What changed
The first time bucket (1-14 days) in the Structural Liquidity Statement is now split into three: Next day, 2-7 days, and 8-14 days. Cumulative negative mismatch limits are set at 5% (Next day), 10% (2-7 days), 15% (8-14 days), and 20% (15-28 days) of cumulative cash outflows in the respective buckets. Banks must prepare the Structural Liquidity Statement daily for top management, though reporting to RBI remains fortnightly.
What it means for you
UCBs need to upgrade their MIS to capture daily cash flows across finer time buckets, which will improve early warning on liquidity stress. The tighter cumulative mismatch caps (especially 5% for Next day) require more proactive liquidity management and may necessitate holding higher high-quality liquid assets. Banks with weaker data systems will face operational challenges in achieving 100% data coverage.
What you must do
- Revise your Structural Liquidity Statement format to include Next day, 2-7 days, 8-14 days, and 15-28 days buckets with the new cumulative mismatch limits of 5%, 10%, 15%, and 20% of cumulative cash outflows respectively.
- Set up daily preparation of the Structural Liquidity Statement for ALCO/Top Management review.
- Ensure your MIS can capture and slot cash flows into the new time buckets, aiming for 100% data coverage.
- Update the Short-term Dynamic Liquidity statement similarly and prepare it daily, putting it up to ALCO/Top Management within 2/3 days from the close of the reporting Friday.
- Train treasury and risk teams on the revised limits and reporting timelines.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM desks of UCBs, Risk management and compliance teams, Board and ALCO members
When do the revised ALM norms take effect?
The revised norms and supervisory reporting in the new format commence from the period beginning January 1, 2009.
What are the new cumulative mismatch limits for each bucket?
The net cumulative negative mismatch should not exceed 5% for Next day, 10% for 2-7 days, 15% for 8-14 days, and 20% for 15-28 days of cumulative cash outflows in those buckets.
Has the Interest Rate Sensitivity statement changed?
No, there is no change to the Interest Rate Sensitivity statement. It continues to be prepared monthly as on the last reporting Friday and submitted to RBI within 3 weeks.