5.2.10.10 Calculation of Liquidity under Alternative Liquidity Approach

In order to meet any shortfalls in the LCR, RBI allows banks to avail a special liquidity facility termed as “Facility to Avail Liquidity for Liquidity Coverage Ratio” or FALLCR. This is allowed to be utilized only if a bank has exhausted all eligible HQLA held for meeting liquidity needs and as a last resort. The liquidity facility is provided by RBI to banks under certain conditions including:

• Facility can be availed for a maximum of 90 days.
• Liquidity against securities is available after applying the haircuts specified for availing MSF.
• Rate of interest will be 200 basis points above the prevailing LAF rate or as specified by RBI.
• The facility will be effective from 1, January 2015.

The application identifies FALLCR through the standard product type, line of credit received, the credit line purpose, Contractual Committed Facility Extended by Central Bank as Alternative Liquidity, and where the counterparty is a central bank. This is a standard facility extended by multiple regulators across jurisdictions and hence is captured in a manner that is consistent across jurisdictions. Only those credit lines received from the central bank with the specific credit line purpose are assumed to meet the conditions to avail FALLCR and therefore are included in the stock of HQLA in case of shortfalls. Such credit lines are excluded from the net cash outflow calculations.

The application utilizes the alternative liquidity approach to bridge the shortfall as follows:

1. The LCR is computed in each currency and the shortfall in HQLA is identified as follows:
   
   

   

   
   
2. The application checks whether a line of credit received from a central bank with the credit line purpose “Contractual Committed Facility Extended by Central Bank as Alternative Liquidity” exists in the particular shortfall currency.
   If such a line of credit exists, then the application computes the liquidity availed under the alternative liquidity approach as follows:
   
   

   

   
   
   Where:
   ALA Committed Amount : Amount available to be drawn down under the Facility to Avail Liquidity for Liquidity Coverage Ratio
   = Drawn + Undrawn Amount of the line of credit received with the credit line purpose “Contractual Committed Facility Extended by Central Bank as Alternative Liquidity” The value included in the stock of HQLA on a consolidated currency basis on availing FALLCR is computed as follows:
   
   

   

   
   
   Where:
   n: Number of currencies in which an HQLA shortfall is observed which are allowed to be bridged using the ALA.