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Asset Liabilities Management HDFC
Asset Liabilities Management HDFC
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 the
sector. 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 is
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
In the context of ALM 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.
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RBI revises asset liability management guidelines
February 6/2018In 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.
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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NEED AND IMPORTANTS OF THE STUDY:
The need of the study is to concentrates on the growth and performance of HDFC and to
calculate the growth and performance by using asset and liability management and to know the
management of nonperforming assets.
Renewal Fees
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SCOPE OF THE STUDY:
In this study the analysis based on ratios to know asset and liabilities management under
HDFC and to analyze the growth and performance of HDFC by using the calculations under
asset and liability management based on ratio.
Ratio analysis
Comparative statement
GEOGRAPHICAL SCOPE:-
The same problem was with the all other branches of HDFC Bank even out of the pune city.
The management is conducting the same research on a big ground while my
contribution is tiny. Though my s ample size and geographical area was defined and
confine to a particular territory but the application of output from the research are going to
be wide.
PRODUCT SCOPE:-
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OBJECTIVES OF THE STUDY
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METHODOLOGY OF THE STUDY
Gathering the information from other managers and other officials of the organization.
Collected from books regarding journal, and management containing relevant information
about ALM and Other main sources were
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LIMITATION OF THE STUDY:
Study takes into consideration only LTP and issue prices and their difference for
The study is based on the issues that are listed on NSE only.
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Company and industry profile
The level of government regulation of the banking industry varies widely, with countries
such as Iceland, having relatively light regulation of the banking sector, and countries such as
China having a wide variety of regulations but no systematic process that can be followed typical
of a communist system.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena,
Italy, which has been operating continuously since 1472.
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History
The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, there are traces of banking activity even in ancient
times, which indicates that the word 'bank' might not necessarily come from the word 'banco'.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the foreign currency into
the only legal tender in Rome—that of the Imperial Mint.
The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC, presented
in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a
pun on the name of the city.
In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.
Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to customers'
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current accounts. Banks also enable customer payments via other payment methods such as
telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making installment loans, and by
investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment services such
as remittance companies are not normally considered an adequate substitute for having a bank
account.
Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a significant and
in many cases adequate substitute for bank loans, and money market funds, cash management
trusts and other non-bank financial institutions in many cases provide an adequate substitute to
banks for lending savings to.
Entry regulation:-
Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank licence to operate.
Usually the definition of the business of banking for the purposes of regulation is extended
to include acceptance of deposits, even if they are not repayable to the customer's order—
although money lending, by itself, is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a monopoly
on the business of issuing banknotes. However, in some countries this is not the case. In the UK,
for example, the Financial Services Authority licences banks, and some commercial banks (such
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as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of
England, the UK government's central bank.
Definition:-
Under English common law, a banker is defined as a person who carries on the business of
banking, which is specified as:
In most English common law jurisdictions there is a Bills of Exchange Act that codifies the
law in relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or not,
who carry on the business of banking' (Section 2, Interpretation). Although this definition seems
circular, it is actually functional, because it ensures that the legal basis for bank transactions such
as cheques do not depend on how the bank is organised or regulated.
The business of banking is in many English common law countries not defined by statute but
by common law, the definition above. In other English common law jurisdictions there are
statutory definitions of the business of banking or banking business. When looking at these
definitions it is important to keep in minds that they are defining the business of banking for the
purposes of the legislation, and not necessarily in general. In particular, most of the definitions
are from legislation that has the purposes of entry regulating and supervising banks rather than
regulating the actual business of banking. However, in many cases the statutory definition
closely mirrors the common law one. Examples of statutory definitions:
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"banking business" means the business of receiving money on current or deposit account,
paying and collecting cheques drawn by or paid in by customers, the making of advances to
customers, and includes such other business as the Authority may prescribe for the purposes of
this Act; (Banking Act (Singapore), Section 2, Interpretation).
receiving from the general public money on current, deposit, savings or other similar
account repayable on demand or within less than [3 months] ... or with a period of call or
notice of less than that period;
paying or collecting cheques drawn by or paid in by customers[6]
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit,
direct debit and internet banking, the cheque has lost its primacy in most banking systems as a
payment instrument. This has led legal theorists to suggest that the cheque based definition
should be broadened to include financial institutions that conduct current accounts for customers
and enable customers to pay and be paid by third parties, even if they do not pay and collect
cheques.
Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and credit.
Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses.
This means you credit a credit account to increase its balance, and you debit a debit account to
decrease its balance.
This also means you debit your savings account every time you deposit money into it (and
the account is normally in deficit), while you credit your credit card account every time you
spend money from it (and the account is normally in credit).
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However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money and you debit it when you withdraw funds. If you have cash in
your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative
(or deficit) balance.
The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which should
have a positive balance). Conversely, your loans are your liabilities but the bank's assets, so they
are debit accounts (which should also have a positive balance).
Where bank transactions, balances, credits and debits are discussed below, they are done so
from the viewpoint of the account holder—which is traditionally what most people are used to
seeing.
Economic functions:-
Issue of money, in the form of banknotes and current accounts subject to cheque or payment
at the customer's order. These claims on banks can act as money because they are negotiable
and/or repayable on demand, and hence valued at par. They are effectively transferable by
mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or
cash.
netting and settlement of payments – banks act as both collection and paying agents for
customers, participating in interbank clearing and settlement systems to collect, present, be
presented with, and pay payment instruments. This enables banks to economise on reserves
held for settlement of payments, since inward and outward payments offset each other. It
also enables the offsetting of payment flows between geographical areas, reducing the cost of
settlement between them.
credit intermediation – banks borrow and lend back-to-back on their own account as middle
men.
credit quality improvement – banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes
from diversification of the bank's assets and capital which provides a buffer to absorb losses
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without defaulting on its obligations. However, banknotes and deposits are generally
unsecured; if the bank gets into difficulty and pledges assets as security, to rise the funding it
needs to continue to operate, this puts the note holders and depositors in an economically
subordinated position.
maturity transformation – banks borrow more on demand debt and short term debt, but
provide more long term loans. In other words, they borrow short and lend long. With a
stronger credit quality than most other borrowers, banks can do this by aggregating issues
(e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and
redemptions of banknotes), maintaining reserves of cash, investing in marketable securities
that can be readily converted to cash if needed, and raising replacement funding as needed
from various sources (e.g. wholesale cash markets and securities markets).
Law of banking
Banking law is based on a contractual analysis of the relationship between the bank (defined
above) and the customer—defined as any entity for which the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:
The bank account balance is the financial position between the bank and the customer:
when the account is in credit, the bank owes the balance to the customer; when the
account is overdrawn, the customer owes the balance to the bank.
The bank agrees to pay the customer's cheques up to the amount standing to the credit of
the customer's account, plus any agreed overdraft limit.
The bank may not pay from the customer's account without a mandate from the customer,
e.g. a cheque drawn by the customer.
The bank agrees to promptly collect the cheques deposited to the customer's account as
the customer's agent, and to credit the proceeds to the customer's account.
The bank has a right to combine the customer's accounts, since each account is just an
aspect of the same credit relationship.
The bank has a lien on cheques deposited to the customer's account, to the extent that the
customer is indebted to the bank.
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The bank must not disclose details of transactions through the customer's account—
unless the customer consents, there is a public duty to disclose, the bank's interests
require it, or the law demands it.
The bank must not close a customer's account without reasonable notice, since cheques
are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer
and the bank. The statutes and regulations in force within a particular jurisdiction may also
modify the above terms and/or create new rights, obligations or limitations relevant to the bank-
customer relationship.
Some types of financial institution, such as building societies and credit unions, may be
partly or wholly exempt from bank licence requirements, and therefore regulated under separate
rules.
