The Reserve Bank of India (RBI) on November 28, 2025 issued Directions on Asset Liability Management (ALM) for Payments Banks, aimed at strengthening the governance, monitoring, and control of liquidity and interest rate risks. The Directions define key terms such as intraday liquidity, funding liquidity risk, market liquidity risk, and interest rate risk, and clarify applicability to all Payments Banks from the date of issue. The framework emphasizes the role of the Board of Directors in overall management of liquidity risk, approval of policies, limits, and contingency funding plans (CFP), and ensuring risk tolerance is understood across all levels of the bank.
The Directions set out detailed requirements for Liquidity Risk Management, including governance structures involving the Board, Risk Management Committee (RMC), Asset-Liability Management Committee (ALCO), and ALM Support Group. Banks are required to adopt comprehensive policies covering risk identification, measurement, monitoring, and mitigation. Liquidity risk is to be measured using flow and stock approaches, with structural liquidity statements (SLS) prepared daily for domestic operations and reported fortnightly to RBI. Stress testing, scenario analysis, and monitoring of intraday and multi-currency liquidity are mandatory, alongside formal approval of funding strategies and prudential limits by the Board.
Interest Rate Risk (IRR) management, monitoring, and reporting frameworks are also prescribed, including evaluation from earnings and economic value perspectives, and alignment with internal limits on Earnings at Risk (EaR) and Market Value of Equity (MVE). Banks must maintain a robust Management Information System (MIS) to provide timely, forward-looking information on liquidity and interest rate risks. The Directions reiterate adherence to Basel principles, periodic review of assumptions, and reporting of vulnerabilities to the Board to ensure resilient ALM practices and safeguard financial stability.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/215 DOR.LRG.No.134/13-10-003/2025-26]
