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
- Review and update your ALM policy to align with the new directions, especially board oversight and liquidity risk management.
- Implement systems to compute LCR and NSFR as per the prescribed factors and disclosure standards.
- 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.
Who it affects
Small Finance Banks, Treasury departments of SFBs, Risk management teams, Board of Directors of SFBs, Compliance and audit functions
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.