The Reserve Bank of India (RBI) on Thursday released draft guidelines on net stable funding ratio (NSFR) under basel III framework on liquidity standards for banks.

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

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

The central bank has proposed to make NSFR applicable to banks in India from Jan. 1, 2018.

The RBI has requested for comments on these guidelines by email at the earliest, but not later than Jun. 26, 2015. It had proposed to issue the guidelines in the First Bi-monthly Monetary Policy Statement, 2015-16 announced on Apr. 7, 2015.