According to the RBI’s discussion paper on the Expected Credit Loss (EC

The RBI’s discussion paper on the ECL framework, aligned with Ind AS 109, allows banks to measure ECL based on credit risk changes: • For most financial assets: o 12-month ECL applies if there is no significant increase in credit risk (SICR). o Lifetime ECL applies if there is a SICR or if the asset is credit-impaired. • However, lease receivables and contractual guarantee contracts are treated differently. o For these, banks are required to always recognize lifetime ECL, regardless of whether there has been a SICR. o This ensures higher prudence, given the nature of these exposures. Thus, the correct requirement is lifetime ECL.