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RBI to prescribe net stable funding ratio for banks

BS Reporter|Mumbai May 29, 2015 12:40 AM IST

Inabidtoensurebanksmaintainadequateliquidresources,ReserveBankofIndia(RBI)plansto
prescribeanetstablefundingratio(NSFR)undertheBaselIIIframework.
NSFRistheamountofavailablestablefundingrelativetotheamountofrequiredstablefunding.
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NSFRlimitsoverrelianceonshorttermwholesalefunding,encouragesbetterassessmentof
fundingriskacrossallonandoffbalancesheetitems,andpromotesfundingstability.RBI
proposestomakeNSFRapplicabletobanksfromJanuary1,2018.
Theavailablestablefundingisaportionofcapitalandliabilities,expectedtobereliableoverthe
timehorizonconsideredbytheNSFR,whichextendstooneyear.Theamountofstablefunding
requiredisafunctionoftheliquiditycharacteristicsandresidualmaturitiesofthevariousassets
heldbybanks.
TheNSFRrequirementsareoverandabovetheLiquidityCoverageRatio(LCR)normsannounced
earlier.TheNSFRwouldbeapplicableforIndianbanksatthesoloaswellasconsolidatedlevel.
ForforeignbanksoperatingasbranchesinIndia,theframeworkwouldbeapplicableonastand
alonebasis.
Inthebackdropoftheglobalfinancialcrisisthatstartedin2007,theBaselCommitteeonBanking
Supervision(BCBS)proposedcertainreformstostrengthenglobalcapitalandliquidity
regulations,withtheobjectiveofpromotingamoreresilientbankingsector.
BCBSissuedthefinalrulesonNSFRinOctober2014.RBIhasstartedphasinginimplementation

oftheLCRfromJanuary2015.
BankswouldberequiredtomeettheNSFRlimitonanongoingbasis.ByDecember2017quarter,
theyshouldhavetherequiredsystemsinplaceforsuchcalculationandmonitoring.
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