RBI announced that the guidelines on the net stable funding ratio (NSFR) will come into effect from April 01, 2020. In May 2018, RBI had published the final guidelines on the NSFR, as part of its Basel III Framework on Liquidity Standards. The effective date of the final NSFR guidelines was not communicated in the May 2018 circular.
The NSFR guidelines are expected to ensure reduction in funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding to mitigate the risk of future funding stress. The guidelines take into account the Indian conditions but are based on the final rules text on NSFR, which BCBS had published in October 2014. The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. The NSFR limits over reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.
Effective Date: April 01, 2020
Keywords: Asia Pacific, India, Banking, Basel III, NSFR, Date, Liquidity Risk, RBI
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