SlideShare a Scribd company logo
1 of 2
Download to read offline
[ASSET 
LIABILITY MANAGEMENT] 
October 
4, 2014 
Asset Liability Mismatch or ALM is considered to be a comprehensive and dynamical framework for measurement, monitoring and managing the market risk of the Banks. Asset Liability Mismatch arises in the following situation: The Primary source of funds for the banks is deposits, and most deposts have a short- to medium-term maturities, thus need to be paid back to the investor in 3-5 years. In comparison, the banks usually provide loans for a longer period to borrowers. Out of them, the home loans and Infrastructure projects loans are of longest maturity. So when a bank provides the long term loans from much shorter maturity funds, the situation is called asset-liability mismatch. ALM creates Risk and Risk has to be managed. This is called Asset Liability Management. Consequences of the Asset Liability Mismatch The Interest rate risks (due to fluctuation) and Liquidity Risk (due to long maturity of loans) are two typical consequences of Asset Liability Mismatch. Interest Rate Risk: The banks would require to reprice the deposits faster than the loans and during this process if the bank has to pay a higher rate, the adjustment is difficult. Liquidity Risk: The banks would have to repay the depositors when their funds mature. But when they repay, the cannot recall their loans. In this situation, bank would require the new deposits. This may create a acute situation if there are no deposits available. In some cases, the bank may also need to be paying higher interests on new deposits. The asset-liability management in the Indian banks is still in its nascent stage. With the freedom obtained through reform process, the Indian banks have reached greater
[ASSET 
LIABILITY MANAGEMENT] 
October 
4, 2014 
horizons by exploring new avenues. The government ownership of most banks resulted in a carefree attitude towards risk management. This complacent behavior of banks forced the Reserve Bank to use regulatory tactics to ensure the implementation of the ALM. Also, the post-reform banking scenario is marked by interest rate deregulation, entry of new private banks, and gamut of new products and greater use of information technology. To cope with these pressures banks were required to evolve strategies rather than ad hoc fire fighting solutions. Imprudent liquidity management can put banks’ earnings and reputation at great risk. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of banks has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Banks are exposed to several major risks in the course of their business – credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risk. It is, therefore, important that banks introduce effective risk management systems that address the issues related to interest rate, currency and liquidity risks. It is a tool that enables bank managements to take business decisions in a more informed framework with an eye on the risks that bank is exposed to. It is an integrated approach to financial management, requiring simultaneous decisions about the types of amounts of financial assets and liabilities - both mix and volume - with the complexities of the financial markets in which the institution operates.

More Related Content

What's hot

Camel Analysis of IDCs Rank of Financial Ratios
Camel Analysis of IDCs Rank of Financial RatiosCamel Analysis of IDCs Rank of Financial Ratios
Camel Analysis of IDCs Rank of Financial RatiosJohn Rickmeier
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementwindpravin
 
Stress Tests Completed: Now What?
Stress Tests Completed: Now What?Stress Tests Completed: Now What?
Stress Tests Completed: Now What?Libby Bierman
 
Camels rating system
Camels rating systemCamels rating system
Camels rating systemirum_iiui
 
Bank analysis and rating using the CAMEL model
Bank analysis and rating using the CAMEL modelBank analysis and rating using the CAMEL model
Bank analysis and rating using the CAMEL modelRoger Aung
 
Risk management in financial institution
Risk management in financial institutionRisk management in financial institution
Risk management in financial institutionUjjwal 'Shanu'
 
Gap analysis in banks
Gap analysis in banksGap analysis in banks
Gap analysis in bankshas10nas
 
risk management in banks
risk management in banksrisk management in banks
risk management in bankspallvisachdeva
 
Risk Management Guidelines
Risk Management GuidelinesRisk Management Guidelines
Risk Management Guidelinesrehan23may
 
Risk Management in Banks.pptx
Risk Management in Banks.pptxRisk Management in Banks.pptx
Risk Management in Banks.pptxSaurabh Saurabh
 
