"The draft is experimental in nature and we have told them that where there are practical difficulties in implementing the guidelines, they should offer their recommendations latest by June 30, 1999," they said.

It may be recalled that the ten FIs, to whom the directives have been issued, have to introduce the ALM system on a trial basis from October 1, 1999 so that they can be ready for a regular system from April 1, 2000.

A source in a leading FI said that they would be offering recommendations individually, depending on the existing systems they had and its functionality.

In fact many of the leading FIs already have their own ALM systems in place. "We are already following a method of monitoring the liquidity and interest rate risk of our investments," said thesource.

The RBI has factored this aspect of it in its guidelines, stating that if any of the FIs had more sophisticated ALM systems in place, then they could continue with it but should fine tune their reporting systems so that it could conform with the guidelines issued by the RBI.

When asked specifically as to what sort of recommendations they would make, FI sources said they were going through the guidelines thoroughly and it would take some time for them to come up with their suggestions.

However some of the FIs said that they would be focussing on liquidity management systems as the recent liquidity glut led to a fall in spreads of paper issued by FIs, in the first half of this month while there are apprehensions that the thrust on liquidity given in the credit policy would result in further fall of yields.

The RBI has asked the financial institutions to set up a small group under the charge of senior executives looking after the treasury operations of the organisation.

The group comprisingmembers from the areas of investments, foreign exchange, credit and management information systems, and would be responsible for formalising the ALM system in the institution.