The requirements for the issue of a bank licence vary between jurisdictions but typically include:
Minimum capital
Minimum capital ratio
'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior
officers
Approval of the bank's business plan as being sufficiently prudent and plausible.
Types of banks:-
Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth management
services to high net worth individuals and families; and investment banking, relating to activities
on the financial markets. Most banks are profit-making, private enterprises. However, some are
owned by government, or are non-profit organizations.
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Central banks are normally government-owned and charged with quasi-regulatory
responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They
generally provide liquidity to the banking system and act as the lender of last resort in event of a
crisis.
Commercial bank: the term used for a normal bank to distinguish it from an investment
bank. After the Great Depression, the U.S. Congress required that banks only engage in
banking activities, whereas investment banks were limited to capital market activities.
Since the two no longer have to be under separate ownership, some use the term
"commercial bank" to refer to a bank or a division of a bank that mostly deals with
deposits and loans from corporations or large businesses.
Community Banks: locally operated financial institutions that empower employees to
make local decisions to serve their customers and the partners.
Community development banks: regulated banks that provide financial services and
credit to under-served markets or populations.
Postal savings banks: savings banks associated with national postal systems.
Private banks: banks that manage the assets of high net worth individuals.
Offshore banks: banks located in jurisdictions with low taxation and regulation. Many
offshore banks are essentially private banks.
Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even
18th century. Their original objective was to provide easily accessible savings products to
all strata of the population. In some countries, savings banks were created on public
initiative; in others, socially committed individuals created foundations to put in place the
necessary infrastructure. Nowadays, European savings banks have kept their focus on
retail banking: payments, savings products, credits and insurances for individuals or
small and medium-sized enterprises. Apart from this retail focus, they also differ from
commercial banks by their broadly decentralised distribution network, providing local
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and regional outreach—and by their socially responsible approach to business and
society.
Building societies and Landesbanks: institutions that conduct retail banking.
Ethical banks: banks that prioritize the transparency of all operations and make only what
they consider to be socially-responsible investments.
Islamic banks: Banks that transact according to Islamic principles.
Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for
their own accounts, make markets, and advise corporations on capital market activities
such as mergers and acquisitions.
Merchant banks were traditionally banks which engaged in trade finance. The modern
definition, however, refers to banks which provide capital to firms in the form of shares
rather than loans. Unlike venture capital firms, they tend not to invest in new companies.
Both combined:-
Universal banks, more commonly known as financial services companies, engage in several
of these activities. These big banks are very diversified groups that, among other services, also
distribute insurance— hence the term bancassurance, a portmanteau word combining "banque or
bank" and "assurance", signifying that both banking and insurance are provided by the same
corporate entity.
Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around
several well-established principles based on Islamic canons. All banking activities must avoid
interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on
the financing facilities that it extends to customers.
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Industrial profile
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995.
HDFC is India's premier housing finance company and enjoys an impeccable track record
in India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
As on 31st December, 2015 the authorized share capital of the Bank is Rs. 550 crore. The
paid-up capital as on said date is Rs. 455,23,65,640/- (45,52,36,564 equity shares of Rs. 10/-
each). The HDFC Group holds 23.87 % of the Bank's equity and about 16.94 % of the equity is
held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue).
27.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about
4,58,683 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
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New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository
Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr.
Capoor was Deputy Governor of the RBI
MANAGEMENT
The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years,
and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.The
Bank's Board of Directors is composed of eminent individuals with a wealth of experience in
public policy, administration, industry and commercial banking. Senior executives representing
HDFC are also on the Board. Senior banking professionals with substantial experience in India
and abroad head various businesses and functions and report to the Managing Director. Given
the professional expertise of the management team and the overall focus on recruiting and
retaining the best talent in the industry, the bank believes that its people are a significant
competitive strength.
BOARD OF DIRECTORS
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Mr. Harish Engineer, Executive Director
REGISTERED OFFICE:-
HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has three key business segments
The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small & mid-sized corporates and agri-based businesses. For these customers,
the Bank provides a wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash management, etc. The bank is
also a leading provider of structured solutions, which combine cash management services with
vendor and distributor finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong customer
orientation, the Bank has made significant inroads into the banking consortia of a number of
leading Indian corporates including multinationals, companies from the domestic business
houses and prime public sector companies. It is recognised as a leading provider of cash
management and transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.
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Retail Banking Services:-
The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all his/her
banking requirements. The products are backed by world-class service and delivered to
customers through the growing branch network, as well as through alternative delivery channels
like ATMs, Phone Banking, NetBanking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind needs of
customers who seek distinct financial solutions, information and advice on various investment
avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans
against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading
provider of Depository Participant (DP) services for retail customers, providing customers the
facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in association
with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank
launched its credit card business in late 2001. By March 2015, the bank had a total card base
(debit and credit cards) of over 13 million. The Bank is also one of the leading players in the
“merchant acquiring” business with over 70,000 Point-of-sale (POS) terminals for debit / credit
cards acceptance at merchant establishments. The Bank is well positioned as a leader in various
net based B2C opportunities including a wide range of internet banking services for Fixed
Deposits, Loans, Bill Payments, etc.
Treasury:-
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
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treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government securities.
2017
- Best Bank - Runner Up
Outlook Money
Best Bank Award
2017
Best Commercial - Driving Positive Change
Vehicle Financier
Businessworld Best - Best Bank
Bank award
BCI Continuity & - Most Effective Recovery of the Year
Resilience Award
Financial Express - Best in Strength and Soundness
Best Bank Survey - 2nd Best in the Private Sector
2016-17
CNBC TV18's Best - Best Bank
Bank & Financial - Mr. Aditya Puri, Outstanding Finance Professional
Institution Awards
Dun & Bradstreet Best Private Sector Bank - SME Financing
Banking Awards
2017
ISACA 2017 award Best practices in IT Governance and IT Security
for IT Governance
IBA Productivity New Channel Adopter (Private Sector)
Excellence Awards
2017
DSCI (Data Security in Bank
Security Council of
India) Excellence
Awards 2017
Euromoney Awards Best Bank in India
for Excellence 2017
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FINANCE ASIA - BEST BANK
Country Awards - BEST CASH MANAGEMENT BANK
2017: India - BEST TRADE FINANCE BANK
Asian Banker Strongest Bank in Asia Pacific
BloombergUTV's Best Bank
Financial
Leadership Awards
2017
IBA Banking Winner -
Technology 1) Technology Bank of the Year
Awards 2016 2) Best Online Bank
3) Best Customer Initiative
4) Best Use of Business Intelligence
5) Best Risk Management System
Runners Up -
Best Financial Inclusion
IDC FIIA Awards Excellence in Customer Experience
2017
2016
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Corporate Governance:-
The bank was among the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent assessment
of an entity's current performance and an expectation on its "balanced value creation and
corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1'
rating, which indicates that the bank's capability with respect to wealth creation for all its
stakeholders while adopting sound corporate governance practices is the highest.We are aware
that all these awards are mere milestones in the continuing, never-ending journey of providing
excellent service to our customers. We are confident, however, that with your feedback and
support, we will be able to maintain and improve our services.
Technology:-
The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. The Bank's business
is supported by scalable and robust systems which ensure that our clients always get the finest
services we offer. The Bank has prioritised its engagement in technology and the internet as one
of its key goals and has already made significant progress in web-enabling its core businesses. In
each of its businesses, the Bank has succeeded in leveraging its market position, expertise and
technology to create a competitive advantage and build market share.
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Mission and Business Strategy:-
Our mission is to be "a World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology, service
levels, risk management and audit & compliance. The objective is to build sound customer
franchises across distinct businesses so as to be a preferred provider of banking services for
target retail and wholesale customer segments, and to achieve a healthy growth in profitability,
consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest
levels of ethical standards, professional integrity, corporate governance and regulatory
compliance.
