The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Rural Co-operative Banks – Asset Liability Management) Directions, 2025.
The following has been stated namely: -
• The ALM framework requires banks to adopt a comprehensive risk management system that concurrently monitors and controls liquidity risk, interest rate risk, and currency risk, rather than managing assets and liabilities in silos.
• Banks are expected to classify and match future cash inflows and outflows into maturity buckets (short-term, medium, long), and set tolerance limits for mismatches (gaps) in each bucket (especially in near-term buckets like 1–14 days, 15–28 days) to ensure liquidity adequacy.
• Initially, banks should cover a substantial portion (e.g. at least 60%) of their assets and liabilities under the ALM system, and progressively aim for full coverage (100%) of their portfolio as systems mature.
• The guidelines mandate robust Management Information Systems (MIS) to provide timely, accurate, and adequate data on the structure of assets, liabilities, interest rates, cash flows, and behavioural assumptions, which are essential for ALM decision making.
• Interest rate risk should be managed through tools such as gap analysis, duration gap, simulations, and scenario testing to assess how net interest income or economic value may vary under rate shifts.
• The ALM policy shall define authority lines, approval procedures, accountability, limits, reviews, escalation of mismatches, and contingency funding plans (liquidity buffers) to deal with stress situations.
• For co-operative and smaller banks, RBI expects adaptation of the ALM framework in line with their scale and systems, but the key principles (matching cash flows, setting tolerance limits, MIS, management oversight) remain binding.
[Notification no. - RBI/DOR/2025-26/310 DOR.LRG.REC.No.229/13-10-007/2025-26]
