There is also an important equity perspective to the revised framework. As successive Financial Stability Reports of the Reserve Bank have pointed out, the proportion of stressed assets in the larger advances is higher than the share of larger advances in the total advances (see chart below).
If the stress in larger advances is not handled in a manner such that both probability of default and loss given default are contained, the resultant low risk-adjusted return on bank assets may have to be compensated in the form of higher borrowing rates for the smaller borrowers.