Reserve Bank of India (Payments Banks – Asset Liability Management) Directions, 2025

RBI/DOR/2025-26/215 DOR.LRG.No.134/13-10-003/2025-26 November 28, 2025

Reserve Bank of India (Payments Banks – Asset Liability Management) Directions, 2025

Table of Contents

Chapter I – Preliminary A. Short Title and Commencement B. Applicability C. Definitions

Chapter II – Role of the Board A. Responsibilities of the Board B. Approval of Policies, limits and reviews

Chapter III – Liquidity Risk Management A. Introduction B. Governance of Liquidity Risk Management C. Liquidity Risk Management Policy D. Strategy for Managing Liquidity Risk E. Identification F. Risk Measurement – Flow Approach G. Risk Measurement – Stock Approach H. Risk Monitoring I. Liquidity Across Currencies J. Liquidity Risk Tolerance K. Management Information System (MIS) L. Internal Controls M. Monitoring of Liquidity N. Collateral Position Management O. Incorporation of Liquidity Costs, Benefits and Risks in the Internal Pricing P. Funding Strategy - Diversified Funding Q. Liquidity risk due to Intra Group transfers R. Stress Testing S. Contingency Funding Plan (CFP)

Chapter IV – Interest Rate Risk (IRR) Management A. General Instructions B. Earnings Perspective – TGA C. Economic Value Perspective – DGA D. Monitoring of Interest Rate Risk E. Treatment of positions in various currencies F. Interest rate risk management

Chapter V – Monitoring and Reporting A. Liquidity Risk A.1 Preparation and Review of Statements A.2 Regulatory Reporting and Periodicity of Returns B. Interest Rate Risk B.1 Preparation and Review of Statements B.2 Regulatory Reporting and Periodicity of Returns

Chapter VI – Repeal and Other Provisions A. Repeal and Saving B. Application of other laws not barred C. Interpretations

Annex-I: Basel Principles for Liquidity Risk Management Annex-II: Liquidity Return Annex-III: Interest Rate Sensitivity Statement Annex-IV: Guidance for Slotting Cash Flows Part A1 Annex-V: Guidance for Slotting Cash Flows Part A2 Annex-VI: Guidance on Bucketing

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.

Chapter I – Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Payments Banks– Asset Liability Management) Directions, 2025.
2. These Directions shall come into effect from the date of issue.

B. Applicability

3. These Directions shall be applicable to Payments Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').

Note: Mere mention of an activity, transaction or item in these Directions does not imply that it is permitted, and the bank shall refer to the extant statutory and regulatory requirements while determining the permissibility or otherwise of an activity, transaction, or item.

C. Definitions

4. In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:

• (1) ‘Business Day’ means the opening hours of the Large Value Payment System (LVPS) or of correspondent banking services during which a bank can receive and make payments in a local jurisdiction. Explanation: An LVPS is a funds transfer system that typically handles large-value and high-priority payments. In India, Real Time Gross Settlement System (RTGS) is an LVPS.
• (2) ‘Cash in hand’ shall consist of total amount of notes and coins held by bank branches / ATMs / Cash deposit machines maintained by a bank, including transit cash on bank’s books as also cash with Business Correspondents (BCs), but shall exclude cash, where physical possession is with outsourced vendors / BCs, which is not replenished in bank’s ATM and / or is not reflected on bank’s books.
• (3) ‘Cash Reserve Ratio (CRR)’ shall have the same meaning as defined in the Reserve Bank of India (Payments Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025.
• (4) ‘Government security’ shall have the same meaning as assigned to it in Section 2(f) of the Government Securities Act, 2006.
• (5) ‘Interest Rate Risk (IRR)’ means the risk where changes in market interest rates might adversely affect a bank's financial condition.
• (6) ‘Intraday Liquidity’ means funds which can be accessed during the business day, usually to enable a bank make payments in real time.
• (7) ‘Intraday Liquidity Risk’ means the risk that a bank fails to manage its intraday liquidity effectively, which could leave it unable to meet a payment obligation at the time expected, thereby affecting its own liquidity position and that of other parties.
• (8) ‘Funding Liquidity Risk’ means the risk that a bank will not be able to meet efficiently the expected and unexpected current and future cash flows and collateral needs without affecting either its daily operations or its financial condition.
• (9) ‘Marginal Standing Facility (MSF)’ shall mean the facility as mentioned in RBI press release dated September 30, 2025.
• (10) ‘Market Liquidity Risk’ means the risk that a bank cannot easily offset or eliminate a position at the prevailing market price because of inadequate market depth or market disruption.
• (11) ‘Modified Duration’ means the approximate percentage change in value of an asset or liability for a 100-basis point change in the rate of interest.
• (12) ‘Net Worth’ comprises of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve, and credit balance in Profit & Loss Account, less debit balance in Profit and Loss Account, Accumulated Losses, and Intangible Assets. No general or specific provisions should be included in computation of Net Worth.
• (13) ‘Statutory Liquidity Ratio (SLR)’ shall have the same meaning as defined in Reserve Bank of India (Payments Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025.
• (14) ‘Time-specific obligations’ means the obligations which must be settled at a specific time within the day or have an expected intraday settlement deadline.
• (15) ‘Unencumbered’ means free of legal, regulatory, contractual or other restrictions on the ability of a bank to liquidate, sell, transfer or assign an asset.