Understanding credit risk : mint2save
Understanding credit risk : mint2saveUnderstanding credit risk : mint2save
Understanding credit risk : mint2saveMint2Save
 
Mutual funds classification & asset investment
Mutual funds classification & asset investmentMutual funds classification & asset investment
Mutual funds classification & asset investmentvasishta bhargava
 

What's hot (20)

Camels approach
Camels approachCamels approach
Camels approach
 
Camels rating
Camels ratingCamels rating
Camels rating
 
Camel Analysis of IDCs Rank of Financial Ratios
Camel Analysis of IDCs Rank of Financial RatiosCamel Analysis of IDCs Rank of Financial Ratios
Camel Analysis of IDCs Rank of Financial Ratios
 
Risk management
Risk managementRisk management
Risk management
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
 
Stress Tests Completed: Now What?
Stress Tests Completed: Now What?Stress Tests Completed: Now What?
Stress Tests Completed: Now What?
 
CEIS Review Q1 2015
CEIS Review Q1 2015CEIS Review Q1 2015
CEIS Review Q1 2015
 
Camels rating system
Camels rating systemCamels rating system
Camels rating system
 
Bank analysis and rating using the CAMEL model
Bank analysis and rating using the CAMEL modelBank analysis and rating using the CAMEL model
Bank analysis and rating using the CAMEL model
 
Camels Modeling
Camels ModelingCamels Modeling
Camels Modeling
 
Risk management in financial institution
Risk management in financial institutionRisk management in financial institution
Risk management in financial institution
 
Gap analysis in banks
Gap analysis in banksGap analysis in banks
Gap analysis in banks
 
risk management in banks
risk management in banksrisk management in banks
risk management in banks
 
Risk Management Guidelines
Risk Management GuidelinesRisk Management Guidelines
Risk Management Guidelines
 
Preliminary Test for CFA Program
Preliminary Test for CFA ProgramPreliminary Test for CFA Program
Preliminary Test for CFA Program
 
Risk Management in Banks.pptx
Risk Management in Banks.pptxRisk Management in Banks.pptx
Risk Management in Banks.pptx
 
Understanding credit risk : mint2save
Understanding credit risk : mint2saveUnderstanding credit risk : mint2save
Understanding credit risk : mint2save
 
Mutual funds classification & asset investment
Mutual funds classification & asset investmentMutual funds classification & asset investment
Mutual funds classification & asset investment
 
Shadow Banking
Shadow BankingShadow Banking
Shadow Banking
 
Javed Siddiqi
Javed SiddiqiJaved Siddiqi
Javed Siddiqi
 

Viewers also liked

Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quên
Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quênNguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quên
Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quênthanh369
 
кристаллические и аморфные тела
кристаллические и аморфные телакристаллические и аморфные тела
кристаллические и аморфные телаTalyzina Alla
 
Welcome to mosaic sales solutions!
Welcome to mosaic sales solutions!Welcome to mosaic sales solutions!
Welcome to mosaic sales solutions!madalynsade
 
Title sequence of seven
Title sequence of sevenTitle sequence of seven
Title sequence of sevenamycoker
 
Kicking Habits: Revitalizing the Church
Kicking Habits: Revitalizing the ChurchKicking Habits: Revitalizing the Church
Kicking Habits: Revitalizing the ChurchPablo A. Jimenez
 
Concepción 16 de noviembre
Concepción 16 de noviembreConcepción 16 de noviembre
Concepción 16 de noviembreAlejandra Bernal
 
The fox and the crow
The fox and the crowThe fox and the crow
The fox and the crowPamuji Pam
 
Treinamento De Venda (Visitante Novo Level 2)
Treinamento De Venda  (Visitante Novo Level 2)Treinamento De Venda  (Visitante Novo Level 2)
Treinamento De Venda (Visitante Novo Level 2)guest49c3962
 
Aula funções-trigonometricas lante-uff
Aula funções-trigonometricas lante-uffAula funções-trigonometricas lante-uff
Aula funções-trigonometricas lante-uffMário César Cunha
 