Our business strategy emphasizes the following :
Increase our market share in India’s expanding banking and financial services industry by
following a disciplined growth strategy focusing on quality and not on quantity and delivering
high quality customer service.
Leverage our technology platform and open scaleable systems to deliver more products to
more customers and to control operating costs.
Maintain our current high standards for asset quality through disciplined credit risk
management.
Develop innovative products and services that attract our targeted customers and address
inefficiencies in the Indian financial sector.
Continue to develop products and services that reduce our cost of funds.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of
1,725 branches spread in 771 cities across India. All branches are linked on an online real-time
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basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's
expansion plans take into account the need to have a presence in all major industrial and
commercial centres where its corporate customers are located as well as the need to build a
strong retail customer base for both deposits and loan products. Being a clearing/settlement bank
to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE
have a strong and active member base.
The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's
ATM network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
AIMS:
Continuous effort to improving the services.
Evaluating individual skill trough training and motivations.
Total involvement through participant’s management activities.
Creating healthy and safe environment.
Social development.
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CONCEPTUAL FRAMWORK
ASSET LIABILITY MANAGEMENT (ALM) SYSTEM:-
But in the last decade the meaning of ALM has evolved. It is now used in many different
ways under different contexts. ALM, which was actually pioneered by financial institutions and
banks, are now widely being used in industries too. The Society of Actuaries Task Force on
ALM Principles, Canada, offers the following definition for ALM: "Asset Liability Management
is the on-going process of formulating, implementing, monitoring, and revising strategies related
to assets and liabilities in an attempt to achieve financial objectives for a given set of risk
tolerances and constraints."
Traditionally, banks and insurance companies used accrual system of accounting for all
their assets and liabilities. They would take on liabilities - such as deposits, life insurance
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policies or annuities. They would then invest the proceeds from these liabilities in assets such as
loans, bonds or real estate. All these assets and liabilities were held at book value. Doing so
disguised possible risks arising from how the assets and liabilities were structured.
Consider a bank that borrows 1 Crore (100 Lakhs) at 6 % for a year and lends the same
money at 7 % to a highly rated borrower for 5 years. The net transaction appears profitable-the
bank is earning a 100 basis point spread - but it entails considerable risk. At the end of a year, the
bank will have to find new financing for the loan, which will have 4 more years before it
matures. If interest rates have risen, the bank may have to pay a higher rate of interest on the new
financing than the fixed 7 % it is earning on its loan.
Suppose, at the end of a year, an applicable 4-year interest rate is 8 %. The bank is in
serious trouble. It is going to earn 7 % on its loan but would have to pay 8 % on its financing.
Accrual accounting does not recognize this problem. Based upon accrual accounting, the bank
would earn Rs 100,000 in the first year although in the preceding years it is going to incur a loss.
The problem in this example was caused by a mismatch between assets and liabilities. Prior
to the 1970's, such mismatches tended not to be a significant problem. Interest rates in developed
countries experienced only modest fluctuations, so losses due to asset-liability mismatches were
small or trivial. Many firms intentionally mismatched their balance sheets and as yield curves
were generally upward sloping, banks could earn a spread by borrowing short and lending long.
Things started to change in the 1970s, which ushered in a period of volatile interest rates
that continued till the early 1980s. US regulations which had capped the interest rates so that
banks could pay depositors, was abandoned which led to a migration of dollar deposit overseas.
Managers of many firms, who were accustomed to thinking in terms of accrual accounting, were
slow to recognize this emerging risk. Some firms suffered staggering losses. Because the firms
used accrual accounting, it resulted in more of crippled balance sheets than bankruptcies. Firms
had no options but to accrue the losses over a subsequent period of 5 to 10 years.
One example, which drew attention, was that of US mutual life insurance company "The
Equitable." During the early 1980s, as the USD yield curve was inverted with short-term interest
28
rates sky rocketing, the company sold a number of long-term Guaranteed Interest Contracts
(GICs) guaranteeing rates of around 16% for periods up to 10 years. Equitable then invested the
assets short-term to earn the high interest rates guaranteed on the contracts. But short-term
interest rates soon came down. When the Equitable had to reinvest, it couldn't get even close to
the interest rates it was paying on the GICs. The firm was crippled. Eventually, it had to
demutualize and was acquired by the Axa Group.
The capital of most financial institutions is small relative to the firm's assets or liabilities,
and so small percentage changes in assets or liabilities can translate into large percentage
changes in capital. Accrual accounting could disguise the problem by deferring losses into the
future, but it could not solve the problem. Firms responded by forming asset-liability
management (ALM) departments to assess these asset-liability risk.
Techniques for assessing asset-liability risk came to include Gap Analysis and Duration
Analysis. These facilitated techniques of managing gaps and matching duration of assets and
liabilities. Both approaches worked well if assets and liabilities comprised fixed cash flows. But
cases of callable debts, home loans and mortgages which included options of prepayment and
floating rates, posed problems that gap analysis could not address. Duration analysis could
address these in theory, but implementing sufficiently sophisticated duration measures was
problematic. Accordingly, banks and insurance companies started using Scenario Analysis.
Under this technique assumptions were made on various conditions, for example: -
29
Several interest rate scenarios were specified for the next 5 or 10 years. These specified
conditions like declining rates, rising rates, a gradual decrease in rates followed by a
sudden rise, etc. Ten or twenty scenarios could be specified in all.
Assumptions were made about the performance of assets and liabilities under each
scenario. They included prepayment rates on mortgages or surrender rates on insurance
products.
Assumptions were also made about the firm's performance-the rates at which new
business would be acquired for various products, demand for the product etc.
Market conditions and economic factors like inflation rates and industrial cycles were
also included.
Based upon these assumptions, the performance of the firm's balance sheet could be
projected under each scenario. If projected performance was poor under specific scenarios, the
ALM committee would adjust assets or liabilities to address the indicated exposure. Let us
consider the procedure for sanctioning a commercial loan. The borrower, who approaches the
bank, has to appraise the banks credit department on various parameters like industry prospects,
operational efficiency, financial efficiency, management qualities and other things, which would
influence the working of the company. On the basis of this appraisal, the banks would then
prepare a credit-grading sheet after covering all the aspects of the company and the business in
which the company is in.
Then the borrower would then be charged a certain rate of interest, which would cover the
risk of lending.
But the main shortcoming of scenario analysis was that, it was highly dependent on the
choice of scenarios. It also required that many assumptions were to be made about how specific
assets or liabilities will perform under specific scenarios. Gradually the firms recognized a
potential for different type of risks, which was overlooked in ALM analyses. Also the
deregulation of the interest rates in US in mid 70 s compelled the banks to undertake active
planning for the structure of the balance sheet. The uncertainty of interest rate movements gave
rise to Interest Rate Risk thereby causing banks to look for processes to manage this risk.
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In the wake of interest rate risk came Liquidity Risk and Credit Risk, which became
inherent components of risk for banks. The recognition of these risks brought Asset Liability
Management to the centre-stage of financial intermediation. Today even Equity Risk, which until
a few years ago was given only honorary mention in all but a few company ALM reports, is now
an indispensable part of ALM for most companies. Some companies have gone even further to
include Counterparty Credit Risk, Sovereign Risk, as well as Product Design and Pricing Risk as
part of their overall ALM.
Now a day's a company has different reasons for doing ALM. While some companies view
ALM as a compliance and risk mitigation exercise, others have started using ALM as strategic
framework to achieve the company's financial objectives. Some of the business reasons
companies now state for implementing an effective ALM framework include gaining
competitive advantage and increasing the value of the organization.
