RBI/2007-2008/165

DBOD. No. BP. BC. 38 / 21.04.098/ 2007-08

October 24, 2007
Chairmen / Chief Executive Officers
All Commercial Banks
(excluding RRBs)
Guidelines on Asset-Liability Management (ALM) System amendments
Reserve Bank had issued guidelines on ALM system vide Circular No. DBOD. BP. BC. 8 /
21.04.098/
99 dated February 10, 1999, which covered, among others, interest rate risk and liquidity
risk
measurement / reporting framework and prudential limits. As a measure of liquidity
management,
banks are required to monitor their cumulative mismatches across all time buckets in
their Statement
of Structural Liquidity by establishing internal prudential limits with the approval of the
Board /
Management Committee. As per the guidelines, the mismatches (negative gap) during
the time
buckets of 1-14 days and 15-28 days in the normal course, are not to exceed 20 per cent
of the cash
outflows in the respective time buckets.
2. Having regard to the international practices, the level of sophistication of banks in
India and the
need for a sharper assessment of the efficacy of liquidity management, these guidelines
have been
reviewed and it has been decided that :
(a) the banks may adopt a more granular approach to measurement of liquidity risk by
splitting the
first time bucket (1-14 days at present) in the Statement of Structural Liquidity into three
time buckets
viz. Next day , 2-7 days and 8-14 days.
(b) the Statement of Structural Liquidity may be compiled on best available data
coverage, in due
consideration of non-availability of a fully networked environment. Banks may, however,
make
concerted and requisite efforts to ensure coverage of 100 per cent data in a timely
manner.
(c) the net cumulative negative mismatches during the Next day, 2-7 days, 8-14 days
and 15-28 days
buckets should not exceed 5 % ,10%, 15 % and 20 % of the cumulative cash outflows in
the
respective time buckets in order to recognise the cumulative impact on liquidity.
(d) banks may undertake dynamic liquidity management and should prepare the
Statement of
Structural Liquidity on daily basis. The Statement of Structural Liquidity, may, however,
be reported to
RBI, once a month, as on the third Wednesday of every month.
3. The format of Statement of Structural Liquidity has been revised suitably and is
furnished at Annex
I. The guidance for slotting the future cash flows of banks in the revised time buckets has
also been
suitably modified and is furnished at Annex II. The format of the Statement of Short-term
Dynamic
Liquidity may also be amended on the above lines.
4. To enable the banks to fine tune their existing MIS as per the modified guidelines, the
revised
norms as well as the supervisory reporting as per the revised format would commence
with effect from

the period beginning January 1, 2008 and the reporting frequency would continue to be
monthly for
the present. However, the frequency of supervisory reporting of the Structural Liquidity
position shall
be fortnightly, with effect from the fortnight beginning April 1, 2008.
Yours faithfully,
(Prashant Saran)
Chief General Manager-in-Charge
Annex - I
Name of the bank :
Statement of Structural Liquidity as on :
(Amounts in Crores of Rupees)
Residual maturity
OUTFLOWS
Day1 2-7
day
s
8-14
day
s
15 -28
days
29 days
and upto
3months
Over 3
months
and
upto
6months
Over 6
Months
and
upto
1year
Over 1
year
and
upto
3 years
Over 3
years
and
upto
5years
Over
5years
Total
1. Capital
2. Reserves & Surplus
3. Deposits XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Current Deposits
(ii) Savings Bank
Deposits
(iii) Term Deposits
(iv) Certificates of
Deposit
4. Borrowings XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Call and Short

Notice
(ii) Inter-Bank
(Term)
(iii) Refinances
(iv) Others (specify)
5.Other Liabilities &
Provisions
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Bills Payable
(ii) Provisions
(iii) Others
6.Lines of Credit
committed to
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Institutions
(ii) Customers
7. Unavailed portion
of Cash Credit /
Overdraft / Demand
Loan component of
Working Capital
8. Letters of Credit /
Guarantees
9. Repos
10. Bills Rediscounted
(DUPN)
11.Swaps (Buy/Sell) /
maturing forwards
12. Interest payable
13. Others (specify)
A. TOTAL
OUTFLOWS
B. CUMULATIVE
OUTFLOWS
2
Residual Maturity
INFLOWS
Day1 2-7
day
s
8-14
day
s
15 -28
days
29 days
and upto
3 months
Over 3
months
and
upto
6months
Over 6
months
and
upto
1year
Over

