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11 February, 2022

What is provisioning

 Provisioning: The Provisioning is a non-cash expense at present for banks to account for future losses on loan defaults. Banks assume that a certain percentage of loans will default or become slow-paying. Banks enter a percentage as an expense when calculating their pre-tax incomes. This guarantees a bank's solvency and capitalization if and when the defaults occur. The provision allocated each year increases with the riskiness of the loans a given bank makes.