Assets and Liability Management of Different Banks - Comparative Study of

Bank of India, Oriental Bank of Commerce, Bank of Rajasthan Ltd. and Jammu
& Kashmir Bank

This Project Report is on Assets and Liability Management of Different Banks and all
information about Comparative Study of Bank of India, Oriental Bank of Commerce, Bank of
Rajasthan Ltd. and Jammu & Kashmir Bank
Contents :

Introduction of the Topic

Assets Liability Management of Banks

Objective of the study

Research Methodology

Analysis

Findings

Suggestions

Assets and Liabilities Management :

Assets and Liabilities Management {A.L.M.}:- Assets liabilities Management is concerned
with strategic balance sheet management involving risks caused by changes in interest rates,
exchange rate, credit risk and the liquidity position of bank.
Asset Liability Management is the act of planning, acquiring, and directing the flow of funds
through an organization.

Parameters of ALM
Gap :- Total assets Total liability
Net Interest Income:- Interest Income Interest Expenses
Net Interest Margin:- Net Interest Income/ Average Assets
Equity Economic Ratio:- Owners fund / Total assets

Components of Banks Balance Sheet

Banks Liabilities :

Capital
Reserve and Surplus

Deposits

Borrowings

Other Liabilities & Pro.

Contingent Liabilities

Banks Assets :

Cash and Balance with RBI

Balance with other banks

Investment

Advances

Fixed assets

Other assets

Flow-Chart of Banks :

Objectives of the study

An effective Asset Liabilities Management technique aims to manage the volume, mix, maturity,
and rate sensitivity, quality of assets and liabilities as a whole so as to attain a predetermined
acceptable risk/reward ratio. The main purpose of ALM is to enhance the asset quality.

To study the components of assets and liabilities in Banks

To study the Asset Liability Management in public and private sector banks

Bank of India - Balance sheet of March 2008

Source of Funds

Rs. (in Crore) Uses of Funds

Equity share capital

525.91 Fixed assets: Net block

Reserve & surplus

8300.38 Capital work in progress

Unsecured loans

150011.98 Investments

Current Liabilities and provision

11056.16 l Current assets, Loan & advances

Total

169894.43 Total

Rs. (in Crore)

636.05
26.92
41802.88
3407.32
45873.17

Parameter of Asset and Liability Management :

Gap -: Total assets Total liability
Gap-: 45873.17-169894.43 = (-124021.26)
Equity Economic Ratio-: Owners fund / Total assets
Equity Economic Ratio-: 525.91/4143.37 = 0.13
Interpretation: The equity economic ratio shows that owners stake is less(.13) as compare to
total assets and huge gap between (-124021.26 crore) total assets and total liabilities.

Findings

In case of public sector banks, Equity Economic Ratio is very low rather than private
sector banks (bank of Rajasthan Ltd.).
In case of public sector banks, these banks have no more investment in fixed assets rather
than the private sector banks.

All banks (public as well as private sector) have more current liabilities over the current
assets.

All banks (public as well as private sector) have more unsecured loans.

In case of public sector banks, there is huge gap between total assets and liabilities rather
than private sector banks (Jammu and Kashmir bank).

Suggestions

All banks (public as well as private) should use more owners funds so that banks can
manage their assets and liabilities in case of pre maturity of liabilities.

All banks (public as well as private) should try to reduce their current liabilities or
increase their current assets.

All banks should (mostly public sector bank) invest more in fixed assets.

All banks (public as well as private) should not use more unsecured loan otherwise there
will be more default risk.