from April 2027, aligns India's system with global IFRS 9 norms and aims to improve early detection of loan stress.

Chandra said most of PNB's hit will come from "Stage 2" assets—those showing rising risk but not yet in default—which could shave about 0.85 percentage points off the bank's capital ratio.

Despite the upfront cost, PNB expects to absorb the impact through earnings, underscoring how India's banking sector is preparing for a more risk-sensitive era of provisioning.