RBI Strengthens Liquidity Stress Testing Framework for Banks
| Category | Details |
|---|---|
| Announcement | RBI plans to strengthen liquidity stress testing framework for Scheduled Commercial Banks (SCBs). |
| Source | RBI's Annual Report 2024-25. |
| Key Objectives | Ensure resilience against liquidity shocks, introduce forward-looking stress test models, integrate climate-related financial risks, protect depositors, and maintain financial stability. |
| SCBs Measures | Cash flow analysis framework to evaluate liquidity under extreme stress conditions and ensure sufficient buffers. |
| NBFCs Measures | Development of an in-house liquidity stress testing framework specific to NBFCs. |
| UCBs Measures | Expansion of macro stress testing to large and mid-sized Urban Cooperative Banks. |
| RBI's Market Portfolio | Framework for liquidity risk stress testing using historical market stress scenarios, integrated with interest rate and forex risk tests. |
| Climate Risk Initiatives | Development of prudential guidelines, finalization of disclosure norms, and introduction of climate scenario analysis and stress tests. |
| Growth-at-Risk Model | New tool to assess how financial vulnerabilities may impact future economic growth. |
| Significance | Stress testing helps assess resilience to sudden withdrawals; inclusion of NBFCs/UCBs due to systemic importance; global push for ESG (Environmental, Social, Governance) risks integration. |