ALM in its most apparent sense is based on funds management. Funds management
represents the core of sound bank planning and financial management. Although funding
practices, techniques, and norms have been revised substantially in recent years, it is not a new
concept. Funds management is the process of managing the spread between interest earned and
interest paid while ensuring adequate liquidity. Therefore, funds management has following
three components, which have been discussed briefly.
Liquidity Management:-
Liquidity represents the ability to accommodate decreases in liabilities and to fund increases
in assets. An organization has adequate liquidity when it can obtain sufficient funds, either by
increasing liabilities or by converting assets, promptly and at a reasonable cost. Liquidity is
essential in all organizations to compensate for expected and unexpected balance sheet
fluctuations and to provide funds for growth. The price of liquidity is a function of market
conditions and market perception of the risks, both interest rate and credit risks, reflected in the
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balance sheet and off-balance sheet activities in the case of a bank. If liquidity needs are not met
through liquid asset holdings, a bank may be forced to restructure or acquire additional liabilities
under adverse market conditions. Liquidity exposure can stem from both internally (institution-
specific) and externally generated factors. Sound liquidity risk management should address both
types of exposure. External liquidity risks can be geographic, systemic or instrument-specific.
Internal liquidity risk relates largely to the perception of an institution in its various markets:
local, regional, national or international. Determination of the adequacy of a bank's liquidity
position depends upon an analysis of its: -
As all banks are affected by changes in the economic climate, the monitoring of economic
and money market trends is key to liquidity planning. Sound financial management can minimize
the negative effects of these trends while accentuating the positive ones. Management must also
have an effective contingency plan that identifies minimum and maximum liquidity needs and
weighs alternative courses of action designed to meet those needs. The cost of maintaining
liquidity is another important prerogative. An institution that maintains a strong liquidity position
may do so at the opportunity cost of generating higher earnings. The amount of liquid assets a
bank should hold depends on the stability of its deposit structure and the potential for rapid
expansion of its loan portfolio. If deposit accounts are composed primarily of small stable
accounts, a relatively low allowance for liquidity is necessary.
Additionally, management must consider the current ratings by regulatory and rating
agencies when planning liquidity needs. Once liquidity needs have been determined,
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management must decide how to meet them through asset management, liability management, or
a combination of both.
Asset Management:-
Many banks (primarily the smaller ones) tend to have little influence over the size of their
total assets. Liquid assets enable a bank to provide funds to satisfy increased demand for loans.
But banks, which rely solely on asset management, concentrate on adjusting the price and
availability of credit and the level of liquid assets. However, assets that are often assumed to be
liquid are sometimes difficult to liquidate. For example, investment securities may be pledged
against public deposits or repurchase agreements, or may be heavily depreciated because of
interest rate changes. Furthermore, the holding of liquid assets for liquidity purposes is less
attractive because of thin profit spreads.
Asset liquidity, or how "salable" the bank's assets are in terms of both time and cost, is of
primary importance in asset management. To maximize profitability, management must carefully
weigh the full return on liquid assets (yield plus liquidity value) against the higher return
associated with less liquid assets. Income derived from higher yielding assets may be offset if a
forced sale, at less than book value, is necessary because of adverse balance sheet fluctuations.
Seasonal, cyclical, or other factors may cause aggregate outstanding loans and deposits to
move in opposite directions and result in loan demand, which exceeds available deposit funds. A
bank relying strictly on asset management would restrict loan growth to that which could be
supported by available deposits. The decision whether or not to use liability sources should be
based on a complete analysis of seasonal, cyclical, and other factors, and the costs involved. In
addition to supplementing asset liquidity, liability sources of liquidity may serve as an alternative
even when asset sources are available.
Liability Management:-
Liquidity needs can be met through the discretionary acquisition of funds on the basis of
interest rate competition. This does not preclude the option of selling assets to meet funding
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needs, and conceptually, the availability of asset and liability options should result in a lower
liquidity maintenance cost. The alternative costs of available discretionary liabilities can be
compared to the opportunity cost of selling various assets. The major difference between
liquidity in larger banks and in smaller banks is that larger banks are better able to control the
level and composition of their liabilities and assets. When funds are required, larger banks have a
wider variety of options from which to select the least costly method of generating funds. The
ability to obtain additional liabilities represents liquidity potential. The marginal cost of liquidity
and the cost of incremental funds acquired are of paramount importance in evaluating liability
sources of liquidity. Consideration must be given to such factors as the frequency with which the
banks must regularly refinance maturing purchased liabilities, as well as an evaluation of the
bank's ongoing ability to obtain funds under normal market conditions.
The obvious difficulty in estimating the latter is that, until the bank goes to the market to
borrow, it cannot determine with complete certainty that funds will be available and/or at a price,
which will maintain a positive yield spread. Changes in money market conditions may cause a
rapid deterioration in a bank's capacity to borrow at a favorable rate. In this context, liquidity
represents the ability to attract funds in the market when needed, at a reasonable cost vis-e-vis
asset yield. The access to discretionary funding sources for a bank is always a function of its
position and reputation in the money markets.
Although the acquisition of funds at a competitive cost has enabled many banks to meet
expanding customer loan demand, misuse or improper implementation of liability management
can have severe consequences. Further, liability management is not riskless. This is because
concentrations in funding sources increase liquidity risk. For example, a bank relying heavily on
foreign interbank deposits will experience funding problems if overseas markets perceive
instability in U.S. banks or the economy. Replacing foreign source funds might be difficult and
costly because the domestic market may view the bank's sudden need for funds negatively.
Again over-reliance on liability management may cause a tendency to minimize holdings of
short-term securities, relax asset liquidity standards, and result in a large concentration of short-
term liabilities supporting assets of longer maturity. During times of tight money, this could
cause an earnings squeeze and an illiquid condition.
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Also if rate competition develops in the money market, a bank may incur a high cost of
funds and may elect to lower credit standards to book higher yielding loans and securities. If a
bank is purchasing liabilities to support assets, which are already on its books, the higher cost of
purchased funds may result in a negative yield spread.
Preoccupation with obtaining funds at the lowest possible cost, without considering
maturity distribution, greatly intensifies a bank's exposure to the risk of interest rate fluctuations.
That is why banks who particularly rely on wholesale funding sources, management must
constantly be aware of the composition, characteristics, and diversification of its funding
sources.
In order to determine the efficacy of Asset Liability Management one has to follow a
comprehensive procedure of reviewing different aspects of internal control, funds management
and financial ratio analysis. Below a step-by-step approach of ALM examination in case of a
bank has been outlined.
Step 1
The bank/ financial statements and internal management reports should be reviewed to assess the
asset/liability mix with particular emphasis on: -
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Ratio of pledged securities to total securities.
Step 2
It is to be determined that whether bank management adequately assesses and plans its
liquidity needs and whether the bank has short-term sources of funds. This should include: -
Review of internal management reports on liquidity needs and sources of satisfying these
needs.
Step 3
The banks future development and expansion plans, with focus on funding and liquidity
management aspects has to be looked into. This entails: -
Determining whether bank management has effectively addressed the issue of need for
liquid assets to funding sources on a long-term basis.
Reviewing the bank's budget projections for a certain period of time in the future.
Determining whether the bank really needs to expand its activities. What are the sources
of funding for such expansion and whether there are projections of changes in the bank's
asset and liability structure?
Assessing the bank's development plans and determining whether the bank will be able to
attract planned funds and achieve the projected asset growth.
Determining whether the bank has included sensitivity to interest rate risk in the
development of its long term funding strategy.
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Step 4
Examining the bank's internal audit report in regards to quality and effectiveness in terms of
liquidity management
Step 5
Determining whether the bank's management assessed the potential expenses that the
bank will have as a result of unanticipated financial or operational problems.
Determining the alternative sources of funding liquidity and/or assets subject to necessity.
