Regional Rural Banks Asset Liability Management Directions

RBI/DOR/2025-26/261 DOR.LRG.REC.No.180/13-10-008/2025-26 November 28, 2025

Reserve Bank of India (Regional Rural 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 – Asset Liability Management Governance A. Introduction B. ALM Information Systems C. ALM Organisation D. ALM Process Chapter IV – Liquidity Risk Management A. Management of Liquidity Risk B. Maturity Ladder-based monitoring C. Behavioural Patterns D. Statement of Dynamic Liquidity E. Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) Chapter V – Currency Risk Management Chapter VI – Interest Rate Risk (IRR) Management A. Introduction B. Traditional Gap Analysis C. Interest Rate Sensitivity Statement D. Behavioural Patterns Chapter VII – Monitoring and Reporting A. Preparation and Review of Statements Chapter VIII – Repeal and Other Provisions A. Repeal and Saving B. Application of other laws not barred C. Interpretations Annex – I: Structural Liquidity Statement Annex – II: Short-term Dynamic Liquidity statement Annex – III: Interest Rate Sensitivity Statement Annex IV: Maturity Profile – Liquidity Annex V: Interest Rate Sensitivity

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 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 (Regional Rural Banks – Asset Liability Management) Directions, 2025.

2 These Directions shall become effective from the date of issue.

B. Applicability

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

C. Definitions

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

(1) ‘Defeasance Period’ is the time taken to liquidate the investment in securities on the basis of liquidity in the secondary market.

(2) ‘Interest Rate Risk’ means risk where changes in market interest rates might adversely affect a bank's financial condition.

(3) ‘Cash Reserve Ratio (CRR)’ shall have the same meaning as defined in the Reserve Bank of India (Regional Rural Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025.

(4) ‘Statutory Liquidity Ratio (SLR)’ shall have the same meaning as defined in Reserve Bank of India (Regional Rural Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025.

(5) ‘Marginal Standing Facility (MSF)’ shall mean the facility as mentioned in RBI press release dated September 30, 2025.

5 All other expressions unless defined herein shall have the same meaning as have been assigned to them under the BR 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 shall have the overall responsibility for management of risks and shall decide the risk management policy and procedures, set prudential limits, auditing, reporting and review mechanism in respect of liquidity, interest rate, and forex risks.

B. Approval of policies, limits, and reviews

7 The Board shall approve the ALM Policy, exercise the requisite oversight on the implementation of the ALM system and review its functioning periodically.

8 The Board shall approve the internal prudential limits for cumulative mismatches (running total) across all time buckets for Structural Liquidity Statement.

9 The Board shall approve prudential limits on individual Gaps of Interest Rate Sensitivity Statement for a bank.

Chapter III – Asset Liability Management Governance

A. Introduction

10 These Directions shall serve as a benchmark for ALM system for those banks that lack a formal ALM system. In case a bank has introduced more sophisticated systems, it may continue with it, but shall ensure compliance with ALM systems suggested in the directions. ALM, among other functions, shall provide a dynamic framework for measuring, monitoring and managing liquidity, interest rate and foreign exchange (forex) risks, involving assessment of various types of risks and altering balance sheet (assets and liabilities) items in a dynamic manner to manage risks.

11 The ALM system shall rest on the following three pillars:

(1) ALM Information Systems comprising of: Management Information Systems (MIS); and Availability, accuracy, adequacy, and expediency of information.

(2) ALM Organisation incorporating: Structure and responsibilities; and Level of Top management involvement.

(3) ALM Process comprising of: Risk parameters; Risk identification; Risk measurement; Risk management; and Risk policies and procedures, prudential limits and auditing, reporting, and review.

B. ALM Information Systems

12 ALM shall be supported by specific risk policies and procedures and prudential limits. The framework shall be built on sound methodology, with the availability of timely, adequate and accurate information being central to the ALM exercise.

C. ALM Organisation

13 A bank shall constitute an Asset-Liability Management Committee (ALCO), headed by the CEO or the Secretary, which shall be responsible for ensuring adherence to the policies and limits set by the Board as well as for deciding the business strategy (on both assets and liabilities) in line with the bank's business and risk management objectives. The Board shall approve the ALM Policy, exercise the requisite oversight on the implementation of the ALM system, and review its functioning periodically.

14 The ALCO shall be a decision-making unit responsible for balance sheet planning from risk-return perspective, including the strategic management of liquidity, interest rate, and forex risks. The ALCO's future business strategy decisions shall be based on a bank’s views on current interest rates. In respect of the funding policy, for instance, its responsibility would be to decide on source and mix of liabilities or sale of assets. The ALCO shall develop a view on future direction of interest rate movements and decide on funding mixes between fixed and floating rate funds, wholesale and retail deposits, short term and long-term deposits, etc.

15 The size (number of members) of ALCO shall depend on the size of the bank, level of business and organisational structure. The Heads of Investment, Treasury, Credit, Strategy, and Risk Management can be members of the Committee, along with other members, as deemed suitable. The Head of the Information Technology Division responsible for building up of MIS, shall be an invitee. An RRB shall, at its discretion, have Sub-committees and Support Groups.

16 The ALM Support Groups, consisting of operating staff, shall be responsible for analysing, monitoring and reporting the risk profiles to the ALCO. The staff shall also prepare forecasts (simulations) showing the effects of various possible changes in market conditions related to the balance sheet and recommend the action needed to adhere to bank's internal limits.

17 The business and risk management strategy of the Top Management shall ensure that it operates within the limits / parameters set by the Board. The ALCO shall inter alia consider pricing of both deposits and advances, desired maturity profile and mix of the incremental assets and liabilities, etc. In addition to monitoring the risk levels of a bank, the ALCO shall also review the results of and progress in implementation of the decisions made in the previous meetings.