A

SYNOPSIS REPORT

ON

ASSET LIABILITY MANAGEMENT

AT
ICICI BANK LTD
Submitted
By
ARUPULA RAVALI
H.T.NO: 1304-20-672-119
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE

OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

AURORA POST GRADUATE COLLEGE
PEERZADIGUDA

(Affiliated to Osmania University)

2020-2022

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 AURORA POST GRADUATE COLLEGE
PEERZADIGUDA

DEPARTMENT OF MANAGEMENT
SYNOPSIS

Title of the Project : ASSET LIABILITY MANAGEMENT

Student Name : ARUPULA RAVALI

Hall Ticket Number : 1304-20-672-119

Signature of the Student :

Signature of the Guide :

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 TABLE OF CONTENTS
S. No. CHAPTER Page No

1 INTRODUCTION

2 NEED FOR THE STUDY

3 OBJECTIVES OF THE STUDY

4 RESEARCH METHODOLOGY

5 LIMITATIONS OF THE STUDY

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 1.1 INTRODUCTION

Asset Liability Management (ALM) is a strategic approach of managing the balance sheet

dynamics in such a way that the net earnings are maximized. This approach is concerned with

management of net interest margin to ensure that its level and riskiness are compatible with

the risk return objectives.

If one has to define Asset and Liability management without going into detail about its need

and utility, it can be defined as simply “management of money” which carries value and can

change its shape very quickly and has an ability to come back to its original shape with or

without an additional growth. The art of proper management of healthy money is ASSET

AND LIABILITY MANAGEMENT (ALM).

The Liberalization measures initiated in the country resulted in revolutionary changes in

thesector. There was a shift in the policy approach from the traditionally administered market

regime to a free market driven regime. This has put pressure on the earning capacity of co-

operative, which forced them to foray into new operational areas thereby exposing

themselves to new risks.As major part of funds at the disposal from outside sources, the

management are concerned about RISK arising out of shrinkage in the value of asset, and

managing such risks became critically important to them. Although co-operatives are able to

mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed

deposits were not properly matched with the maturities of assets created out of them. The tool

called ASSET AND LIABILITY MANAGEMENT provides a better solution for this.

ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and

liability of an organization. This is a method of matching various assets with liabilities on the

basis of expected rates of return and expected maturity pattern

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 In the context of ASSET LIABILITY MANAGEMENT is defined as “a process of

adjusting s liability to meet loan demands, liquidity needs and safety requirements". This will

result in optimum value of the same time reducing the risks faced by them and managing the

different types of risks by keeping it within acceptable levels.

RBI revises asset liability management guidelines

On February 6/2014

Guidelines on ALM system issued in February 1999(first revised), covered, inter alia, interest

rate risk and liquidity risk measurement reporting framework and prudential limits. Gap

statements are prepared by scheduling all assets and liabilities according to the stated or

anticipated re-pricing date or maturity date. As a measure of liquidity management, banks

were required to monitor their cumulative mismatches across all time buckets in their

statement of structural liquidity by establishing internal prudential limits with the approval of

their boards/ management committees. As per the guidelines, in the normal course, the

mismatches (negative gap) in the time buckets of 1-14 days and 15-28 days were not to

exceed 20 per cent of the cash outflows in the respective time buckets.

In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its Asset

Liability Management guidelines. Banks have now been asked to calculate modified duration

of assets (loans) and liabilities (deposits) and duration of equity.

This was stated by the executive director of RBI, V K Sharma, and here today. He said that

this concept gives banks a single number indicating the impact of a 1 per cent change of

interest rate on its capital, captures the interest rate risk, and can thus help them move

forward towards assessment of risk based capital. This approach will be a graduation from

the earlier approach, which led to a mismatch between the assets and liabilities.

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The ED said that RBI has been laying emphasis that banks should maintain a more realistic

balance sheet by giving a true picture of their non performing assets (NPAs), and they should

not be deleted to show huge profits. Though the banking system in India has strong risk

management architecture, initiatives have to be taken at the bank specific level as well as

broader systematic level. He also emphasized on the need for sophisticated credit-scoring

models for measuring the credit risks of commercial and industrial portfolios.

Emphasizing on a need for an effective control system to manage risks, he said that the

implementation of BASEL II norms by commercial banks should not be delayed. He said that

the banks should have a robust stress testing process for assessment of capital adequacy in

wake of economic downturns, industrial downturns, market risk events and sudden shifts in

liquidity conditions. Stress tests should enable the banks to assess risks more accurately and

facilitate planning for appropriate capital requirements.

Sharma spoke at length about the need to extend the framework of integrated risk

management to group-wide level, especially among financial conglomerates. He said that

RBI has already put in place a framework for oversight of financial conglomerates, along

with SEBI and IRDA. He also said that at the systematic level efforts are being made to

create an enabling environment for all market participants in terms of regulation,

infrastructure and instruments.

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1.2 NEED AND IMPORTANCE OF THE STUDY:

The need of the study is to concentrate on the growth and performance by using asset and

liability management and to know the management of nonperforming assets .To know

financial position and to analyze existing situation which helps to improve the performance

of company. The prime importance of the study is to analyze the maintenance of the asset and

liability it helps to compete with the other cooperatives.

1.2 SCOPE OF THE STUDY:

In this study the analysis based on ratios to know asset and liabilities management and to

analyze the growth and performance by using the calculations under asset and liability

management based on ratio of the company. It covers both a prudential and component and

an optimization role, with in the limits of compliance .

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1.3 OBJECTIVES OF THE STUDY

 The main objective of the study is to present a proven solution set which achieves

integrated risk management.

 To study the concept of asset liability management and the process of cash inflow

and outflow .

 To practice financial risk arises due to the mismatch between asset and liability .

 To study reserves cycle of ASSET LIABILITY MANAGEMENT

 It also ensures an acceptable balance between profitability and growth rate.

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1.5 METHODOLOGY OF THE STUDY

The study of Asset-Liability Management is based on

 Secondary data collection

SECONDARY DATA COLLECTION:

Collected from books regarding journal, and management containing relevant information

about ALM and Other main sources were

 Annual report

 Published report

1.7 PERIOD OF THE STUDY:

The data is obtained from the ICICI BANK LTD for the purpose of Assets and liability.

The information is gathered from different channels for a period of 45 days.

1.8 REFERENCE PERIOD:

For the present study, the data pertaining to financial year 2017-2021 was collected.

TOOLS FOR DATA ANALYSIS

 Return on assets (ROA) is a financial ratio that shows the percentage of profit a

company earns in relation to its overall resources. It is commonly defined as net

income divided by total assets.

Net Income

Return on assets (ROA) ══ -----------------------

Average total assets

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 Return on equity (ROE) is a measure of the profitability of a business in

relation to the equity, also known as net assets or assets minus liabilities. ROE is

a measure of how well a company uses investments to generate earnings growth.

Net Income

Return on equity (ROE) ══ ------------------------------

Average stockholders’ equity

 Return on common equity ratio (ROCE) reveals the amount of net profit

that could potentially be payable to common stockholders .

Net Income

Return on common equity══ -------------------------------------

Average common stockholder’s equity

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1.6 LIMITATION OF THE STUDY:

 The subject is based on past data of ICICI BANK LTD

 The analysis is based on structural liquidity assertion and hole evaluation.

 The study is mainly based totally on secondary facts.

 There was a constraint with regard to time allocation for the research study i.e for

only a period of 45 days.

 Detailed study of the topic was not possible due to limited size of the project.

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