Determining the impact of the bank's liquidity management on net earnings position.
Step 6
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Whether the bank's policy of asset and liability management prohibits or defines certain
restrictions for attracting borrowed means from bank related persons (organizations) in
order to satisfy liquidity needs.
Does the bank's policy of asset and liability management provide for an adequate control
over the position of contingent liabilities of the bank?
Is the foregoing information considered an adequate basis for evaluating internal control
in that there are no significant deficiencies in areas not covered in this questionnaire that
impair any controls?
The post-reform banking scenario in India was marked by interest rate deregulation, entry
of new private banks, and gamut of new products along with greater use of information
technology. To cope with these pressures banks were required to evolve strategies rather than ad
hoc solutions. Recognising the need of Asset Liability management to develop a strong and
sound banking system, the RBI has come out with ALM guidelines for banks and FIs in April
1999.The Indian ALM framework rests on three pillars: -
The ALCO or the Asset Liability Management Committee consisting of the banks senior
management including the CEO should be responsible for adhering to the limits set by the board
as well as for deciding the business strategy of the bank in line with the banks budget and
decided risk management objectives. ALCO is a decision-making unit responsible for balance
sheet planning from a risk return perspective including strategic management of interest and
liquidity risk. The banks may also authorise their Asset-Liability Management Committee
(ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board
immediately thereafter. The banks should also fix maximum spread over the PLR with the
approval of the ALCO/Board for all advances other than consumer credit.
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ALM Information System:-
The ALM Information System is required for the collection of information accurately,
adequately and expeditiously. Information is the key to the ALM process. A good information
system gives the bank management a complete picture of the bank's balance sheet.
ALM Process:-
The basic ALM processes involving identification, measurement and management of risk
parameter .The RBI in its guidelines has asked Indian banks to use traditional techniques like
Gap Analysis for monitoring interest rate and liquidity risk. However RBI is expecting Indian
banks to move towards sophisticated techniques like Duration, Simulation, VaR in the future.
For the accrued portfolio, most Indian Private Sector banks use Gap analysis, but are gradually
moving towards duration analysis. Most of the foreign banks use duration analysis and are
expected to move towards advanced methods like Value at Risk for the entire balance sheet.
Some foreign banks are already using VaR for the entire balance sheet.
ALM has evolved since the early 1980's. Today, financial firms are increasingly using
market value accounting for certain business lines. This is true of universal banks that have
trading operations. Techniques of ALM have also evolved. The growth of OTC derivatives
markets has facilitated a variety of hedging strategies. A significant development has been
securitization, which allows firms to directly address asset-liability risk by removing assets or
liabilities from their balance sheets. This not only eliminates asset-liability risk; it also frees up
the balance sheet for new business.
Thus, the scope of ALM activities has widened. Today, ALM departments are addressing
(non-trading) foreign exchange risks as well as other risks. Also, ALM has extended to non-
financial firms. Corporations have adopted techniques of ALM to address interest-rate
exposures, liquidity risk and foreign exchange risk. They are using related techniques to address
commodities risks. For example, airlines' hedging of fuel prices or manufacturers' hedging of
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steel prices are often presented as ALM. Thus it can be safely said that Asset Liability
Management will continue to grow in future and an efficient ALM technique will go a long way
in managing volume, mix, maturity, rate sensitivity, quality and liquidity of the assets and
liabilities so as to earn a sufficient and acceptable return on the portfolio.
ALM is a comprehensive and dynamic framework for measuring, monitoring and managing
the market risk of a bank. It is the management of structure of balance sheet (liabilities and
assets) in such a way that the net earning from interest is maximised within the overall risk-
preference (present and future) of the institutions. The ALM functions extend to liquidly risk
management, management of market risk, trading risk management, funding and capital planning
and profit planning and growth projection. Benefits of ALM - It is a tool that enables bank
managements to take business decisions in a more informed framework with an eye on the risks
that bank is exposed to. It is an integrated approach to financial management, requiring
simultaneous decisions about the types of amounts of financial assets and liabilities - both mix
and volume - with the complexities of the financial markets in which the institution operates
The concept of ALM is of recent origin in India. It has been introduced in Indian Banking
industry w.e.f. 1st April, 1999. ALM is concerned with risk management and provides a
comprehensive and dynamic framework for measuring, monitoring and managing liquidity,
interest rate, foreign exchange and equity and commodity price risks of a bank that needs to be
closely integrated with the banks’ business strategy.
The assets and liabilities of the bank’s balance sheet are nothing but future cash inflows or
outflows. With a view to measure the liquidity and interest rate risk, banks use of maturity ladder
and then calculate cumulative surplus or deficit of funds in different time slots on the basis of
statutory reserve cycle, which are termed as time buckets.
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As a measure of liquidity management, banks are 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 the Board / Management Committee.
Risk parameters
Risk identification
Risk measurement
Risk management
Risk policies and tolerance levels.
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figures are inflows. In September, 2013, having regard to the international practices, the level of
sophistication of banks in India, the need for a sharper assessment of the efficacy of liquidity
management and with a view to providing a stimulus for development of the term-money
market, RBI revised these guidelines and it was provided that
the banks may adopt a more granular approach to measurement of liquidity risk by
splitting the first time bucket (1-14 days at present) in the Statement of Structural
Liquidity into three time buckets viz., next day , 2-7 days and 8-14 days. Thus, now we
have 10 time buckets.
After such an exercise, each bucket of assets is matched with the corresponding bucket of
the liabililty. When in a particular maturity bucket, the amount of maturing liabilities or
assets does not match, such position is called a mismatch position, which creates liquidity
surplus or liquidity crunch position and depending upon the interest rate movement, such
situation may turnout to be risky for the bank. Banks are required to monitor such
mismatches and take appropriate steps so that bank is not exposed to risks due to the
interest rate movements during that period.
The net cumulative negative mismatches during the Next day, 2-7 days, 8-14 days and
15-28 days buckets should not exceed 5 % ,10%, 15 % and 20 % of the cumulative cash
outflows in the respective time buckets in order to recognise the cumulative impact on
liquidity.
The Board’s of the Banks have been entrusted with the overall responsibility for the
management of risks and is required to decide the risk management policy and set limits
for liquidity, interest rate, foreign exchange and equity price risks.
Asset-Liability Committee (ALCO) is the top most committee to oversee the
implementation of ALM system and it is to be headed by CMD or ED. ALCO considers
product pricing for both deposits and advances, the desired maturity profile of the
incremental assets and liabilities in addition to monitoring the risk levels of the bank. It
will have to articulate current interest rates view of the bank and base its decisions for
future business strategy on this view.
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Rate Sensitive Assets & Liabilities : -
Assets and liabilities which receive / pay interest that vary with a benchmark rate are re-
priced at pre-determined intervals and are rate sensitive at the time of re-pricing.
INTEREST RISK:
The phased deregulation of interest rates and the operational flexibility given to banks in
pricing most of the assets and liabilities imply the need for the banking system to hedge the
Interest-Rate Risk. Interest Rate Risk is the risk where changes in market interest rates might
adversely affect the Bank’s Net Interest Income. The gap report should be generated by grouping
interest rate sensitive liabilities, assets and off balance sheet positions into time buckets
according to residual maturity or next reprising period, whichever is earlier. Interest rates on
term deposits are fixed during their currency while the advance interest rates are floating rates.
The gaps on the assets and liabilities are to be identified on different time buckets from 1–28
days, 29 days upto 3 months and so on. The interest changes should be studied vis-a-vis the
impact on profitability on different time buckets to assess the interest rate risk.
