Reserve Bank of India on 17th February, 2023 issued a Circular regarding Governance, measurement and management of Interest Rate Risk in Banking Book.
Interest Rate Risk in Banking Book (IRRBB) refers to the current or prospective risk to banks’ capital and earnings arising from adverse movements in interest rates that affect its banking book positions. Excessive IRRBB can pose a significant risk to banks’ current capital base and/or future earnings. These guidelines, accordingly, require banks to measure, monitor and disclose their exposure to IRRBB.
The final guidelines on Interest Rate Risk in Banking Book (IRRBB), in alignment with the revised framework issued by the Basel Committee on Banking Supervision (BCBS), are provided in Annex of the given Circular.
Further, the Banks are advised to be prepared for measuring, monitoring, and disclosing their exposure to interest rate risk in the banking book in terms of this circular. (b) Ahead of the implementation, banks shall submit the disclosures stipulated in Table B of Appendix-3 to the Department of Regulation, Reserve Bank of India (by e-mail: cgmicdor@rbi.org.in) within two months from the end of the respective quarter, as per following schedule:
| Entities | Frequency | Return to be submitted from the quarter ended |
| D-SIBs | Quarterly | March 2023 |
| Other Banks | Quarterly | June 2023 |
Further, the instruction on interest rate risk management issued vide circular DBOD.No.BP.BC.8/21.04.098/99 dated February 10, 1999 on ‘Asset Liability Management (ALM) system’ which require banks to undertake Traditional Gap Analysis and circular DBOD.No.BP.BC.59/21.04.098/2010-11 dated November 04, 2010 on ‘Guidelines on Banks’ Asset Liability Management Framework – Interest Rate Risk’ which require banks to undertake Duration Gap Analysis, shall be phased out post implementation of these guidelines, the details of which shall be advised in due course.
This Circular is applicable to all commercial banks (other than Regional Rural Banks, Small Finance Banks, Payments Banks and Local Area Banks) and shall come into force with immediate effect.
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