MOSL: FINANCIALS – NBFC-Draft guidelines for ALM and LCR requirements of NBFCs
Financials - NBFC: Draft guidelines for ALM and LCR requirements of NBFCs; Increases transparency | Profit neutral
The Reserve Bank of India’s (RBI) draft guidelines on the liquidity risk management framework for NBFCs aim to (a) strengthen the ALM processes with more focus on granular short-duration buckets, (b) address the acute liquidity stress scenario over a one-month period by introducing LCR requirements (akin to Banks) and (c) enhance transparency via increasing the borrower/concentration details on the liability side.
- Post the liquidity crisis in Sep’18, most NBFCs increased liquidity (8-10% of borrowings) on the balance sheet to address any potential ALM issues. Consequently, achieving the LCR requirements (as described below) should not be a challenge in the current context. However, margins and RoA would be marginally impacted by the drag from excess liquidity.
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