What changed
RBI introduced a comprehensive framework to limit concentration risk on the liability side of banks. Inter-bank liabilities are now capped at 200% of networth, with a higher 300% limit for banks with CRAR at least 11.25%. The rules apply from April 1, 2007, and exclude CBLO borrowings and refinance from NABARD/SIDBI.
What it means for you
Banks must now actively manage their inter-bank liability concentration, not just asset-side risks. This reduces systemic risk from large, interconnected liabilities. Banks with high wholesale deposits need to reassess liquidity risk policies.
What you must do
- Calculate your bank's inter-bank liabilities as a percentage of networth as of March 31, 2006.
- Ensure IBL does not exceed 200% of networth (or 300% if CRAR ≥ 11.25%) from April 1, 2007.
- If non-compliant, submit a board-approved plan to RBI for achieving compliance.
- Review and update policies on wholesale deposit concentration to manage liquidity risk.
Who it affects
All commercial banks excluding RRBs, Treasury and risk management teams, Board of Directors
What is the new limit for inter-bank liabilities?
The general limit is 200% of networth as of March 31 of the previous year. Banks with CRAR at least 11.25% can go up to 300%.
Are CBLO borrowings included in this limit?
No, collateralized borrowings under CBLO and refinance from NABARD, SIDBI, etc., are excluded from the limit.
What if my bank cannot comply by April 1, 2007?
You must submit a plan to RBI for approval, indicating the date by which compliance will be achieved.