How RBI’s ECL Direction Could Affect Borrowers With Lower CIBIL Scores

Key Takeaways

• The RBI released ECL Direction-2026 on April 27, 2026, and the same will come into effect from April 1, 2027, according to which banks are supposed to forecast the default on the loan before it happens. This rule will be stringent for loan applicants who have a CIBIL score lower than 730.
   
• The Reserve Bank of India released a draft discussion paper in relation to ECL in January 2023. Later, the RBI governor mentioned the implementation of this new guideline in October 2025 during the monetary policy review.

What is RBI’s ECL rule? How does this affect your loan eligibility?

The Reserve Bank of India issued its final guidelines regarding ECL on April 27, 2026. These new guidelines will become applicable from April 1, 2027. According to the previous guidelines, lenders would begin making provisions once the loans are classified as non-performing assets.

According to the new regulations, banks should forecast the possibility of default and make provisions in advance. The RBI said in a statement that it would help strengthen credit risk management practices, along with bringing the regulation in line with financial reporting guidelines followed across the world.

This change is likely to cause banks to incur a loss amounting to ₹42,000 crore because of provisioning. In order to mitigate the loss, banks are expected to be stricter in their lending standards.

Individuals having a CIBIL score of less than 730 are expected to be affected adversely by the new rule. Almost 62 percent of applicants applying for home, automobile, and education loans have a CIBIL score of less than 730.

Who Gets Hit the Hardest? 62% of India’s Loan Applicants are in the Risk Zone

Banks are expected to pivot their strategies toward approximately 70 million premium customers who have maintained scores of 730 and above. These customers represent lower risk under the ECL model, meaning banks need to hold less capital against their loans. 

The impact will be direct for those outside this group. A borrower with a score of 680 may face higher interest rates, more collateral demands, and outright rejection risk.

The table below shows how ECL changes loan treatment based on credit score:

Competitive rates, easier approval

650 to 729

Moderate risk

Higher rates, added collateral

Below 650

High risk

Possible rejection or very strict terms

On LoansJagat, over 58% of loan enquiries in the past 6 months came from borrowers in the 600 to 720 CIBIL score range. This group is most likely to feel the impact of the April 2027 rule change.