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RBI’s Circular Regarding LCR Computation

Published on November 25, 2022
Current Context: The Reserve Bank of India (RBI) announced that overnight balances under the Standing Deposit Facility (SDF), held by banks with the RBI, were eligible for Liquidity Coverage Ratio (LCR) computation.
RBI’s Circular Regarding LCR Computation
  • It will be eligible as Level 1 High-Quality Liquid Assets (HQLA) for LCR computation.
  • The circular by the RBI came after the central bank received concerns from the banks regarding the treatment of SDF under the Liquidity Risk Management Framework.
  • This guideline applies to all commercial banks, except Regional Rural Banks, Local Area Banks, and Payments Bank, with immediate effect.
  • SDF is a tool that facilitates an overnight transfer of excess liquidity (deposit) from banks to the RBI without any collateral (Government Securities).
  • LCR is the minimum amount of High-Quality Liquid Assets (HQLA) that are mandatorily held by the banks so as to increase the short-term resilience of liquidity risk.

Question:

Q.1 Recently a circular was released by ____ regarding the computation of the LCR.
a. RBI
b. SEBI
c. NABARD
d. SIDBI
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