GAP ANALYSIS:-
The various items of rate sensitive assets and liabilities and off-balance sheet items are classified
into time buckets such as 1-28 days, 29 days and upto 3 months etc. and items non-sensitive to
interest based on the probable date for change in interest.The gap is the difference between Rate
Sensitive Assets (RSA) and Rate Sensitive Liabilities (RSL) in various time buckets. The
positive gap indicates that it has more RSAS than RSLS whereas the negative gap indicates that
43
it has more RSLS. The gap reports indicate whether the institution is in a position to benefit from
rising interest rates by having a Positive Gap (RSA > RSL) or whether it is a position to benefit
from declining interest rate by a negative Gap (RSL > RSA).
Total Risk
(Responsibility of CEO)
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PRODUCT MARKET RISK:-
This risk decision relate to the operating revenues and expenses of the form that impact the
operating position of the profit and loss statements which include crisis, marketing, operating
systems, labor cost, technology, channels of distributions at strategic focus. Product Risks relate
to variations in the operating cash flows of the firm, which effect Capital Market, required Rates
Of Return :
CREDIT RISK
STRATEGIC RISK
COMMODITY RISK
OPERATIVE RISK
LEGAL RISK
Risk in Product Market relate to the operational and strategic aspects of managing operating
revenues and expenses. The above types of Product Risks are explained as follows :
CREDIT RISK:-
The most basic of all Product Market Risk or other financial intermediary is the erosion of
value due to simple default or non-payment by the borrower. Credit risk has been around for
centuries and is thought by many to be the dominant financial services today’s intermediate the
risk appetite of lenders and essential risk ness of borrowers. manage this risk by ;
45
making intelligent lending decisions so that expected risk of borrowers is both accurately
assessed and priced;
Diversifying across borrowers so that credit losses are not concentrated in time;
purchasing third party guarantees so that default risk is entirely or partially shifted away from
lenders.
STRATEGIC RISK:-
This is the risk that entire lines of business may succumb to competition or obsolescence. In
the language of strategic planner, commercial paper is a substitute product for large corporate
loans. Strategic risk occurs when a is not ready or able to compete in a newly developing line of
business. Early entrants enjoyed a unique advantage over newer entrants. The seemingly
conservative act of waiting for the market to develop posed a risk in itself. Business risk accrues
from jumping into lines of business but also from staying out too long.
COMMODITY RISK:-
Commodity prices affects and other lenders in complex and often unpredictable ways. The
macro effect of energy price increases on inflation also contributed to a rise in interest rates,
which adversely affected the value of many fixed rate financial assets. The subsequent crash in
oil prices sent the process in reverse with nearly equally devastating effe.
OPERATING RISK:-
46
opaque to their users. Because developers do not use the system and users often have not
constitutes a significant Product Market Risk. No financial service firm can small management
challenge in the modern financial services company.
HUMAN RESOURCES RISK:
Few risks are more complex and difficult to measure than those of personnel policy; they are
Recruitment, Training, Motivation and Retention. Risk to the value of the Non-Financial Assets
as represented by the work force represents a much more subtle of risk. Concurrent with the loss
of key personal is the risk of inadequate or misplaced motivation among management personal.
This human redundancy is conceptually equivalent to safety redundancy in operating systems. It
is not inexpensive, but it may well be cheaper than the risk of loss. The risk and rewards of
increased attention to the human resources dimension of management are immense.
LEGAL RISK:-
This is the risk that the legal system will expropriate value from the shareholders of financial
services firms. The legal landscape today is full of risks that were simply unimaginable even a
few years ago. More over these risks are very hard to anticipate because they are often unrelated
to prior events which are difficult and impossible to designate but the management of a financial
services firm today must have these risks at least in view. They can cost millions.
In the Capital Market Risk decision relate to the financing and financial support of Product
Market activities. The result of product market decisions must be compared to the required rate
of return that results from capital market decision to determine if management is creating value.
Capital market decisions affect the risk tolerance of product market decisions related to
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variations in value associated with different financial instruments and required rate of return in
the economy.
LIQUIDITY RISK
CURRENCY RISK
SETTLEMENT RISK
BASIS RISK
LIQUIDITY RISK:-
For experienced financial services professionals, the foremost capital market risk is that of
inadequate liquidity to meet financial obligations. The obvious form is an inability to pay desired
withdrawals. Depositors react desperately to the mere prospect of this situation.
They can drive a financial intermediary to collapse by withdrawing funds at a rate that
exceeds its capacity to pay. For most of this century, individual depositors who lost faith in
ability to repay them caused failures from liquidity. Funds are deposited primarily as a financial
of rate. Such funds are called “purchased money” or “headset funds” as they are frequently
bought by employees who work on the money desk quoting rates to institutions that shop for the
highest return. To check liquidity risk, firms must keep the maturity profile of the liabilities
compatible with that of the assets. This balance must be close enough that a reasonable shift in
interest rates across the yield curve does not threaten the safety and soundness of the entire firm.
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INTEREST RATE RISK:-
In extreme conditions, Interest Rate fluctuations can create a liquidity crisis. The fluctuation
in the prices of financial assets due to changes in interest rates can be large enough to make
default risk a major threat to a financial services firm’s viability. There’s a function of both the
magnitude of change in the rate and the maturity of the asset. This inadequacy of assessment and
consequent mispricing of assets, combined with an accounting system that did not record
unrecognized gains and losses in asset values, created a financial crisis. Risk based capital rules
pertaining to have done little to mitigate the interest rate risk management problem. The decision
to pass it of, however is not without large cost, so the cost benefit tradeoff becomes complex.
CURRENCY RISK:-
The risk of exchange rate volatility can be described as a form of basis risk among
currencies instead of basis risk among interest rates on different securities. Balance sheets
comprised of numerous separate currencies contain large camouflaged risks through financial
reporting systems that do not require assets to be marked to market. Exchange rate risk affects
both the Product Markets and The Capital Markets. Ways to contain currency risk have
developed in today’s derivative market through the use of swaps and forward contracts. Thus,
this risk is manageable only after the most sophisticated and modern risk management technique
is employed
SETTLEMENT RISK:-
Settlement Risk is a particular form of default risk, which involves the competitors.
Amounts settle obligations having to do with money transfer, check clearing, loan disbursement
and repayment, and all other inter- transfers within the worldwide monetary system. A single
payment is made at the end of the day instead of multiple payments for individual transactions.
BASIS RISK :-
49
Basis risk is a variation on the interest rate risk theme, yet it creates risks that are less easy to
observe and understand. To guard against interest rate risk, somewhat non comparable securities
may be used as a hedge. However, the success of this hedging depends on a steady and
predictable relationship between the two no identical securities. Basis can negate the hedge
partially or entirely, which vastly increases the Capital Market Risk exposure of the firm.
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DATA ANALYSIS
&
INTERPRETATION
RISK MANAGEMENT SYSTEM
Assuming and managing risk is the essence of business decision-making. Investing in a new
technology, hiring a new employee, or launching a marketing campaign is all decisions with
uncertain outcomes. As a result all the major management decisions of how much risk to take
and how to manage the risk.
The implementation of risk management varies from business to business, from one
management style to another and from one time to another. Risk management in the financial
services industry is different from others. Circumstances, Institutions and Managements are
different. On the other hand, an investment decision is no recent history of legal and political
stability, insights into the potential hazards and opportunities.
Many risks are managed quantitatively. Risk exposure is measured by some numerical
index. Risk cost tradeoff many tools are described by numerical valuation formulas.
Risk management can be integrated into a risk management system. Such a system can
be utilized to manage the trading position of a small-specialized division or an entire financial
institution. The modules of the system can be implemented with different degrees of accuracy
and sophistication.
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RISK MANAGEMENT SYSTEM
52
RISK MANAGEMENT SYSTE:-
Arbitrage pricing models range from simple equations to large scale numerically
sophisticated algorithms. Cash flow generators also vary from a single formula to a
simulator that accounts for the dependence of cash flows on the history of the risk factors.
