“Liquidity” means NBFC’s[Non-Banking Financial corporations] capacity to fund the increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses.
“Liquidity Risk” means inability of an NBFC to meet such obligations as they become due without adversely affecting the NBFC’s financial condition. Effective liquidity risk management helps ensure an NBFC’s ability to meet its obligations as and when they fall due and reduces the probability of an adverse situation developing.