1 year
and
upto
3years
Over 3
years
and
upto
5 years
Over
5years
Total
1. Cash
2. Balances with RBI
3.Balances with other
Banks
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Current Account
(ii) Money at Call
and Short Notice,
Term Deposits
and other
placements
4.Investments
(including those
under Repos but
excluding Reverse
Repos)
5. Advances
(Performing)
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Bills Purchased
and Discounted
(including bills
under DUPN)
(ii) Cash Credits,
Overdrafts and
Loans repayable
on demand
(iii) Term Loans
6. NPAs (Advances
and Investments) *
7. Fixed Assets
8. Other Assets XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
(i) Leased Assets
(ii) Others
9. Reverse Repos
10. Swaps (Sell /
Buy)/ maturing
forwards
11.Bills Rediscounted
(DUPN)
12. Interest
receivable
13. Committed Lines
of Credit
14. Export Refinance
from RBI.
15. Others (specify)

C. TOTAL INFLOWS
D. MISMATCH
( C-A )
E. MISMATCH as %
to OUTFLOWS
(D as % to A)
F. CUMULATIVE
MISMATCH
G. CUMULATIVE
MISMATCH
as a % to
CUMULATIVE
OUTFLOWS
( F as a % to B)
Net of provisions, interest suspense and claims received from ECGC/DICGC.
Annex II
Guidance for slotting the future cash flows
of banks in the revised time buckets
Heads of Accounts Classification into time buckets
A. Outflows
1. Capital, Reserves and
Surplus
Over 5 years bucket.
2. Demand Deposits
(Current and Savings
Bank Deposits)
Savings Bank and Current Deposits may be classified into volatile and
core portions. Savings Bank (10%) and Current (15%) Deposits are
generally withdrawable on demand. This portion may be treated as
volatile. While volatile portion can be placed in the Day 1, 2-7 days
and 8-14 days time buckets, depending upon the experience and
estimates of banks and the core portion may be placed in over 1- 3
years bucket.
The above classification of Savings Bank and Current Deposits is only
a benchmark. Banks which are better equipped to estimate the
behavioural pattern, roll-in and roll-out, embedded options, etc. on the
basis of past data/empirical studies could classify them in the
appropriate buckets, i.e. behavioural maturity instead of contractual
maturity, subject to the approval of the Board/ALCO.
3. Term Deposits Respective maturity buckets. Banks which are better equipped to
estimate the behavioural pattern, roll-in and roll-out, embedded options,
etc. on the basis of past data/empirical studies could classify the retail
deposits in the appropriate buckets on the basis of behavioural
maturity rather than residual maturity. However, the wholesale
deposits should be shown under respective maturity buckets.
(wholesale deposits for the purpose of this statement may be Rs 15
lakhs or any such higher threshold approved by the banks Board).
4. Certificates of Deposit,
Borrowings and Bonds
(including Sub-ordinated
Debt)
Respective maturity buckets. Where call/put options are built into the
issue structure of any instrument/s, the call/put date/s should be
reckoned as the maturity date/s and the amount should be shown in the
respective time buckets.
5. Other Liabilities and
Provisions
(i) Bills Payable
(ii) Provisions other than

for loan loss and

depreciation in
investments
(iii) Other Liabilities
(i) The core component which could reasonably be estimated on the
basis of past data and behavioural pattern may be shown under Over
1-3 years time bucket. The balance amount may be placed in Day 1, 27 days and 8-14 days buckets, as per behavioural pattern.
(ii) Respective buckets depending on the purpose.
(iii) Respective maturity buckets. Items not representing cash
payables (i.e. income received in advance, etc.) may be placed in over
5 years bucket.
6. Export Refinance
Availed
Respective maturity buckets of underlying assets.

2
3
B. Inflows
Heads of Accounts Classification into time buckets
1. Cash Day 1 bucket.
2. Balances with RBI While the excess balance over the required CRR/SLR may be shown
under Day 1 bucket, the Statutory Balances may be distributed amongst
various time buckets corresponding to the maturity profile of DTL with a
time-lag of 14 days.

3.

Balances with other

banks
(i) Current Account
(ii) Money at Call and
Short Notice, Term
Deposits and other
placements
(i) Non-withdrawable portion on account of stipulations of minimum
balances may be shown under Over 1-3 years bucket and the
remaining balances may be shown under Day 1 bucket.
(ii) Respective maturity buckets.

4.

