RBI issues guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies

Nov 07, 2019 | by Avantis RegTech Legal Research Team


The Reserve Bank of India (RBI) on November 04, 2019, has decided to revise the guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies (NBFCs) and Core Investment Companies in order to strengthen and raise the standard of the Asset Liability Management (ALM) framework applicable to NBFCs. All NBFCs with asset size of Rs. 100 crore and above, systemically important Core Investment Companies and all deposit taking NBFCs shall adhere to the guidelines

The guidelines deal with the following aspects of Liquidity Risk Management Framework, those are:-

1. Liquidity Risk Management Policy, Strategies and Practices

2. Management Information System (MIS)

3. Internal Controls

4. Maturity Profiling

5. Liquidity Risk Measurement – Stock Approach

6. Currency Risk

7. Managing Interest Rate Risk (IRR)

8. Liquidity Risk Monitoring Tools

In addition to the guidelines, the following categories of NBFCs shall adhere to the guidelines on Liquidity Coverage Ratio (LCR):

1. All non-deposit taking NBFCs with asset size of Rs. 10,000 crore and above, and all deposit taking NBFCs irrespective of their asset size, shall maintain a liquidity buffer in terms of LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days.

2. All non-deposit taking NBFCs with asset size of Rs. 5,000 crore and above but less than Rs. 10,000 crore shall also maintain the required level of LCR starting December 01, 2020.

[Notification No. RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20]


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