The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Small Finance Banks – Asset Liability Management) Directions, 2025 for public comments. The aims to establish a comprehensive framework for liquidity and interest rate risk management in Small Finance Banks (SFBs), ensuring their ability to meet obligations under normal and stressed conditions. It lays down principles for governance, measurement, monitoring, and reporting of liquidity risk, aligned with Basel III standards, covering aspects such as Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and stress testing.
The Directions define key risk concepts including funding liquidity, market liquidity, intraday liquidity, and interest rate risk. They assign specific roles to the Board, Risk Management Committee (RMC), Asset-Liability Management Committee (ALCO), and ALM Support Group for effective oversight. The Board is tasked with setting liquidity risk tolerance, approving related policies and limits, and ensuring an effective Contingency Funding Plan (CFP). ALCO, chaired by the CEO or Executive Director, will manage day-to-day liquidity strategy, review stress test outcomes, and integrate liquidity costs into pricing and business planning.
The also mandates that SFBs maintain robust Management Information Systems (MIS), adopt a structured liquidity statement for cash flow tracking, and report data to the RBI at prescribed intervals. It further prescribes behavioural analysis of deposits and borrowings, periodic review of assumptions, and variance analysis to ensure accurate liquidity projections. The proposed framework seeks to strengthen resilience and promote sound asset-liability management practices across the SFB sector.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/194 DOR.LRG.No.113/13-10-002/2025-26]
