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RBI releases draft guidelines on net stable funding ratio

Posted Date : 29-May-2015 , 08:30:42 am | Posted By CASANSAAR print Print
Reserve Bank of India (RBI) on Thursday released draft guidelines on implementation of net stable funding ratio (NSFR) in Indian banks.
NSFR is defined as the amount of available stable funding (ASF) relative to the amount of required stable funding (RSF). The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis.
ASF is defined as the portion of capital and liabilities expected to be reliable over a year. RSF for an institution is “a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures,” RBI said in a statement on its website.
The NSFR will have to be a minimum 100% on an ongoing basis, the draft guidelines stated. However, the RBI may require an individual bank to adopt a higher ratio to reflect its funding and liquidity risk profile, after a supervisory assessment.
The NSFR requirement would be binding on banks from 1 January 2018, RBI said.
Banks are required to have the required systems in place for such calculation and monitoring, the central bank said. The NSFR as at the end of each quarter, starting from December 2017, should be reported to the RBI within 15 days from the end of the quarter.
“The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis,” RBI said.
The Basel committee on banking supervision had issued the final rules on NSFR in October 2014, the banking regulator had noted in its monetary policy announcement on 7 April.
“The Reserve Bank has already started phasing in implementation of the Liquidity Coverage Ratio (LCR) from January 2015 and is committed to the scheduled implementation of NSFR from January 1, 2018 for banks in India. The Reserve Bank proposes to issue draft guidelines on NSFR by May 15, 2015,” RBI had said in the policy document.
Comments on the guidelines have been invited up to 26 June.

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