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. 5.
The guidelines to amendments on Asset-Liability Management (ALM) System are being
issued as a draft for feedback from all concerned. The draft will be open for
comments for a period of 10 days. Your comments / feedback may be sent to the
undersigned at the following address and by
email within
a period of 10 days from the date of this letter. Department
of Banking Operations and Development Reserve Bank of India 12th
floor, Central Office Building Shahid Bhagat Singh Marg Mumbai – 400 001 Yours
faithfully, (Prashant
Saran) Chief General Manager-in-Charge |