RBI’s Circular Regarding LCR Computation

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.

• 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