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RBI's New ALM Directions for Small Finance Banks

Current · Source: Reserve Bank of India · RBI/DOR/2025-26/194 · issued 28 Nov 2025 · ~2 min read
Quick answerRBI issued comprehensive Asset Liability Management (ALM) directions for Small Finance Banks, covering liquidity risk, LCR, NSFR, and interest rate risk. Effective immediately, these replace older guidelines and mandate stricter board oversight, stress testing, and reporting. Banks must align policies by the next review cycle.
The rule, in the simplest words
How it plays out — a real example

As a branch operations officer in Indore, I need to make sure our bank has enough liquid assets to meet its daily needs. This means we need to have enough cash or easily sellable assets, like gold, to give to customers who need it. If the market value of our gold falls, we need to have a plan in place to raise more liquid assets, like cash, to meet our daily needs. This is an example of managing liquidity risk.

What changed

RBI released a consolidated ALM framework specifically for Small Finance Banks, replacing previous guidelines (as per Chapter IX Repeal and Saving). The directions introduce detailed chapters on liquidity risk management, intraday liquidity, LCR, NSFR, and interest rate risk, with explicit board responsibilities and reporting formats. This is a new, standalone regulation.

What it means for you

Small Finance Banks must now comply with a full-fledged ALM framework, raising compliance and operational costs. The focus on liquidity buffers (LCR, NSFR) and stress testing will require system upgrades and tighter treasury management. Non-compliance could attract supervisory action, making ALM a board-level priority.

What you must do

Who it affects

Small Finance Banks, Treasury departments of SFBs, Risk management teams, Board of Directors of SFBs, Compliance and audit functions

❓ Common questions

When do these directions take effect?

The directions were issued on November 28, 2025, and are effective from that date. Banks must comply immediately, though transitional arrangements may be specified in the full document.

Do these directions apply to all Small Finance Banks?

Yes, the applicability section (Chapter I) states these directions apply to all Small Finance Banks. However, the source text does not specify any exemptions.

What are the key reporting requirements?

Banks must submit liquidity returns (Annex I), Basel III liquidity returns (Annex II), and interest rate sensitivity statements (Annex III) as per the periodicity in Chapter VIII. The exact frequency is not detailed in the source.

📜 Read the original circular — full text as issued by RBI
• Adverse implications for the value of liquid assets that a bank holds to meet its intraday liquidity usage. • A widespread fall in the market value and/ or credit rating of a bank’s unencumbered liquid assets may constrain its ability to raise intraday liquidity from the market. • For a bank that uses correspondent banking services, a widespread fall in the market value and / or credit rating of its unencumbered liquid assets may constrain its ability to raise intraday liquidity from its correspondent bank(s). A  reporting bank should consider the likely impact that the stress would have on its sources of available intraday liquidity at the start of the business day.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/DOR/2025-26/194 · issued 28 Nov 2025. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Implement systems to compute LCR and NSFR as per the prescribed factors and disclosure standards.
📜 Compliance
  • Review and update your ALM policy to align with the new directions, especially board oversight and liquidity risk management.
  • Set up intraday liquidity monitoring tools and stress testing frameworks as per Chapter IV.
  • Train treasury and risk teams on the new reporting formats (Annex I-III) and submission timelines.
  • Conduct a gap analysis between current practices and the new requirements, and report findings to the board.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Small Finance Banks, Treasury departments of SFBs, Risk management teams, Board of Directors of SFBs, Compliance and audit functions), your first concrete step on “RBI's New ALM Directions for Small Finance Banks” is: “Review and update your ALM policy to align with the new directions, especially board oversight and liquidity risk management.” (RBI issued this 28 Nov 2025).

  1. Circular: RBI/DOR/2025-26/194 -- RBI's New ALM Directions for Small Finance Banks
  2. Issued: 28 Nov 2025
  3. Action required: Review and update your ALM policy to align with the new directions, especially board oversight and liquidity risk management.
  4. Action required: Implement systems to compute LCR and NSFR as per the prescribed factors and disclosure standards.
  5. Action required: Set up intraday liquidity monitoring tools and stress testing frameworks as per Chapter IV.
  6. Action required: Train treasury and risk teams on the new reporting formats (Annex I-III) and submission timelines.
  7. Action required: Conduct a gap analysis between current practices and the new requirements, and report findings to the board.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13115&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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