Liquidity risk management

Liquidity risk is the risk that a bank will be unable to meet its financial obligations as they fall due without incurring unacceptable losses. It arises when a bank cannot fund increases in assets or meet obligations at a reasonable cost.

Time needed to exit or hedge a position without moving market price.

Funding liquidity risk is the inability to raise funds to meet cash flow obligations, while market liquidity risk is the risk that a bank cannot easily offset or eliminate a position in the market without significantly affecting its price.

100% of net cash outflows over a 30-day stress period.

RBI's guidelines on Liquidity Risk Management issued in 2012, along with the Basel III Liquidity Standards framework, govern liquidity risk management in Indian scheduled commercial banks.

Oversees liquidity risk framework, policies, and limit enforcement.

LCR is a Basel III metric requiring banks to hold sufficient High-Quality Liquid Assets (HQLA) to cover total net cash outflows over a 30-day stress period. The minimum LCR requirement in India is 100%.

Board-approved maximum liquidity risk a bank is willing to accept.