DBOD. No. BP. 256 /
21.04.098/ 2007-08
September 5, 2007
To
Chairmen / Chief Executive Officers
All Commercial Banks
(excluding RRBs)
Guidelines on Asset-Liability Management (ALM) System - Draft
Amendments
Reserve Bank had issued guidelines on ALM system vide Circular No.
DBOD. BP. BC. 8 / 21.04.098/ 99 dated February 10, 1999, which
covered, among others, interest rate risk and liquidity risk
measurement / reporting framework and prudential limits. As a
measure of liquidity management, banks are required to monitor
their cumulative mismatches across all time buckets in their
Statement of Structural Liquidity by establishing internal
prudential limits with the approval of the Board / Management
Committee. As per the guidelines, the mismatches (negative gap)
during the time buckets of 1-14 days and 15-28 days in the normal
course, are not to exceed 20 per cent of the cash outflows in the
respective time buckets.
2.
Having regard to the international practices, the level of
sophistication of banks in India, the need for a sharper
assessment of the efficacy of liquidity management and with a view
to providing a stimulus for development of the term-money market,
these guidelines have been reviewed and it has been decided that :
(a)
the banks may adopt a more granular approach to measurement of
liquidity risk by splitting the first time bucket (1-14 days at
present) in the Statement of Structural Liquidity into three
time buckets viz., next day , 2-7 days and 8-14 days.
(b)
The net cumulative negative mismatches during the Next day, 2-7
days, 8-14 days and 15-28 days buckets should not exceed 5 %
,10%, 15 % and 20 % of the cumulative cash outflows in the
respective time buckets in order to recognise the cumulative
impact on liquidity.
3.
The format of Statement of Structural Liquidity has been revised
suitably and is furnished at
Annex I. The guidance for slotting the future cash flows of
banks in the revised time buckets has also been suitably modified
and is furnished at
Annex II.
4. To
enable the banks to fine tune their existing MIS as per the
modified guidelines, the revised norms as well as the supervisory
reporting as per the revised format would commence with effect
from the period beginning January 1, 2008 and the reporting
frequency would continue to be monthly for the present. However,
the frequency of supervisory reporting of the Structural Liquidity
position shall be fortnightly, with effect from the fortnight
beginning April 1, 2008.