The important ingredient of the risk management approach is the treatment of risk
factors and securities as an integrated portfolio. Analyzing the correlation among the real,
financial and strategic assets of an organization leads to clear understanding of risk
exposure. Special attention is paid to risk factors, which translate to correlation among
the values of securities. Identifying the correlation among the basic risk factors leads to
more effective risk management.
CONCLUSION:-
The burden of the Risk and its Costs are both manageable and transferable. Financial
service firms, in the addition to managing their own risk, also sell financial risk management to
others. They sell their services by bearing customers financial risks through the products they
provide. A financial firm can offer a fixed-rate loan to a borrower with the risk of interest rate
movements transferred from the borrower to the. Financial innovations have been concerned
with risk reduction than any other subject. With the possibility of managing risk near zero, the
challenge becomes not how much risk can be removed.
Financial services involve the process of intermediation between those who have financial
resources and those who need them, either as a principal or as an agent. Thus, value breaks into
several distinct functions, and it includes the intermediation of the following:
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Maturity Preference mismatch, Default, Currency Preference mis-match, Size of
transaction and Market access and information.
Asset and liability management (ALM) is “the Art and Science of choosing the best mix
of assets for the firm’s asset portfolio and the best mix of liabilities for the firm’s liability
portfolio”. It is particularly critical for Financial Institutions.
For a long time it was taken for granted that the liability portfolio of financial firms was
beyond the control of the firm and so management concentrated its efforts on choosing the asset
mix. Institutions treasury department used the funds provided by deposits to structure an asset
portfolio that was appropriate for the given liability portfolio.
With the advent of Certificate of Deposits (CDs), a tool by which to manipulate the mix of
liabilities that supported their Asset portfolios, which has been one of the active management of
assets and liabilities.
Asset and liability management program evolve into a strategic tool for management, the
main elements of the ALM system are:
ALM INFORMATION.
ALM ORGANISATION.
ALM FUNCTION.
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ALM INFORMATION:-
ALM is a risk management tool through which Market risk associated with business are
identified, measured and monitored to maintain profits by restructuring Assets and Liabilities.
The ALM framework needs to be built on sound methodology with necessary information
system as back up. Thus the information is key element to the ALM process.
There are various methods prevalent worldwide for measuring risks. These range from the
simple Gap statement to extremely sophisticate and data intensive Risk adjusted profitability
measurement (RAPM) methods. The central element for the entire ALM exercise is the
availability of adequate and accurate information.
However, the existing systems in many Indians do not generate information in manner
required for the ALM. Collecting accurate data is the biggest challenge before, the particularly
those having wide network of branches, but lacking full-scale computerization.
Therefore the introduction of these information systems for risk measurement and
monitoring has to be addressed urgently.
The large network of branches and the lack of support system to collect information
required for the ALM which analysis information on the basis of residual maturity and
behavioral pattern, it would take time for s in the present state to get the requisite information.
ALM ORGANISATION:-
Successful implementation of the risk management process requires strong commitment on
the part of senior management in the to integrate basic operations and strategic decision making
with risk management.
The Board of Directors should have overall responsibility for management of risk and
should decide the risk management policy of the, setting limits for liquidity, interest rate, foreign
exchange and equity / price risk.
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The Asset Liability Management Committee (HDFC) consisting of the s senior
management, including CEO/CMD should be responsible for ensuring adherence to the limits set
by the Board of Directors as well as for deciding the business strategy of the (on the assets and
liabilities sides) in line with the s budget and decided risk management objective.
The ALM support group consisting of operation staff should be responsible for analyzing,
monitoring and reporting the risk profiles to the HDFC. The staff should also prepare forecasts
(simulations) showing the effects of various possible changes in market condition related to the
balance sheet and recommend the action needed to adhere to s internal limits,
The HDFC is a decision-making unit responsible for balance sheet planning from a risk-
return perspective including the strategic management of interest rate and liquidity risks. Each
has to decide on the role of its HDFC, its responsibility as also the decision to be taken by it. The
business and risk management strategy of the should ensure that the operates within the limits /
parameters set by the Board. The business issues that an HDFC would consider, inter alia, will
include product pricing for deposits and advances, desired maturity profile and mix of the
incremental Assets and Liabilities, etc. in addition to monitoring the risk levels of the , the
HDFC should review the results of and progress in implementation of the decisions made in the
previous meetings. The HDFC would also articulate the current interest rate view of the and base
its decisions for future business strategy on this view. In respect of this funding policy, for
instance, its responsibility would be to decide on source and mix of liabilities or sale of assets.
Towards this end, it will have to develop a view on future direction of interest rate movements
and decide on funding mixes between fixed vs. floating rate funds, wholesale vs. retail deposits,
Money markets vs. Capital market funding, domestic vs. foreign currency funding etc.
Individuals will have to decide the frequency for holding their HDFC meetings.
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Reviewing the interest rate outlook for pricing of assets and liabilities (Loans and
Deposits)
Deciding on the introduction of any new loan / deposit product and their impact on
interest rate / exchange rate and other market risks;
Reviewing the asset and liability portfolios and the risk limits and thereby, assessing the
capital adequacy;
Deciding on the desired maturity profile of incremental assets and liabilities and thereby
assessing the liquidity risk; and
Reviewing the variances in actual and projected performances with regard to Net Interest
Margin(NIM), spreads and other balance sheet ratios.
COMPOSITION OF HDFC:-
The size (number of members) of HDFC would depend on the size of each institution,
business mix and organizational complexity, To ensure commitment of the Top management and
timely response to market dynamics, the CEO/MD or the GM should head the committee. The
chiefs of Investment, Credit, Resources Management or Planning, Funds Management / Treasury
(domestic), etc., can be members of the committee. In addition, the head of the computer
(technology) Division should also be an invitee for building up of MIS and related
computerization. Some of may even have Sub-Committee and Support Groups.
ALM BOARD
HDFC
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ALM CELL
COMMITTEE OF DIRECT
ALM BOARD:-
The Board of management should have overall responsibility for management of risk
and should decide the risk management policy of the and set limits for liquidity and
interest rate risks.
HDFC:-
The bank has constituted an Asset- Liability committee (HDFC). The committee may consist
of the following members.
The HDFC is a decision making unit responsible for ensuring adherence to the limits set by
board as well as for balance sheet planning from risk return perspective including the strategic
management of interest rate and liquidity risks, in line with the s budget and decided risk
management objectives.
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The Business issues that an HDFC would consider interalia, will include fixation of interest
rates for both deposits and advances, desired maturity profile of the incremental assets and
liabilities etc.
The HDFC would also articulate the current interest rate due of the and base its decisions for
future business strategy on this view. In respect of funding policy, for instance, its responsibility
would be decided on source and mix of liability.
Individuals will have to decide the frequency for their HDFC meetings. However, it is
advised that HDFC should meet at least once in a fortnight. The HDFC should review results of
and process in implementation of the decisions made in the previous meetings
ALM CELL:-
The ALM desk / cell consisting of operating staff should be responsible for analyzing,
monitoring and reporting the profiles to the HDFC. The staff should also prepare forecasts
(simulations) showing the effects of various possible changes in market conditions related to the
balance sheet and recommend the action needed to adhere to the internal limits.
COMMITTEE OF DIRECTORS:-
ALM PROCESS
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Interest Rate Risk Management
The RBI guidelines mainly address Liquidity Risk Management and Interest Rate Risk
Management.
The following are the concepts discussed for analysis of Asset-Liability Management
under above mentioned risks.
Liquidity Risk
Maturity profiles
Gap analysis
Measuring and managing liquidity needs are vital activities of the Risk. By assuring a
returns ability to meet its liability as they become due, liquidity management can reduce the
probability of an adverse situation development. The importance of liquidity transcends
individual institutions, as liquidity shortfall in one institution can have repercussions on the
entire system.
