RBI Retail Loan Loss Provisioning - WB 2014 - World Bank

PLLP - Flow Rates – Example

January February

Curr 100.000 105.000
1-30
31-60 3.000 3.500
61-90
91-120 500 600
121-150
Balance 151-180 280 300
181 new
180+ 200 210

Curr 140 160
1-30
31-60 130 135
61-90
91-120 120 128
121-150
151-180 3.000 3.120
181 new
Flow Rate --
- 3,50%
- 20,00%
- 60,00%
- 75,00%
-
-
-

Slide no.26

March April May

PLLP - Flow Rates – Example

January February

Curr 100.000 105.000
1-30
31-60 3.000 3.500
61-90
91-120 500 600
121-150
Balance 151-180 280 300
181 new
180+ 200 210

Curr 140 160
1-30
31-60 130 135
61-90
91-120 120 128
121-150
151-180 3.000 3.120
181 new
Flow Rate --
- 3,50%
- 20,00%
- 60,00%
- 75,00%
- 80,00%
-
-

Slide no.27

March April May

PLLP - Flow Rates – Example

January February

Curr 100.000 105.000
1-30
31-60 3.000 3.500
61-90
91-120 500 600
121-150
Balance 151-180 280 300
181 new
180+ 200 210

Curr 140 160
1-30
31-60 130 135
61-90
91-120 120 128
121-150
151-180 3.000 3.120
181 new
Flow Rate --
- 3,50%
- 20,00%
- 60,00%
- 75,00%
- 80,00%
- 96,43%
-

Slide no.28

March April May

PLLP - Flow Rates – Example

January February

Curr 100.000 105.000
1-30
31-60 3.000 3.500
61-90
91-120 500 600
121-150
Balance 151-180 280 300
181 new
180+ 200 210

Curr 140 160
1-30
31-60 130 135
61-90
91-120 120 128
121-150
151-180 3.000 3.120
181 new
Flow Rate --
- 3,50%
- 20,00%
- 60,00%
- 75,00%
- 80,00%
- 96,43%
- 98,46%

Slide no.29

March April May

PLLP - Loss Factor – Definition

Loss Factors means the probability th
state to Loss (180+)

It is determined as the product of all
(where an account is now) to the Abso

Bucket (i) Probability of loss (

Current (1) LF1 = AVG FR1 * AVG FR2
1-30 dpd (2)
31-60 dpd (3) LF2 = AVG FR2 * AVG FR3
61-90 dpd (4) LF3 = AVG FR3 * AVG FR4
91-120 dpd (5) LF4 = AVG FR4 * AVG FR5
121-150 dpd (6) LF5 = AVG FR5 * AVG FR6
151 - 180 dpd (7) LF6 = AVG FR6 * AVG FR7
LF7 = AVG FR7

Slide no.30

hat an account will flow from current

flow rates between the bucket
orbing state (180+)

(Loss factor LF)

* AVG FR3 * AVG FR4 * AVG FR5 * AVG FR6 * AVG FR7
* AVG FR4 * AVG FR5 * AVG FR6 * AVG FR7
* AVG FR5 * AVG FR6 * AVG FR7
5 * AVG FR6 * AVG FR7
* AVG FR7

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+

Slide no.31

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
180+ 0,24%

Loss Factor

Slide no.32

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
180+ 0,24% 0,32%
6,84%
Loss Factor

Slide no.33

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18%

Slide no.34

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97%

Slide no.35

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%
36,86% 34,62%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96%

Slide no.36

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%
36,86% 34,62%
63,19% 60,39%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95%

Slide no.37

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%
36,86% 34,62%
63,19% 60,39%
82,42% 79,81%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46%

Slide no.38

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%
36,86% 34,62%
63,19% 60,39%
82,42% 79,81%
96,16% 94,21%

PLLP - Loss Factor – Example

February March

Curr --
1-30
31-60 3,50% 3,81%
61-90
Flow Rate 91-120 20,00% 22,86%
121-150
151-180 60,00% 58,33%
181 new
75,00% 76,67%
Curr
1-30 80,00% 85,71%
31-60
61-90 96,43% 96,88%
91-120
121-150 98,46% 99,26%
151-180
Loss Factor 180+ 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00%

Slide no.39

April I April II

--

3,81% 2,81%

22,86% 21,86%

58,33% 57,33%

76,67% 75,67%

85,71% 84,71%

96,88% 95,88%

99,26% 98,26%

0,32% 0,21%
8,43% 7,57%
36,86% 34,62%
63,19% 60,39%
82,42% 79,81%
96,16% 94,21%
99,26% 98,26%

PLLP - Transition Matrix – Definition

TMM is based on a matrix that describes the
(exposures) from one state (BOP) to each of
generally just the probability of a move to Lo

This model calculates using the complex acc
taken into account) in contrast to FRM

EOP State (after 7

EURO Net Bal Current Current Current
BOP MOB1_1 MOB MOB Current
new Volume 2 13_24 25_36 other 1_30
B Current MOB1_12
O Current MOB 13_24 5.079 4.741 0 0 0
P Current MOB 25_36
90.608 62.755 9.571 0 0 3.91
Current other 73.071 0 45.134 10.916 0 2.58
S 1_30 64.720 0 32.095 13.446 4.23
t 31_60 0
a 61_90
t 91_120 107.398 0 0 0 76.576 8.90
e 121_150
20.497 543 803 1.801 477 6.10
151_180
Total 5.888 138 165 150 150 3

