ECL Framework
For a Midsize SME and Retail Focussesd NBFC
CLIENT & PROBLEM STATEMENT
- 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.
APPROACH
- 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.
SOLUTION & OUTPUT
- 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.
