RBI Updates 2015- Net Stable Funding Ratio (NSFR)

    RBI Updates 2015- Net Stable Funding Ratio (NSFR)
    RBI Updates 2015- Net Stable Funding Ratio (NSFR):
    Important Key Points about Net Stable Funding Ration (NSFR) were given here below, under the RBI Updates 2015. Candidates those who are preparing for upcoming RBI Assistant Exam 2015 can use this material.

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    RBI release Draft Guidelines on Net Stable Funding Ratio for Banks:
    The Reserve Bank of India, on 28 May 2015, released the Draft Guidelines on Net Stable Funding Ratio (NUFR) under Basel III Framework on Liquidity Standards for banks. The Reserve Bank proposed to make NSFR is to ensure that banks maintain a stable funding profile in relation to their assets and off-balance sheet activities.

    Net Stable Funding Ratio
    What is NSFR?
    • Net Stable Funding Ratio (NSFR) is defined as the amount of available stable funding relative to the amount of required stable funding.
    • It measures the amount of longer-term, stable sources of funding employed by an institution relative to the liquidity profiles of the assets funded and the potential for contingent calls on funding liquidity arising from off-balance sheet commitments and obligations.

    Background

    • In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulation with the objective of promoting a more resilient banking sector.
    • In this regard, the Basel III: International framework for liquidity risk measurement, standards and monitoring was issued in December 2010 which presented the details of global regulatory standards on liquidity. The Basel Committee on Banking Supervision issued the final rules on the NSFR in October 2014.
    • Two minimum standards- Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for funding liquidity were prescribed by the Basel Committee for achieving two separate but complementary objectives.
    • The RBI has already started phasing in implementation of the Liquidity Coverage Ratio (LCR) from January 2015.

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