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...Honolulu Civil Beat
 

Viewers also liked (15)

Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quên
Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quênNguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quên
Nguy cơ mất trí nhớ, Alzheimer do đãng trí, hay quên
 
Rúbrica para evaluar ensayos
Rúbrica para evaluar ensayosRúbrica para evaluar ensayos
Rúbrica para evaluar ensayos
 
кристаллические и аморфные тела
кристаллические и аморфные телакристаллические и аморфные тела
кристаллические и аморфные тела
 
Welcome to mosaic sales solutions!
Welcome to mosaic sales solutions!Welcome to mosaic sales solutions!
Welcome to mosaic sales solutions!
 
Didáctica general - Ejercicio nº 2 rúbrica
Didáctica general - Ejercicio nº 2    rúbricaDidáctica general - Ejercicio nº 2    rúbrica
Didáctica general - Ejercicio nº 2 rúbrica
 
Cuali fisi
Cuali fisiCuali fisi
Cuali fisi
 
Title sequence of seven
Title sequence of sevenTitle sequence of seven
Title sequence of seven
 
Kicking Habits: Revitalizing the Church
Kicking Habits: Revitalizing the ChurchKicking Habits: Revitalizing the Church
Kicking Habits: Revitalizing the Church
 
Location Recce
Location RecceLocation Recce
Location Recce
 
Current affairs
Current affairsCurrent affairs
Current affairs
 
Concepción 16 de noviembre
Concepción 16 de noviembreConcepción 16 de noviembre
Concepción 16 de noviembre
 
The fox and the crow
The fox and the crowThe fox and the crow
The fox and the crow
 
Treinamento De Venda (Visitante Novo Level 2)
Treinamento De Venda  (Visitante Novo Level 2)Treinamento De Venda  (Visitante Novo Level 2)
Treinamento De Venda (Visitante Novo Level 2)
 
Aula funções-trigonometricas lante-uff
Aula funções-trigonometricas lante-uffAula funções-trigonometricas lante-uff
Aula funções-trigonometricas lante-uff
 
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...
Civil Beat January 2012 Democratic Primary Poll - Statement of Methodology an...
 

Similar to Alm

Study on credit risk management of SBI Cochi
Study on credit risk management of SBI CochiStudy on credit risk management of SBI Cochi
Study on credit risk management of SBI CochiSreelakshmi_S
 
Asset Liability Management in India Banks
Asset Liability Management in India BanksAsset Liability Management in India Banks
Asset Liability Management in India BanksAbhijeet Deshmukh
 
284294201 crm-practices-in-banks
284294201 crm-practices-in-banks284294201 crm-practices-in-banks
284294201 crm-practices-in-banksNeerajs1980
 
ASSET-LIABILITY MANAGEMENT IN BANKS A DYNAMIC APPROACH
ASSET-LIABILITY MANAGEMENT IN BANKS  A DYNAMIC APPROACHASSET-LIABILITY MANAGEMENT IN BANKS  A DYNAMIC APPROACH
ASSET-LIABILITY MANAGEMENT IN BANKS A DYNAMIC APPROACHAaron Anyaakuu
 
Credit risk management lecture
Credit risk management lectureCredit risk management lecture
Credit risk management lectureAloke Saborna
 
project on credit-risk-management
project on credit-risk-managementproject on credit-risk-management
project on credit-risk-managementShanky Rana
 
An Interest Rate Commission Agent Banking System
An Interest Rate Commission Agent Banking SystemAn Interest Rate Commission Agent Banking System
An Interest Rate Commission Agent Banking SystemAmeha Tefera Tessema
 
MS-46 July 2022 SOLVE. SHYAM SINGH.pdf
MS-46 July 2022 SOLVE. SHYAM SINGH.pdfMS-46 July 2022 SOLVE. SHYAM SINGH.pdf
MS-46 July 2022 SOLVE. SHYAM SINGH.pdfssuser5cab8d
 
