MFI heavy banks to be most impacted by ECL model, say experts

The Reserve Bank of India’s (RBI) direction to banks to move from the incurred loss provisioning model to expected credit loss (ECL) will impact microfinance loan-focused banks the most, experts say. Bandhan Bank , IndusInd Bank , RBL Bank , AU Small Finance Bank , and IDFC First Bank have more exposure towards the micro loan segment.

“The RBI plans to implement ECL for banks on new loans from April 2027 and on existing loans from April 2027 to March 2031. ECL will impact MFI banks: AU Small Finance Bank, RBL Bank, IDFC First Bank, IndusInd Bank. It will also impact state banks on existing loans,” analysts at Nuvama Research said.

The ECL model assesses the loss that is likely to occur on a loan or portfolio of loans. It is used to estimate potential future losses on financ