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    Swarnalata Dash
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    Assets liability management is a dynamic process of planning, organizing, and controlling assets and liabilities to maintain liquidity and net interest income. It aims to manage volumes, mixes, maturities, yields, and costs of assets and liabilities as a whole to attain an acceptable risk/reward ratio and stabilize short-term profits, long-term earnings, and the bank's long-term substance. The Reserve Bank of India issued directives in 1998 and 1999 requiring banks to begin implementing asset liability management starting with 60% asset and liability coverage in 1999 and 100% coverage by 2000, initially using gap analysis and later requiring disclosure of maturity patterns on deposits, borrowings, investments, and advances.

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    Session 12

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    Assets liability management is a dynamic process of planning, organizing, and controlling assets and liabilities to maintain liquidity and net interest income. It aims to manage volumes, mixes, maturities, yields, and costs of assets and liabilities as a whole to attain an acceptable risk/reward ratio and stabilize short-term profits, long-term earnings, and the bank's long-term substance. The Reserve Bank of India issued directives in 1998 and 1999 requiring banks to begin implementing asset liability management starting with 60% asset and liability coverage in 1999 and 100% coverage by 2000, initially using gap analysis and later requiring disclosure of maturity patterns on deposits, borrowings, investments, and advances.

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    21 views4 pages

    Assets Liability Management

    Uploaded by

    Swarnalata Dash
    Assets liability management is a dynamic process of planning, organizing, and controlling assets and liabilities to maintain liquidity and net interest income. It aims to manage volumes, mixes, maturities, yields, and costs of assets and liabilities as a whole to attain an acceptable risk/reward ratio and stabilize short-term profits, long-term earnings, and the bank's long-term substance. The Reserve Bank of India issued directives in 1998 and 1999 requiring banks to begin implementing asset liability management starting with 60% asset and liability coverage in 1999 and 100% coverage by 2000, initially using gap analysis and later requiring disclosure of maturity patterns on deposits, borrowings, investments, and advances.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Assets Liability Management

    It is a dynamic process of Planning, Organizing &Controlling of Assets & Liabilities- their volumes, mixes, maturities, yields and costs in order to maintain liquidity and NII.

    Significance of ALM
    Volatility
    Product Innovations & Complexities Regulatory Environment Management Recognition

    Purpose & Objective of ALM


    An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable risk/reward ration. It is aimed to stabilize short-term profits, long-term earnings and long-term substance of the bank. The parameters for stabilizing ALM system are: 1. 2. Assets 3. Economic Equity Ratio The ratio of the shareholders funds to the total assets measures the shifts in the ratio of owned funds to total funds.The fact assesses the sustenance capacity of the bank. Net Interest Income (NII) Interest Income-Interest Expenses. Net Interest Margin (NIM) Net InterestIncome/Average Total

    RBI DIRECTIVES
    Issued draft guidelines on 10th Sept98. Final guidelines issued on 10th Feb99 for implementation of ALM w.e.f.

    01.04.99.
    To begin with 60% of asset &liabilities will be covered; 100% from

    01.04.2000.
    Initially Gap Analysis to be applied in the first stage of implementation. Disclosure to Balance Sheet on maturity pattern on Deposits, Borrowings,

    Investment & Advances w.e.f. 31.03.01

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