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...Cognizant
 
Understanding-Risk-Management-Framework-in-NBFCs.pdf
Understanding-Risk-Management-Framework-in-NBFCs.pdfUnderstanding-Risk-Management-Framework-in-NBFCs.pdf
Understanding-Risk-Management-Framework-in-NBFCs.pdffranciskaleidofin
 
Loan on performing
Loan on performingLoan on performing
Loan on performingfahimkhan65
 
asset liability mgt in commercial banks.pptx
asset liability mgt in commercial banks.pptxasset liability mgt in commercial banks.pptx
asset liability mgt in commercial banks.pptxJohn278053
 
Running head BANKING RISKS .docx
Running head BANKING RISKS                                       .docxRunning head BANKING RISKS                                       .docx
Running head BANKING RISKS .docxsusanschei
 
Study of Asset Liability Managemnt in Banks
Study of Asset Liability Managemnt in BanksStudy of Asset Liability Managemnt in Banks
Study of Asset Liability Managemnt in BanksShruti Ashok
 
Importance Of Banks In An Economy
Importance Of Banks In An EconomyImportance Of Banks In An Economy
Importance Of Banks In An EconomyRudo Chengeta
 
Citizen act ang_basic_banking_knowledge
Citizen act ang_basic_banking_knowledgeCitizen act ang_basic_banking_knowledge
Citizen act ang_basic_banking_knowledgeCITIZEN ACT
 
Caiibrmalmmodule a
Caiibrmalmmodule aCaiibrmalmmodule a
Caiibrmalmmodule aamanmhjn
 

Similar to Alm (20)

Study on credit risk management of SBI Cochi
Study on credit risk management of SBI CochiStudy on credit risk management of SBI Cochi
Study on credit risk management of SBI Cochi
 
Asset Liability Management in India Banks
Asset Liability Management in India BanksAsset Liability Management in India Banks
Asset Liability Management in India Banks
 
284294201 crm-practices-in-banks
284294201 crm-practices-in-banks284294201 crm-practices-in-banks
284294201 crm-practices-in-banks
 
ASSET-LIABILITY MANAGEMENT IN BANKS A DYNAMIC APPROACH
ASSET-LIABILITY MANAGEMENT IN BANKS  A DYNAMIC APPROACHASSET-LIABILITY MANAGEMENT IN BANKS  A DYNAMIC APPROACH
ASSET-LIABILITY MANAGEMENT IN BANKS A DYNAMIC APPROACH
 
Credit risk management lecture
Credit risk management lectureCredit risk management lecture
Credit risk management lecture
 
project on credit-risk-management
project on credit-risk-managementproject on credit-risk-management
project on credit-risk-management
 
An Interest Rate Commission Agent Banking System
An Interest Rate Commission Agent Banking SystemAn Interest Rate Commission Agent Banking System
An Interest Rate Commission Agent Banking System
 
Bcom ALM.pptx
Bcom ALM.pptxBcom ALM.pptx
Bcom ALM.pptx
 
MS-46 July 2022 SOLVE. SHYAM SINGH.pdf
MS-46 July 2022 SOLVE. SHYAM SINGH.pdfMS-46 July 2022 SOLVE. SHYAM SINGH.pdf
MS-46 July 2022 SOLVE. SHYAM SINGH.pdf
 
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...
Strategic Intraday Liquidity Monitoring Solution for Banks: Looking Beyond Re...
 
Understanding-Risk-Management-Framework-in-NBFCs.pdf
Understanding-Risk-Management-Framework-in-NBFCs.pdfUnderstanding-Risk-Management-Framework-in-NBFCs.pdf
Understanding-Risk-Management-Framework-in-NBFCs.pdf
 
Loan on performing
Loan on performingLoan on performing
Loan on performing
 
asset liability mgt in commercial banks.pptx
asset liability mgt in commercial banks.pptxasset liability mgt in commercial banks.pptx
asset liability mgt in commercial banks.pptx
 
Loans Default and Return on Assets (Roa) In the Nigerian Banking System
Loans Default and Return on Assets (Roa) In the Nigerian Banking SystemLoans Default and Return on Assets (Roa) In the Nigerian Banking System
Loans Default and Return on Assets (Roa) In the Nigerian Banking System
 
