Module: | MODULE B: RISK MANAGEMENT
Q435: Consider the following statements regarding the Intraday Liquidity Management framework for commercial banks:
1. Intraday liquidity management ensures that a bank can meet its payment and settlement obligations on a real-time basis during the business day.
2. The Reserve Bank of India mandates that banks must measure expected gross cash inflows and outflows, anticipating the exact time of day these flows occur.
3. Banks are legally exempt from maintaining collateral for intraday liquidity facilities provided by the central bank.
Which of the statements given above is/are correct?
2. The Reserve Bank of India mandates that banks must measure expected gross cash inflows and outflows, anticipating the exact time of day these flows occur.
3. Banks are legally exempt from maintaining collateral for intraday liquidity facilities provided by the central bank.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: Intraday liquidity management is the process by which a bank ensures it has sufficient funds to meet all real-time payment and settlement obligations continuously throughout the business day, preventing payment gridlocks.
Statement 2 is correct: Reserve Bank of India guidelines explicitly mandate that robust intraday management requires banks to measure expected daily gross cash inflows and outflows, and proactively anticipate the specific time of day these flows will occur to prevent structural bottlenecks.
Statement 3 is incorrect: Banks are never exempt from maintaining collateral for central bank liquidity.
To access Intraday Liquidity (IDL) facilities from the Reserve Bank of India, banks must pledge highly rated, unencumbered collateral, primarily standard government securities, to secure the real-time funds.
Statement 2 is correct: Reserve Bank of India guidelines explicitly mandate that robust intraday management requires banks to measure expected daily gross cash inflows and outflows, and proactively anticipate the specific time of day these flows will occur to prevent structural bottlenecks.
Statement 3 is incorrect: Banks are never exempt from maintaining collateral for central bank liquidity.
To access Intraday Liquidity (IDL) facilities from the Reserve Bank of India, banks must pledge highly rated, unencumbered collateral, primarily standard government securities, to secure the real-time funds.