RBI announces ALM norms for NBFCs

By Our Special Correspondent

MUMBAI, JUNE 27. The Reserve Bank of India today announced asset- liability management (ALM) guidelines for non-banking financial companies (NBFCs) as part of the overall system for effective risk management in their various portfolios. However, chit funds and nidhis have been now kept out of the purview of these guidelines.

``The ALM system should be put in place by such NBFCs that have asset size of Rs. 100 crores and above or public deposits of Rs. 20 crores and above as per their balance sheet as on March 31, 2001,'' the RBI stated in a press release today. The central bank has advised the companies that it would be desirable to constitute an Asset Liability Management Committee under the charge of chief executive officer or other senior executive with other specialist members for carrying out the spadework for formalising the ALM system in the institution.

The ALM system is required to be implemented by the year ending March 31, 2002 and the first ALM return comprising statements on structural liquidity, short term dynamic liquidity and interest rate sensitivity as on September 30, 2002 should be submitted to the RBI by October 31, 2002 by companies holding public deposits. In the case of companies not accepting or holding public deposits but having assets of Rs. 100 crores and above, separate supervisory arrangements are being contemplated which would be advised in due course.

The companies have been advised to conduct trial runs during the period ending September 30, 2001 and half-year beginning October 1, 2001 and report any operational difficulties in implementation of the system for necessary corrections.

The RBI further stated that NBFCs not now covered by the guidelines have also been recommended to put in place an ALM system ``as it is the endeavour of the bank to extend these guidelines to all NBFCs in due course.''

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