What changed
RBI has added EXIM Bank and NaBFID to the list of National Development Banks (NDBs) under the NSFR framework, alongside NABARD, NHB, and SIDBI. Unencumbered loans to these NDBs with residual maturity of one year or more and a risk weight of 35% or lower under the Standardised Approach now attract a Required Stable Funding (RSF) factor of 65%, reduced from 100%.
What it means for you
Banks can now hold less stable funding against long-term loans to EXIM Bank and NaBFID, improving their NSFR ratios. This incentivizes lending to these development finance institutions by lowering the liquidity cost. The change aligns with RBI's goal to support infrastructure and export financing through these AIFIs.
What you must do
- Update your NSFR computation systems to include EXIM Bank and NaBFID as NDBs.
- Reclassify existing unencumbered loans to these entities with residual maturity ≥1 year and risk weight ≤35% to apply the 65% RSF factor.
- Review credit risk weights for loans to EXIM Bank and NaBFID to ensure they qualify for the lower RSF factor.
- Communicate the change to your treasury and risk management teams for immediate implementation.
Who it affects
Scheduled Commercial Banks (excluding Payments Banks and RRBs), Treasury and ALM teams, Credit risk and Basel compliance departments, Lenders to EXIM Bank and NaBFID
Which institutions are now classified as National Development Banks for NSFR?
EXIM Bank and NaBFID have been added to the existing list of NABARD, NHB, and SIDBI, making a total of five NDBs under the NSFR framework.
What is the new RSF factor for loans to these NDBs?
Unencumbered loans with residual maturity of one year or more and a risk weight of 35% or lower now have an RSF factor of 65%, down from 100%.
When does this circular take effect?
The instructions are effective immediately from the date of the circular, December 29, 2023.