As per the proposed ECL model for banks what is the

Solution

Treatment of security or collateral available in respect of a loan exposure for the purpose of prudential floors RBI has proposed following options regarding security/collateral while arriving at prudential floors under the proposed framework: • A financial asset should be treated as secured only to the extent of distressed valuation of the security cover available in respect of such an asset. Further, the distressed valuation should not be older than 12 months; • Unsecured exposure should be defined as an exposure where the realisable value of the security, is not more than 51 per cent or a higher percentage to be specified, ab-initio, of the outstanding exposure; or • Factor in the valuation of the collaterals during the calibration of the prudential floor and issue guidance for valuation of collateral to be reckoned while computing ECL using the ECL models of the banks.