Arbitrary macro assumptions weak LGD and ignored EAD can materially distort ECL for banks and NBFCs: NFRA

India’s banking and non banking finance sector has come under sharp regulatory scrutiny after the apex audit watchdog warned that flawed expected credit loss models could be materially distorting balance sheets. Flagging weak assumptions, ignored risk drivers and modelling shortcuts, NFRA said the lapses carry serious implications for capital adequacy, profitability and audit accountability.

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