Mumbai, May 29 (KNN) The Reserve Bank of India (RBI) on Thursday released the draft guidelines on the net stable funding ratio (NSFR) under Basel III framework on liquidity standards for banks and sought comments from all stakeholders by June 26.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.

The objective of the NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities, said RBI.

The Basel Committee on Banking Supervision issued the final rules on the NSFR in October 2014.

"A sustainable funding structure is intended to reduce the probability of erosion of a bank's liquidity position due to disruptions in its regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress," RBI said.

The NSFR limits over-reliance on short-term wholesale funding, encourages better assessment of funding risk across all on and off-balance sheet items, and promotes funding stability.

The Reserve Bank had proposed to issue the guidelines in the April 7, 2015 monetary policy.

The NSFR will become applicable to banks in India from January 1, 2018 and would be applicable for domestic banks at the solo as well as consolidated level.

The RBI has sought comments on NSFR guidelines by June 26, 2015. (KNN Bureau)