Explained: What is expected credit loss (ECL)? Know all about RBI's amendment in the banking system
Through ECL, banks can estimate the forward-looking probability of default for each loan, and then by multiplying that probability by the likely loss given default, the bank gets the percentage loss that is expected to occur if the borrower defaults.
ECL is a method of accounting for credit risk based on the loss likely to occur on a loan or portfolio of loans. (Image: Reuters)