Investments
(Net of provisions)#
(i) Approved securities (i) Respective maturity buckets, excluding the amount required to
be
reinvested to maintain SLR corresponding to the DTL profile in various
time buckets.
(ii) Corporate debentures
and bonds, PSU bonds,
CDs and CPs,
Redeemable
preference shares,
Units of Mutual Funds
(close ended), etc.
(ii) Respective maturity buckets. Investments classified as NPIs should
be shown under over 3-5 years bucket (sub-standard) or over 5 years
bucket (doubtful).
(iii) Shares
(iv) Units of Mutual Funds
(open ended)
(iii) Listed shares (except strategic investments ) in 2-7days bucket,
with a haircut of 50%.
Other shares in Over 5 years bucket.
(iv) Day 1 bucket

(v) Investments in
Subsidiaries/
Joint Ventures
(v) Over 5 years bucket.
(vi) Securities in the Trading
Book
(vi) Day 1, 2-7 days, 8-14 days, 15-28 days and 29-90 days according
to defeasance periods.
5. Advances (Performing)

# Provisions may be netted from the gross investments provided

provisions are held
security-wise. Otherwise provisions should be shown in over 5 years
bucket.
4
Heads of Accounts Classification into time buckets
(i) Bills Purchased and
Discounted (including
bills under DUPN)
(i) Respective maturity buckets.
(ii) Cash Credit / Overdraft
(including TOD) and
Demand Loan
component of Working
Capital.
(ii) Banks should undertake a study of behavioural and seasonal pattern
of availments based on outstandings and the core and volatile portion
should be identified. While the volatile portion could be shown in the
near-term maturity buckets, the core portion may be shown under Over
1-3 years bucket.
(iii) Term Loans (iii) Interim cash flows may be shown under respective maturity
buckets.
6. NPAs
(Net of provisions,
interest suspense and
claims received from
ECGC/DICGC )
(i) Sub-standard (i) Over 3-5 years bucket.
(ii) Doubtful and Loss (ii) Over 5 years bucket.
7. Fixed Assets/
Assets on lease
Over 5 years bucket /
Interim cash flows may be shown under respective maturity buckets.
8. Other Assets
Intangible assets Intangible assets and assets not representing cash receivables may be
shown in Over 5 years bucket.
C. Off balance sheet items
1. Lines of Credit
committed / available
(i) Lines of Credit
committed to/ from
Institutions
(ii) Unavailed portion of
Cash Credit/ Overdraft /
Demand loan
component of Working
Capital limits (outflow)
(iii) Export Refinance
Unavailed (inflow)

(i) Day 1 bucket.

(ii) Banks should undertake a study of the behavioural and seasonal
pattern of potential availments in the accounts and the amounts so
arrived at may be shown under relevant maturity buckets upto 12
months.
(iii) Day 1 bucket.

5
Heads of Accounts Classification into time buckets
2. Contingent Liabilities
Letters of Credit /
Guarantees (outflow)
Devolvement of Letters of Credit/ Guarantees, initially entails cash
outflows. Thus, historical trend analysis ought to be conducted on the
devolvements and the amounts so arrived at in respect of outstanding
Letters of Credit / Guarantees (net of margins) should be distributed
amongst various time buckets. The assets created out of devolvements
may be shown under respective maturity buckets on the basis of
probable recovery dates.
3. Other Inflows / outflows
(i) Repos / Bills
Rediscounted (DUPN)
/ CBLO/ Swaps INR /
USD, maturing forex
forward contracts etc.
(outflow / inflow)
(i) Respective maturity buckets.
(ii) Interest payable /
receivable (outflow /
inflow) Accrued
interest which are
appearing in the books
on the reporting day
(ii) Respective maturity buckets.
Note :
(i) Liability on account of event cash flows i.e. short fall in CRR balance on reporting
Fridays, wage settlement, capital expenditure, etc. which are known to the banks and
any other contingency may be shown under respective maturity buckets. The event cash
outflows, including incremental SLR requirement should be reported against Outflows
Others.
(ii) All overdue liabilities may be placed in the Day 1, 2-7 days and 8-14 days buckets,
based on behavioural estimates.
(iii) Interest and instalments from advances and investments, which are overdue for less
than one month may be placed in Day 1, 2-7 days and 8-14 days buckets, based on
behavioural estimates. Further, interest and instalments due (before classification as
NPAs) may be placed in 29 days to 3 months bucket if the earlier receivables remain
uncollected.
D. Financing of Gap :
In case the net cumulative negative mismatches during the Day 1, 2-7 days, 8-14 days
and 1528 days buckets exceed the prudential limit of 5 % ,10%, 15 % and 20% of the
cumulative cash
outflows in the respective time buckets, the bank may show by way of a foot note as to
how it
proposes to finance the gap to bring the mismatch within the prescribed limits. The gap
can be financed from market borrowings (call / term), Bills Rediscounting, Repos, LAF and
deployment of foreign currency resources after conversion into rupees ( unswapped
foreign
currency funds ), etc.