This is a PPT about Risk Management in Banks.

1. Risk
Management
InPrivateBanks
(HDFCBankLtd.)

2. DISCUSSION
Outline
 What is Risk Management
 Importance of Risk Management
 Credit Risk Management
 Market Risk Management
 Operational Risk Management

3. WHATIS RISK MANAGEMENT ?
The forecasting and evaluation of
financial risks together with the
identification of procedures to avoid or
minimize their impact
Identify
the Risk
Assess
the Risk
Control
Risk
Review
Control
Risk Management Process -

4. Types of Risk
Management

5.  Credit Risk is the risk or potential of loss that may
occur due to failure of borrower to meet the
obligation on agreed terms and condition of
financial contracts.
 Internal and External factors both Credit Risk of
bank portfolio.
 Credit Risk includes –
1. Loans
2. Internet Transactions
3. Derivatives
4. Acceptances

6. Best practices to manage this Risk
 Each bank should develop, with the approval of its
Board, its own credit risk strategy or plan
 They include a statement of the bank’s willingness to grant
loans based on the type of economic activity, geographical
location, currency, market, maturity and anticipated
profitability.
 They take into account the cyclical aspects of the
economy and the resulting shifts in the composition/
quality of the overall credit portfolio.
 Senior management of a bank shall be responsible for
implementing the credit risk strategy approved by the
Board.

7. The possibility of loss to the Bank
caused by changes in market variables
such as Interest rate, foreign exchange,
commodities and equities and prices of
securities etc.
Market risk Comprises of Liquidity risk, Exchange
rate risk, Interest rate risk and Hedging risk.
 Liquidity risk is the potential inability to meet the
liabilities as they become due. It arises when the
banks are unable to generate cash to cope with a
decline in deposits or increase in assets.
 Interest Rate Risk - Interest rate risk is the risk
where changes in market interest rates might
adversely affect a bank’s financial condition.
 Exchange rate risk, is an unavoidable risk of
foreign investment.

8. Strategies to Manage
this Risk
Top management of the Bank
should clearly articulate the
policies.
Bank should form asset-
liability management
committee
Should make a management
committee in order to track
the market risk on real time
basis.

9. Operational Risk

10. Estimating probability of
Operational loss and also
potential size of the loss.
Should be assessed and
reviewed at regular
interval
Can use analytical
techniques to measure the
operational risk level.
Developing enterprise-wise
generic standards for OR
Corporate Governance
standards.
Strategies

11. Per Employee Ratio March 2021 March 2020
Interest Income / Employee Rs. 10063719 9815480
Net Profit / Employee Rs. 2591035 2244771
Key Performance Ratio March 2021 March 2020
ROCE (%) 3.42 3.33
CASA (%) 46.11 42.23
Net Profit Margin (%) 25.74 22.86
Operating Profit Margin (%) 4.89 2.60
Return on Asset (%) 1.78 1.71
Net Interest Margin (%) 3.71 3.67
Operating Expenses / Total Asset (%) 1.87 2.00

12. • People risk
• Disruptions due to COVID-19
• Credit risk in the construction finance
portfolio
• Refinancing and prepayment of loans
• Regulatory risks
• Cyber security
• Environment, Social and
• Governance (ESG)