Running head BANKING RISKS .docx
Running head BANKING RISKS                                       .docxRunning head BANKING RISKS                                       .docx
Running head BANKING RISKS .docx
 
Study of Asset Liability Managemnt in Banks
Study of Asset Liability Managemnt in BanksStudy of Asset Liability Managemnt in Banks
Study of Asset Liability Managemnt in Banks
 
Importance Of Banks In An Economy
Importance Of Banks In An EconomyImportance Of Banks In An Economy
Importance Of Banks In An Economy
 
Asset Liability Management
Asset Liability ManagementAsset Liability Management
Asset Liability Management
 
Citizen act ang_basic_banking_knowledge
Citizen act ang_basic_banking_knowledgeCitizen act ang_basic_banking_knowledge
Citizen act ang_basic_banking_knowledge
 
Caiibrmalmmodule a
Caiibrmalmmodule aCaiibrmalmmodule a
Caiibrmalmmodule a
 

More from gr8 dreamz

October gk 2014 ibps clerks gk material
October gk 2014 ibps clerks gk materialOctober gk 2014 ibps clerks gk material
October gk 2014 ibps clerks gk materialgr8 dreamz
 
Risk in banking
Risk in bankingRisk in banking
Risk in bankinggr8 dreamz
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of bankinggr8 dreamz
 
Important banking awarness
Important banking awarnessImportant banking awarness
Important banking awarnessgr8 dreamz
 
How to get started with drive
How to get started with driveHow to get started with drive
How to get started with drivegr8 dreamz
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agenciesgr8 dreamz
 
Capital adequacy ratio
Capital adequacy ratioCapital adequacy ratio
Capital adequacy ratiogr8 dreamz
 
Banking awarness for ibps po 3
Banking awarness for ibps po 3Banking awarness for ibps po 3
Banking awarness for ibps po 3gr8 dreamz
 
100 golden rules of english
100 golden rules of english100 golden rules of english
100 golden rules of englishgr8 dreamz
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of bankinggr8 dreamz
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of bankinggr8 dreamz
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agenciesgr8 dreamz
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agenciesgr8 dreamz
 

More from gr8 dreamz (14)

October gk 2014 ibps clerks gk material
October gk 2014 ibps clerks gk materialOctober gk 2014 ibps clerks gk material
October gk 2014 ibps clerks gk material
 
Risk in banking
Risk in bankingRisk in banking
Risk in banking
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of banking
 
Important banking awarness
Important banking awarnessImportant banking awarness
Important banking awarness
 
How to get started with drive
How to get started with driveHow to get started with drive
How to get started with drive
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agencies
 
Capital adequacy ratio
Capital adequacy ratioCapital adequacy ratio
Capital adequacy ratio
 
Banking awarness for ibps po 3
Banking awarness for ibps po 3Banking awarness for ibps po 3
Banking awarness for ibps po 3
 
Alm
AlmAlm
Alm
 
100 golden rules of english
100 golden rules of english100 golden rules of english
100 golden rules of english
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of banking
 
Pillars of banking
Pillars of bankingPillars of banking
Pillars of banking
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agencies
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agencies
 

Recently uploaded

भारत-रोम व्यापार.pptx, Indo-Roman Trade,
भारत-रोम व्यापार.pptx, Indo-Roman Trade,भारत-रोम व्यापार.pptx, Indo-Roman Trade,
भारत-रोम व्यापार.pptx, Indo-Roman Trade,Virag Sontakke
 
Proudly South Africa powerpoint Thorisha.pptx
Proudly South Africa powerpoint Thorisha.pptxProudly South Africa powerpoint Thorisha.pptx
Proudly South Africa powerpoint Thorisha.pptxthorishapillay1
 
Crayon Activity Handout For the Crayon A
Crayon Activity Handout For the Crayon ACrayon Activity Handout For the Crayon A
Crayon Activity Handout For the Crayon AUnboundStockton
 
Hierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of managementHierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of managementmkooblal
 
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...M56BOOKSTORE PRODUCT/SERVICE
 
Capitol Tech U Doctoral Presentation - April 2024.pptx
Capitol Tech U Doctoral Presentation - April 2024.pptxCapitol Tech U Doctoral Presentation - April 2024.pptx
Capitol Tech U Doctoral Presentation - April 2024.pptxCapitolTechU
 
CELL CYCLE Division Science 8 quarter IV.pptx
CELL CYCLE Division Science 8 quarter IV.pptxCELL CYCLE Division Science 8 quarter IV.pptx
CELL CYCLE Division Science 8 quarter IV.pptxJiesonDelaCerna
 
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17Celine George
 
Roles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in PharmacovigilanceRoles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in PharmacovigilanceSamikshaHamane
 
How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17Celine George
 
EPANDING THE CONTENT OF AN OUTLINE using notes.pptx
EPANDING THE CONTENT OF AN OUTLINE using notes.pptxEPANDING THE CONTENT OF AN OUTLINE using notes.pptx
EPANDING THE CONTENT OF AN OUTLINE using notes.pptxRaymartEstabillo3
 
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptxECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptxiammrhaywood
 
Earth Day Presentation wow hello nice great
Earth Day Presentation wow hello nice greatEarth Day Presentation wow hello nice great
Earth Day Presentation wow hello nice greatYousafMalik24
 
Historical philosophical, theoretical, and legal foundations of special and i...
Historical philosophical, theoretical, and legal foundations of special and i...Historical philosophical, theoretical, and legal foundations of special and i...
Historical philosophical, theoretical, and legal foundations of special and i...jaredbarbolino94
 
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...Marc Dusseiller Dusjagr
 
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media ComponentAlper Gobel In Media Res Media Component
Alper Gobel In Media Res Media ComponentInMediaRes1
 
Introduction to ArtificiaI Intelligence in Higher Education
Introduction to ArtificiaI Intelligence in Higher EducationIntroduction to ArtificiaI Intelligence in Higher Education
Introduction to ArtificiaI Intelligence in Higher Educationpboyjonauth
 

Recently uploaded (20)

भारत-रोम व्यापार.pptx, Indo-Roman Trade,
भारत-रोम व्यापार.pptx, Indo-Roman Trade,भारत-रोम व्यापार.pptx, Indo-Roman Trade,
भारत-रोम व्यापार.pptx, Indo-Roman Trade,
 
OS-operating systems- ch04 (Threads) ...
OS-operating systems- ch04 (Threads) ...OS-operating systems- ch04 (Threads) ...
OS-operating systems- ch04 (Threads) ...
 
Proudly South Africa powerpoint Thorisha.pptx
Proudly South Africa powerpoint Thorisha.pptxProudly South Africa powerpoint Thorisha.pptx
Proudly South Africa powerpoint Thorisha.pptx
 
Crayon Activity Handout For the Crayon A
Crayon Activity Handout For the Crayon ACrayon Activity Handout For the Crayon A
Crayon Activity Handout For the Crayon A
 
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
Model Call Girl in Bikash Puri  Delhi reach out to us at 🔝9953056974🔝Model Call Girl in Bikash Puri  Delhi reach out to us at 🔝9953056974🔝
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
 
Hierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of managementHierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of management
 
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...
KSHARA STURA .pptx---KSHARA KARMA THERAPY (CAUSTIC THERAPY)————IMP.OF KSHARA ...
 
