An Empirical Study of Asset Liability Management Approach by Indian Banks

11 Pages Posted: 18 Aug 2015

See all articles by Suman Chakraborty

Suman Chakraborty

Department of Commerce, Manipal Academy of Higher Education

Subhalaxmi Mohapatra

The Icfai Business School

Date Written: August 18, 2009

Abstract

The banking scenario in India in the 1980s and now, presents a perfect study of contrast. Due to several reforms, banks are now moving away from the traditional lines of service and in the process, are exposed to more risks. One of the ways for managing the risks is Asset Liability Management (ALM). ALM is an attempt to match the assets and liabilities in terms of their maturities and interest rate sensitivities so that the risk arising from such mismatches mainly — interest rate risk and liquidity risk — can be contained within the desired limit. As far as ALM in Indian banking system is concerned, it is still in a nascent stage. Against this backdrop, the objective of the paper is to study and analyze the status of ALM approach in the Indian banking system. For this purpose, a sample consisting of nationalized, private, and foreign banks operating in the Indian environment was taken and the multivariate statistical technique, canonical correlation has been done to capture the nature and strength of relationship between the assets and liabilities in these banks. From the analysis, it is derived that a majority of banks have a good ALM framework in place. The study also indicates a strong relationship between fixed assets and net worth for all groups of banks.

Keywords: Bank Management Journal, Asset Liability Management, Indian Bank, Risk Management, Financial Markets, Business Decision Making, Capital Markets, Commercial Banks, Private Banks, Liquidity Risks, Money Markets, Foreign Banks

Suggested Citation

Chakraborty, Suman and Mohapatra, Subhalaxmi, An Empirical Study of Asset Liability Management Approach by Indian Banks (August 18, 2009). Available at SSRN: https://ssrn.com/abstract=2646403

Suman Chakraborty (Contact Author)

Department of Commerce, Manipal Academy of Higher Education ( email )

Near 9th Block MIT Campus,
Manipal 576104, Karnataka, India
Manipal, KS Karnataka 576104
India
8904916912 (Phone)

HOME PAGE: http://https://manipal.edu/doc.html

Subhalaxmi Mohapatra

The Icfai Business School ( email )

Dehradun, Uttaranchal
India

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