5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act, the RBI Act, rules / regulations made thereunder, or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

Chapter II – Role of the Board

A. Responsibilities of the Board

6. The Board of Directors (Board) shall be responsible for overall management of liquidity risk, and shall decide the strategy, policies, and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance / limits.

7. The Board shall have a clear understanding of the bank’s liquidity risk, including the liquidity risk profile of all its branches, subsidiaries, and associates (both domestic and overseas).

8. The Board shall ensure that risk tolerance is understood at all levels of management.

9. The Board shall establish executive level authority and responsibility for liquidity risk management, enforce management’s duties to identify, measure, monitor, and manage liquidity risk and formulate / review the Contingent Funding Plan (CFP).

B. Approval of Policies, limits and reviews

10. The Board or its Committee shall oversee the establishment and approval of policies, strategies, and procedures to manage liquidity risk, and review them at least annually. The Board shall also approve the policy regarding inclusion and monitoring of only those intraday liquidity sources which are freely and readily available to the bank at the start of the day.

11. The Board shall approve the internal limits for liquidity stock ratios, based on its liquidity risk management capabilities, experience, and risk profile. It shall also set an explicit liquidity risk tolerance, which shall define the level of liquidity risk that the bank is willing to assume and reflect the bank’s financial condition and funding capacity.

12. The Board shall periodically review information necessary to maintain its understanding of liquidity risk, the key assumptions used in setting the liquidity risk tolerance, and contingency plans for their effectiveness and operational feasibility, at least on an annual basis.

13. The Board or Risk Management Committee (RMC) shall inter-alia approve the internal prudential limits for cumulative mismatches across all time buckets of structural liquidity statement (SLS) for monitoring by bank, as also approve appropriate internal limits on Earnings at Risk (EaR) and volatility in the Market Value of Equity (MVE), based on bank’s risk bearing and risk management capacity.

14. The Board / ALCO shall periodically review the internal limits after assessing various scenarios of interest rates and the resultant volatility of earnings in terms of Net Interest Income (NII) and volatility in Net Worth.

15. A reliable Management Information System (MIS) designed to provide timely and forward-looking information on the liquidity position of the bank and the banking group, under normal and stress situations, shall be presented before the Board and the Asset Liability Management Committee (ALCO).

16. Any vulnerability observed in the stress test results shall be reported to the Board and the Board shall ensure that the bank designs a plan of action to address the vulnerability immediately.

17. The Board shall ensure that the bank:

• (1) develops and adopts a suitable intraday liquidity risk management strategy that enables the bank to: monitor and measure expected daily gross liquidity inflows and outflows; ensure availability of sufficient intraday funding to meet its payment obligations; manage unexpected disruptions to its liquidity flows; and effectively manage collateral as integral part of intraday liquidity strategy.
• (2) establishes suitable policies, procedures, practices, and systems to support the intraday liquidity risk management in all financial markets and currencies in which it has significant payment and settlement flows, including when it chooses to rely on correspondents or custodians to conduct payment and settlement activities.

18. The Board shall approve the risk tolerance of individual business lines, for the bank to align the risk-taking incentives and the liquidity risk exposure of each business line.