Reserve Bank of India (Rural Co-operative Banks – Asset Liability Management) Directions, 2025
RBI master-direction RBI/DOR/2025-26/310 · 28 Nov 2025
RBI master-direction RBI/DOR/2025-26/310 · 28 Nov 2025
Summary
Check the official recordThe Reserve Bank of India establishes a framework for Asset Liability Management (ALM) for State Co-operative Banks and Central Co-operative Banks. Banks must implement an ALM system to manage liquidity, interest rate, and equity price risks. The Board of Directors holds responsibility for risk management policies, internal prudential limits, and oversight. Banks must establish an Asset-Liability Management Committee (ALCO) to monitor risk profiles and ensure compliance with Board-approved limits. The ALM process requires banks to measure cash flow mismatches, monitor interest rate sensitivity, and maintain structural liquidity statements. Banks must submit quarterly ALM returns to the Department of Supervision, NABARD. These directions replace previous ALM instructions for rural co-operative banks effective from November 28, 2025.
What you must do
Key dates
Who is affected
Thresholds
RBI/DOR/2025-26/310
DOR.LRG.REC.No.229/13-10-007/2025-26
November 28, 2025
Reserve Bank of India (Rural Co-operative Banks – Asset Liability Management) Directions, 2025
A. Short Title and Commencement
B. Applicability
C. Definitions
A. Responsibilities of the Board
B. Board approved policies, limits, and reviews
A. Introduction
B. ALM Information Systems
C. ALM Organization
D. ALM Process
A. Introduction
B. Maturity / Cash flow mismatches
C. Dynamic Liquidity Assessment
D. Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for Scheduled StCB
A. Introduction
B. Traditional Gap Analysis
C. Interest Rate Sensitivity Statement
A. Behavioural Patterns
B. Embedded Options
C. Transfer Price Mechanism
D. Financial Reporting and Role of Auditors
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 read with Section 56 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.
1 These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Asset Liability Management) Directions, 2025.
2 These Directions shall come into effect from the date of issue.
3 These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').
In this context, rural co-operative banks shall mean State Co-operative Banks and Central Co-operative Banks, as defined in the National Bank for Agriculture and Rural Development Act, 1981.
4 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
(1) 'Defeasance period' means time taken to liquidate the investment in securities on the basis of liquidity in the secondary market.
(2) 'Interest Rate Risk' is the risk where changes in market interest rates might adversely affect a bank's financial condition.
(3) 'Embedded Options' means customers exercising their options (premature closure of deposits and prepayment of loans and advances).
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.
6 The Board shall have an overall responsibility for risk management and shall decide the risk management policy of a bank including Asset Liability Management (ALM) Policy, and set limits for liquidity, interest rate, and equity price risks.
7 The Management Committee of the Board or any other specific Committee constituted by the Board shall oversee the implementation of the ALM system and review its functioning periodically.
8 The Board shall be responsible for providing adequate information to the stakeholders.
9 The Board / Management Committee shall approve internal prudential limits for cumulative mismatches (running total) across all time buckets of the structural liquidity statement (SLS) for monitoring by a bank.
10 The business and risk management strategy of the bank should ensure that the bank operates within the limits / parameters set by the Board.
11 The Board / Asset-Liability Management Committee (ALCO) of a bank shall approve the volume, composition, holding / defeasance period, and cut-loss limits for the investments in the 'current category'.
12 The Board / Management Committee of a bank shall approve prudential limits on individual gaps in Interest Rate Sensitivity (IRS). The prudential limits shall be based on the Total Assets, Earning Assets, or Equity. The Board / Management Committee of bank shall also approve a prudent level of Earnings at Risk (EaR) or Net Interest Margin (NIM).
13 The Board / ALCO of bank shall approve the estimates of behavioural pattern, embedded options, rolls-in and rolls-out, etc., of various components of assets and liabilities on the basis of past data / empirical studies for classification of the same in the appropriate time buckets.
14 A bank shall establish an ALM system that offers a comprehensive and dynamic framework for measuring, monitoring, and managing liquidity, interest rate, currency / foreign exchange, and equity price risks. The ALM framework shall be closely aligned with the bank's business strategy.
15 The bank shall use the ALM function to promote risk management discipline by making informed business decisions that account for inherent risks. ALM decisions shall be integrated, addressing asset-liability mix and maturity structure simultaneously.
16 The ALM system shall be developed into a strategic tool for a bank's management, clearly specifying the risk policies and tolerance limits.
17 A bank shall ensure that the ALM process encompasses the following:
(1) Planning, directing and controlling the flow, mix, cost, and yield of the consolidated funds;
(2) Assessment of various asset mixes, funding combinations, price volume relations, and their implications on Liquidity, Income, and Capital ratio;
(3) Planning procedure covering all assets and liabilities by rate, amount, and maturity;
(4) Management of the Net Margin to ensure that its level and riskiness are comparable with the risk / return objectives of a bank;
(5) Simultaneous management of assets and liabilities for the purpose of mitigating the impact of the interest rate risk, providing liquidity, and enhancing the market value of equity; and
(6) Managing the income spread while controlling the related risks.
18 A bank shall implement the ALM system on the following three pillars:
(1) ALM Information Systems;
(2) ALM Organisation; and
(3) ALM Process.
19 A bank shall align its ALM operations within the risk policies and tolerance limits approved by the Board. The Top Management of the bank shall put in place a robust Management Information System (MIS) to facilitate timely and accurate data collection. A bank shall evolve the MIS to better capture the risk parameters, measurement of identified risks, and their management.
20 A bank shall supplement its balance sheet, income and cash flow statements with risk disclosures to promote efficient resource allocation, enforce financial discipline, enhance transparency and reflect its true financial health.
21 A bank shall establish an ALCO comprising its Top Management, including the CEO. The ALCO shall meet regularly, ensure compliance with Board-approved limits, and align asset-liability strategies with budget and risk objectives.
22 The size (number of members) of ALCO shall depend on the size of the bank's business mix and organisational complexity. The CEO / MD or General Manager shall head the ALCO, and Heads of Investment, Credit and Strategy, Resources Management, Treasury and Risk Management can be members of the ALCO, along with other members, as deemed suitable. The Head of IT will be a special invitee. A bank, at its discretion, may have Sub-Committees and Support Groups.