Interest Rate Risk Measurement in Indian Banking Industry – An Analytical Research Study

International Journal of Economic Research, Vol. 7, No. 13, January-June 2010

11 Pages Posted: 11 Oct 2010

See all articles by Charumathi Balakrishnan

Charumathi Balakrishnan

Pondicherry University - Department of Management Studies

Date Written: August 23, 2008

Abstract

Assets and Liabilities Management (ALM) is a dynamic process of planning, organizing, coordinating and controlling the assets and liabilities – their mixes, volumes, maturities, yields and costs in order to achieve a specified Net Interest Income (NII). The NII is the difference between interest income and interest expenses and the basic source of banks profitability. The easing of controls on interest rates has led to higher interest rate volatility in India. Hence, there is a need to measure and monitor the interest rate exposure of Indian banks. This paper entitled “Interest Rate Risk Measurement in Indian Banking Industry – An Analytical Research Study” is aimed at measuring the Interest Rate Risk in one of the public sector banks in India, viz., Indian Bank, by using Gap Analysis Technique. Using publicly available information, this paper attempts to assess the interest rate risk carried by the Indian Bank in March 2006, 2007, & 2008. The findings revealed that the bank is exposed to interest rate risk.

Keywords: Interest volatility, Risk, Indian Banks

JEL Classification: E43, D81, G21

Suggested Citation

Balakrishnan, Charumathi, Interest Rate Risk Measurement in Indian Banking Industry – An Analytical Research Study (August 23, 2008). International Journal of Economic Research, Vol. 7, No. 13, January-June 2010, Available at SSRN: https://ssrn.com/abstract=1663594

Charumathi Balakrishnan (Contact Author)

Pondicherry University - Department of Management Studies ( email )

R. V. Nagar
Kalapet
Pondicherry, Puducherry UT 605 014
India

HOME PAGE: http://www.pondiuni.edu.in

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