The main challenges for Indian banks would be system changes, implementation of an expected loss impairment model and skilling human resources. Issues also arise on account of the interaction of the regulatory and accounting frameworks. For instance, apart from the complexities of an expected loss model, transitioning from an incurred loss to an expected loss model may also potentially adversely affect capital adequacy.
Similarly, the introduction of a fair value through other comprehensive income (FVOCI) category coupled with the removal of the regulatory filters under Basel III may also potentially introduce volatility in the capital.