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Liquidity management gets new guidelines from the RBI.

The Reserve Bank of India (RBI) has issued draft guidelines on liquidity management for the Non-Banking Finance Companies (NBFCS) and proposed a liquidity coverage ratio for large NBFCS covering all deposit-taking NBFCS and non-deposit taking NBFCS with an asset size of 5,000 crore and above. Here is a look at what it means and how it will impact you: The key takeaway from the draft guidelines are that a bank-like liquidity coverage ratio (LCR) for NBFCS to be put in place, granular management of asset liability mismatch and board-led liquidity policies or monitoring.

"The guidelines require NBFCS to hold adequate level of high quality liquid assets (to cover the estimated net cash outflows in case of a severe liquidity stress scenario over the next 30 calendar days). This is to ensure NBFCS have enough liquid assets that can be converted to cash to fund the outflows for 30 days in a scenario of acute liquidity stress. With these guidelines, NBFCS will need to stick to ALM and liquidity discipline at all times. More importantly, this will provide comfort to debt market participants that NBFCS will always be prudent on liquidity," said Kotak in a note.

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Title Annotation:Reserve Bank of India
Publication:Pakistan & Gulf Economist
Article Type:Brief article
Geographic Code:9INDI
Date:Jun 16, 2019
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