3.931 0 94 42 100 3
3.520 0 0 14 21 2
3.566 0000
4.889 0000

383.166 68.176 55.769 45.017 90.770 25.84

Slide no.40

e probability of moving the accounts
the other states (EOP) over two periods,
oss state is used at the end.

count behaviour (all possible movements are

7 months) Paid / Loss LF%

Loss
31_60 61_90 91_120 121_150 151_180 Paid (180+) Loss (180+)
0 0 0 62 0 0 276 0 0,00%
14 1.909 2.120 1.794 1.495 915 5.926 208 0,23%
87 2.332 2.346 2.207 1.776 1.330 4.130 314 0,43%
33 2.223 2.055 2.660 1.019 1.586 4.880 524 0,81%
06 2.447 2.240 2.156 2.159 1.640 10.061 1.214 1,13%
02 3.527 1.340 883 633 585 1.029 2.771 13,52%
37 850 465 189 138 334 254 3.019 51,27%
39 48 264 126 53 213 143 2.808 71,43%
26 36 46 113 82 152 92 2.937 83,45%
0 4 7 11 29 123 72 3.322 93,14%
0 0 33 35 44 58 55 4.664 95,40%
44 13.375 10.917 10.237 7.427 6.936 26.918 21.781

Agenda

1 Types of Loan Loss Provisions in the Retail Segm
2 Individual Loan Loss Provisions (ILLP) - Overview
3 ILLP – Treatment of Restructured Accounts
4 ILLP – Calculation steps
5 Portfolio-based Loan Loss Provisions (PLLP) - O
6 PLLP – Flow Rates, Loss Factors, Transition Mat
7 PLLP – Gross Provisions, Recovery Mo
8 Risk Costs – Definitions and Examples
9 Experience from the roll-out across the RBI Gro
10 Future Plans for Loan Loss Provisioning Method

Slide no.41

ment of RBI
w

Overview
trix – Definitions and Examples

odels, Net Provisions - Calculations

oup
dology in RBI Retail Portfolio

PLLP - Gross Provisions – Definition

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

160 180

135 155

128 134

3.120 3.248

Loss Factor Curr 0,24% 0,32%
1-30 6,84% 8,43%
31-60 34,18% 36,86%
61-90 56,97% 63,19%
91-120 75,96% 82,42%
121-150 94,95% 96,16%
151-180 98,46% 99,26%
180+ 100,00% 100,00%

• To calculate the Gross provisions, the prob
respective balances, which will give the gross

Slide no.42

February March

EPxrpoevictsieodnLsoss Curr
1-30
31-60
61-90
91-120
121-150
151-180
181 new
180+

babilities for each state is multiplied with the
s provisions amounts for each state

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.43

Curr February March
1-30 251
31-60
EPxrpoevictsieodnLsoss 61-90
91-120
121-150
151-180
181 new
180+

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.44

EPxrpoevictsieodnLsoss Curr February March
1-30 251
31-60 239
61-90
91-120
121-150
151-180
181 new
180+

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.45

EPxrpoevictsieodnLsoss Curr February March
1-30 251
31-60 239
61-90 205
91-120
121-150
151-180
181 new
180+

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.46

EPxrpoevictsieodnLsoss Curr February March
1-30
31-60 251
61-90 239
91-120 205
121-150 171
151-180
181 new
180+

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.47

EPxrpoevictsieodnLsoss Curr February March
1-30
31-60 251
61-90 239
91-120 205
121-150 171
151-180 160
181 new
180+

PLLP - Gross Provisions – Example

February March

Curr 105.000 110.000
1-30
31-60 3.500 4.000
61-90
91-120 600 800
121-150
Balance 151-180 300 350
181 new
180+ 210 230

Curr 160 180
1-30
31-60 135 155
61-90
91-120 128 134
121-150
151-180 3.120 3.248
180+
Loss Factor 0,24% 0,32%
6,84% 8,43%
34,18% 36,86%
56,97% 63,19%
75,96% 82,42%
94,95% 96,16%
98,46% 99,26%
100,00% 100,00%

Slide no.48

February March

Curr 251 353
1-30
EPxrpoevictsieodnLsoss 31-60 239 337
61-90
91-120 205 295
121-150
151-180 171 221
181 new
180+ 160 190

152 173

133 154

128 134

3.120 3.248

PLLP - Recovery Models - Overview
 Accounts that went into Loss status (180+

future as an outcome of internal collectio

 All payments that came after an account r
 Recovery rate can be calculated either by

recommended) or Simple recovery mode

 Irrespective of the model used the Debt s

recovery modeling data (only exception is

Slide no.49

+ dpd) can be partly (or fully) recovered in the
ons or debt sales

reached Loss status are considered recoveries

using Vintage recovery model (strongly
el

sale accounts must be excluded from the
s if it is a forward flow type of deal)

PLLP - Simple Recovery Model Calcula

Recovery Rate% = Recovery
180+ new

1) Sum of payments in last 12 months on acc
regardless whether they reached Loss status

2) Sum of balances of those accounts that ro
months

This model is possible only for retail and on
recovery history to build the Vintage recove

Slide no.50

ation

y in last 12 months 1
w in last 12 months 2

counts after they reached Loss status 180+;
s in last 12 months or sooner

olled in Loss status 180+ in the last 12

nly for those countries, who have not the
ery model