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As per RBI's discussion paper on ECL model for banks what is the recommended treatment for the transitional adjustment amount in relation to the adoption of the ECL approach?

Q: Answer-As per RBI's discussion paper on ECL model for banks what is the recommended treatment for the trans...

It is proposed that the transitional adjustment amount, i.e., the difference between the accounting provisions held on adoption of ECL approach as on the effective date and the provisions computed as per the extant provisioning norms, net of tax effects, may be allowed to be added back to the Common Equity Tier 1 CET 1 capital. This benefit shall be phased out over a maximum five years. Banks may also choose to spread the transition over a shorter period.

A The transitional adjustment amount should be deducted from the Common Equity Tier 1 (CET 1) capital.

B The transitional adjustment amount should be excluded from the calculation of capital ratios.

C The transitional adjustment amount should be added back to the CET 1 capital.

D The transitional adjustment amount should be treated as a separate provision and accounted for separately.

E The treatment of the transitional adjustment amount is not specified in the proposal.

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As per RBI's discussion paper on ECL model for banks what is the recommended treatment for the transitional adjustment amount in relation to the adoption of the ECL approach?

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