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LCR- RBI Compliances for LIQUIDITY RISK MANAGEMENT FRAMEWORK AND LCR to NBFC along with the changes w.e.f March 31, 2022.

Arun Singh
NBFCs Must Implement Liquidity Risk Management Framework and Disclose Liquidity Coverage Ratio Quarterly as per New Guidelines All deposit-taking Non-Banking Financial Companies (NBFCs) and non-deposit taking NBFCs with an asset size of 100 crore and above must establish a Liquidity Risk Management framework. This includes policies, strategies, practices, internal controls, and disclosures on liquidity risk, currency risk, and maturity profiling, to be reported quarterly and annually. Additionally, non-deposit taking NBFCs with assets of 5,000 crore and above, and all deposit-taking NBFCs, must disclose their Liquidity Coverage Ratio (LCR) quarterly. This involves detailing main LCR drivers, changes, High-Quality Liquid Assets (HQLAs) composition, funding source concentration, derivative exposures, currency mismatches, and other relevant liquidity profile factors. (AI Summary)

Applicability:

All Deposit taking NBFCs and Non-Deposit taking NBFCs with asset size of ₹ 100 crore and above.

Compliances:

All deposit taking NBFCs irrespective of their asset size and Non-deposit taking NBFC with asset size of ₹ 100 crore and above, has to make a framework and procedure related to Liquidity Risk Management Policy, Strategies and Practices, MIS, Internal controls, Maturity Profiling, Liquidity Risk Measurement, Currency Risk etc. and the same has to be disclosed on quarterly and annual basis in a given format.

In addition, all non-deposit taking NBFCs with asset size of ₹ 5,000 crore and above and all deposit taking NBFCs, are required to disclose information on their LCR every quarter along with the (a) the main drivers of their LCR results; (b) intra-period changes as well as changes over time; (c) the composition of HQLAs; (d) concentration of funding sources; (e) derivative exposures and potential collateral calls; (f) currency mismatch in the LCR; (g) other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers to be relevant for its liquidity profile.

Liquidity Coverage Ratio (LCR)= HQLA/ Total net cash outflows over the next 30 calendar Data must be presented as simple averages of daily observations with effect from the financial year ending March 31, 2022.

 

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