India cbank sets limit on asset-resource mismatch

Last Updated: Thu, Nov 08, 2012 10:26 hrs

MUMBAI, Nov 7 (Reuters) - The Indian central bank set tolerance limits for mismatches between assets and resources and also asked banks to restrict their risk exposures to within 10 years, as part of the final guidelines on liquidity risk management, released on Wednesday.

"Long term resources should not fall below 70 percent of long term assets; and (b) long and medium term resources together should not fall below 80 percent of the long and medium term assets," the Reserve Bank of India said.

The central bank also asked lenders to make public disclosures on a regular basis that will help market participants to make informed judgments about the soundness of its liquidity risk management framework and liquidity position.

The RBI also advised banks to conduct stress tests at regular intervals and across different maturities and profiles.

"Banks are encouraged to have stress tests with various survival horizons in mind, say one month or less; two or three months; and six months or more, etc," the RBI said.

The RBI has asked banks to put in place the guidelines on intra-day liquidity risk management strategy by Dec. 31. (Reporting by Neha Dasgupta and Suvashree Dey Choudhury; Editing by Sunil Nair)

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