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CS Professional · IFSCA - Regulations, Listing and Compliances · Banking Services and Finance Companies in IFSC

Ganga Bank's IBU in GIFT IFSC wants to meet liquidity requirements. The compliance head says the IBU must maintain liquidity ratios in a way consistent with IFSCA's prudential framework. Which approach is correct?

The IBU must maintain liquidity ratios such as the Liquidity Coverage Ratio as specified by IFSCA for its foreign currency business. Domestic rupee CRR and SLR do not apply in the same manner, and parent funding lines cannot substitute for the prescribed ratios.

  1. AMaintain liquidity ratios such as LCR on foreign currency business of the IBU as specified by IFSCA, held in the IFSCCorrect
  2. BMaintain CRR and SLR on IBU liabilities in rupees exactly as for domestic branches
  3. CHold no liquidity buffer because the IBU has no retail deposits
  4. DRely entirely on funding lines from the parent without any ratios

Explanation

IBUs are subject to liquidity norms like the Liquidity Coverage Ratio set by IFSCA for their foreign currency operations. Rupee CRR/SLR are domestic requirements and do not apply the same way to IBU business. Absence of retail deposits does not remove the requirement, and parent lines cannot replace ratios.

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