Case Study 44: ECL Framework

For a Midsize SME and Retail Focussesd NBFC

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  • The client is a mid size Retail & SME lending focussed NBFC.
  • The NBFC wanted a ECL Framework to calculate the expected credit loss based on fair value to approach to value the term-loan book.
  • Analyze past DPD and NPA data to create annualized rolling NPA rates .
  • Develop annualized PD for each DPD bucket to get roll rates by DPD bucket and vintage/residual maturity.
  • Use external benchmarks for adjusting for application score card and analyze the recovery rates.
  • Develop ECL calculation model.
  • The Client got the desired ECL Framework which was not existing to evaluate appropriate Credit loss provisioning.
  • Portfolio Futuristic PIT PDs.
  • Facility level PITD PD incorporating rating and DPD.
  • Facility-wise ECL aggregated at portfolio level.
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