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    Question

    In accordance with the recently published discussion

    paper on Introduction of Expected Credit Loss Framework for Provisioning by Banks on which of the below mentioned class the proposed framework would be applicable?
    A Financial assets that meet certain prescribed conditions Correct Answer Incorrect Answer
    B Financial Liabilities that meet certain prescribed conditions Correct Answer Incorrect Answer
    C Both Financial Assets & Financial Liabilities Correct Answer Incorrect Answer
    D Financial liabilities irrespective of any condition Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Proposed scope of ECL for provision for loan loss The proposed framework would be applicable to financial assets that meet both conditions, which are given as under: • Financial assets are ‘applicable financial assets’ which include: o all loans and advances o irrevocable6 loan commitments (including sanctioned limits under revolving credit facilities) o lease receivables o irrevocable financial guarantee contracts o investments classified as held-to-maturity or available-for-sale • Financial assets are measured at amortised cost i.e., they are held under the business model of collecting contractual cash flows and meet the SPPI criterion.

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