Capitol Tech U Doctoral Presentation - April 2024.pptx
Capitol Tech U Doctoral Presentation - April 2024.pptxCapitol Tech U Doctoral Presentation - April 2024.pptx
Capitol Tech U Doctoral Presentation - April 2024.pptx
 
CELL CYCLE Division Science 8 quarter IV.pptx
CELL CYCLE Division Science 8 quarter IV.pptxCELL CYCLE Division Science 8 quarter IV.pptx
CELL CYCLE Division Science 8 quarter IV.pptx
 
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
 
Roles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in PharmacovigilanceRoles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in Pharmacovigilance
 
How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17
 
EPANDING THE CONTENT OF AN OUTLINE using notes.pptx
EPANDING THE CONTENT OF AN OUTLINE using notes.pptxEPANDING THE CONTENT OF AN OUTLINE using notes.pptx
EPANDING THE CONTENT OF AN OUTLINE using notes.pptx
 
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptxECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
 
Earth Day Presentation wow hello nice great
Earth Day Presentation wow hello nice greatEarth Day Presentation wow hello nice great
Earth Day Presentation wow hello nice great
 
Historical philosophical, theoretical, and legal foundations of special and i...
Historical philosophical, theoretical, and legal foundations of special and i...Historical philosophical, theoretical, and legal foundations of special and i...
Historical philosophical, theoretical, and legal foundations of special and i...
 
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
 
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media ComponentAlper Gobel In Media Res Media Component
Alper Gobel In Media Res Media Component
 
Introduction to ArtificiaI Intelligence in Higher Education
Introduction to ArtificiaI Intelligence in Higher EducationIntroduction to ArtificiaI Intelligence in Higher Education
Introduction to ArtificiaI Intelligence in Higher Education
 
ESSENTIAL of (CS/IT/IS) class 06 (database)
ESSENTIAL of (CS/IT/IS) class 06 (database)ESSENTIAL of (CS/IT/IS) class 06 (database)
ESSENTIAL of (CS/IT/IS) class 06 (database)
 

Alm

  • 1. [ASSET LIABILITY MANAGEMENT] October 4, 2014 Asset Liability Mismatch or ALM is considered to be a comprehensive and dynamical framework for measurement, monitoring and managing the market risk of the Banks. Asset Liability Mismatch arises in the following situation: The Primary source of funds for the banks is deposits, and most deposts have a short- to medium-term maturities, thus need to be paid back to the investor in 3-5 years. In comparison, the banks usually provide loans for a longer period to borrowers. Out of them, the home loans and Infrastructure projects loans are of longest maturity. So when a bank provides the long term loans from much shorter maturity funds, the situation is called asset-liability mismatch. ALM creates Risk and Risk has to be managed. This is called Asset Liability Management. Consequences of the Asset Liability Mismatch The Interest rate risks (due to fluctuation) and Liquidity Risk (due to long maturity of loans) are two typical consequences of Asset Liability Mismatch. Interest Rate Risk: The banks would require to reprice the deposits faster than the loans and during this process if the bank has to pay a higher rate, the adjustment is difficult. Liquidity Risk: The banks would have to repay the depositors when their funds mature. But when they repay, the cannot recall their loans. In this situation, bank would require the new deposits. This may create a acute situation if there are no deposits available. In some cases, the bank may also need to be paying higher interests on new deposits. The asset-liability management in the Indian banks is still in its nascent stage. With the freedom obtained through reform process, the Indian banks have reached greater
  • 2. [ASSET LIABILITY MANAGEMENT] October 4, 2014 horizons by exploring new avenues. The government ownership of most banks resulted in a carefree attitude towards risk management. This complacent behavior of banks forced the Reserve Bank to use regulatory tactics to ensure the implementation of the ALM. Also, the post-reform banking scenario is marked by interest rate deregulation, entry of new private banks, and gamut of new products and greater use of information technology. To cope with these pressures banks were required to evolve strategies rather than ad hoc fire fighting solutions. Imprudent liquidity management can put banks’ earnings and reputation at great risk. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of banks has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Banks are exposed to several major risks in the course of their business – credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risk. It is, therefore, important that banks introduce effective risk management systems that address the issues related to interest rate, currency and liquidity risks. It is a tool that enables bank managements to take business decisions in a more informed framework with an eye on the risks that bank is exposed to. It is an integrated approach to financial management, requiring simultaneous decisions about the types of amounts of financial assets and liabilities - both mix and volume - with the complexities of the financial markets in which the institution operates.