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TOOLS FOR MEASURING RISK

:
Ratio analysis is used in order to measure the credit and liquidity risk in SBI AND
ITS ASSOCIATES BANKS.
For Measuring The Liquidity Risk Following Ratios Are Used:-

1. Ratio Of Core Deposit To Total Assets: Core deposits are treated to be the
stable source of liquidity. Core deposit will constitute deposits from the public
in the normal course of business. This ratio is calculated as follows:

Core Deposits (Demand deposits+ saving deposits+ term deposits)
Total assets
Rule of thumb: Higher the ratio better it is the liquidity position of the
bank.

2. Loans To Totals Deposits Ratio-: It reflects the ratio of loans to public
deposits or core deposits. Total loans in this ratio represent the advances
made by the bank to the public. Loan is treated to be less liquid asset . This
ratio is calculated as follows:
Loans(Advances)
Total deposits
Rule of thumb: Lower the ratio better it is the liquidity position of the
bank.

3. Ratio Of Time Deposit To Total Deposits-: Time deposits provide stable
level of liquidity and negligible volatility. This ratio is calculated as follows:
Term deposits/time deposits
Total deposits
Rule of thumb: Higher the ratio better it is the liquidity position of the
bank.

4. Ratio Of Liquid Assets To Total Assets-: Higher level of liquid assets in
total assets will ensure better liquidity. Liquid assets may include bank
balances, money at call and short notice, inter bank placements due within

This ratio is calculated as follws: Cash in hand+ Balance with the RBI+ Balance with banks in India+ Balance with the banks outside India+ money at call and short notice Total assets Rule of thumb: Higher the ratio better it is the liquidity position of the bank. Cash in hand+ Balance with the RBI+ Balance with banks in India+ Balance with the banks outside India Total Assets Rule of thumb: Higher the ratio better it is the liquidity position of the bank. More or higher the ratio better it is. securities held for trading and available for sale having ready market. . 5. Ratio Of Prime Asset To Total Asset: Prime assets may include cash balances with the bank and balances with banks including central bank which can be withdrawn at any time without any notice. one month.