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Liquidity risk management refers to the risk of maturing liability not finding enough
maturing assets to meet these liabilities. It is the potential inability to meet the liability as they
became due. This risk arises because borrows funds for different maturities in the form of
deposits, market operations etc. and lock them into assets of different maturities.
Liquidity Gap also arises due to unpredictability of deposit withdrawals, changes in loan
demands. Hence measuring and managing liquidity needs are vital for effective and viable
operations.
Liquidity measurement is quite a difficult task and usually the stock or cash flow
approaches are used for its measurement. The stock approach used certain liquidity ratios.
The liquidity ratios are the ideal indicators of liquidity of Operating in developed
financial markets, the ratio do not reveal the real liquidity profile of s which are operating
generally in a fairly illiquid market. The assets, which are commonly considered as liquid
like Government securities, have limited liquidity when the market and players are in one
direction. Thus analysis of liquidity involves tracking of cash flow mismatches.
The statement of structural liquidity may be prepared by placing all cash inflows and
outflows in the maturity ladder according to the expected timing of cash flows.
The position of Assets and Liabilities are classified according to the maturity patterns a
maturing liability will be a cash outflow while a maturing asset will be a cash inflows. The
measuring of the future cash flows of s is done in different time buckets.
The time buckets, given the statutory Reserve cycle of 14 days may be distributed as under:
1 to 14 days
15 to 28 days
29 days and up to 3 months
Over 3 months and up to 6 months
Over 6 months and up to 1 year
Over 1 year and up to 3 years
Over 3 years and up to 5 years
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MATURITY PROFILE – LIQUIDITY:-
INFLOWS
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1. Cash 1-14 days bucket.
2. Balance with others
(i) Current Account (i) Non-withdraw able portion on
account of stipulations of
minimum balances may be shown
Less than 1-14 days bucket.
(ii) Money at call and short Notice, (ii) Respective maturity buckets.
Term Deposits and other
Placements
3. Investments
(i) Approved securities (i) Respective maturity buckets
excluding the amount required to
be reinvested to maintain SLR
(ii) Corporate (ii) Respective Maturity buckets.
Debentures and Investments classified as NPAs
bonds, CDs and CPs, Should be shown under 2-5 years
redeemable bucket (sub-standard) or over 5
preference shares, years bucket (doubtful and loss).
units of Mutual (iii) Over 5 years bucket.
Funds (close ended).
Etc. (iv) Over 5 years bucket.
(iii) Share / Units of Mutual
Funds (open ended)
(iii) Investment in
subsidiaries /
Joint Ventures.
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(including bills under of behavioral and seasonal pattern
DUPN) of a ailments based on outstanding
(iii) Cash Credit / Overdraft and the core and volatile portion
(including TOD) and should be identified. While the
Demand Loan component of volatile portion could be shown in
Working Capital. the respective maturity bucket. The
core portion may be shown under
1-2 years bucket.
(iii) Term Loans (iii) Interim cash flows may be
shown under respective maturity
buckets.
5. NPAs
a. Sub-standard (I) 2-5 years bucket.
b. Doubtful and Loss (ii) Over 5 years bucket.
6. Fixed Assets Over 5 years bucket.
7. Other-office Adjustment
(i) Inter-office Adjustment (i) As per trend analysis,
Intangible items or items
not representing cash
receivables may be shown
in over 5 years bucket.
(ii) Others (i) Respective maturity
buckets. Intangible assets
and assets not representing
cash receivables may be
shown in over 5 years
bucket.
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Terms used:-
Other Liabilities: Cash payables, Income received in advance, Loan Loss and
Depreciation in Investments.
Other assets: Cash Receivable, Intangible Assets and Leased Assets.
Interest Rate Risk:-
Interest Rate Risk refers to the risk of changes in interest rates subsequent to the creation
of the assets and liabilities at fixed rates. The phased deregulations of interest rates and the
operational flexibility given in pricing most of the assets and liabilities imply the need for system
to hedge the interest rate risk. This is a risk where changes in the market interest rates might
adversely affect financial conditions.
The changes in interest rates affects in large way. The immediate impact of change in
interest rates is on earnings by changing its Net Interest Income (NII). A long term impact of
changing interest rates is on Market Value of Equity (MVE) or net worth as the economic value
of assets, liabilities and off-balance sheet positions get affected due to variation in market
interest rates.
The risk from the earnings perspective can be measured as changes in the Net Interest
Income (NII) OR Net Interest Margin (NIM).
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There are many analytical techniques for measurement and management of interest rate
risk. In MIS of ALM, slow pace of computerization in and the absence of total deregulation, the
traditional GAP ANALYSIS is considered as a suitable method to measure the interest rate risk.
Data Interpretation
Gap Analysis:-
The Gap or mismatch risk can be measured by calculating Gaps over different time
buckets as at a given date. Gap analysis measures mismatches between rate sensitive liabilities
and rate sensitive assets including off-balance sheet position.
RBI changes the interest rates i.e., on saving deposits, export credit, refinance, CRR
balances and so on, in case where interest rate are administered.
The Gap is the difference between Rate Sensitive Assets (RSA) and Rate sensitive Liabilities
(RSA) for each time bucket.
The positive GAP indicates that RSAs are more than RSLs (RSA>RSL).
The negative GAP indicates that RSAs are more than RSALs (RSA<RSL).
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They can implement ALM policies for the better identification of the mismatch, risk and
for the implementation of various remedial measures.
GENERAL:-
The classification of various components of assets and liabilities into different time
buckets for preparation of Gap reports (Liquidity and interest rate sensitivity) may be done as
indicated in Appendices I & II as a sort of bench mark, which are better equipped to reasonably
estimate the behavioral pattern, embedded options, rolls-in and rolls-out etc of various
components of assets and liabilities on the basis of past date. Empirical studies could classify
them in the appropriate time buckets, subject to approval from the HDFC / Board. A copy of the
note approved by the ALOC / Board may be sent to the Department of Supervision.
The present framework does not capture the impact of embedded options, i.e., the
customers exercising their options (premature closure of deposits and prepayment of loans and
advances) on the liquidity and interest rate risks profile. The magnitude of embedded option risk
at times of volatility in market interest rates is quite substantial should, therefore evolve suitable
mechanism, supported by empirical studies and behavioral analysis to estimate the future
behavior of assets; liabilities and off-balance sheet items to changes in market variables and
estimate the embedded options.
A scientifically evolved internal transfer pricing model by assigning values on the basis of
current market rates to funds provided and funds used is an imported component for elective
implementation of ALM systems. The transfer price mechanism can enhance the management of
margin i.e., landings or credit spread the funding or liability spread and mismatch spread. It also
helps centralizing interest rate risk at one place which facilitates effective control and
management of interest rate risk. A well defined transfer pricing system also provides a rational
framework for pricing of assets and liabilities.
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COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2017-18
ASSETS
68
7,000,000,000
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0
-1,000,000,000
Interpretation:
The total current liabilities for the year are Rs.206159441 is less than the total assets for the
year are Rs.2224585697. Therefore the assets are more than the liabilities. So there is a
positive gap of Rs.548939688 i.e 24.67%
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COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2016-17
70
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
-1,000,000,000
Interpretation:
The total current liabilities for the year are Rs.43731212 is less than the total assets for the
year are Rs.1832707732. Therefore the assets are more than the liabilities. So there is a
positive gap of Rs. 391877965 i.e 21.38%
71
COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2015-16
72
7,000,000,000
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0
-1,000,000,000
-2,000,000,000
-3,000,000,000
Interpretation:
The total current liabilities for the year are Rs.64047747 is less than the total assets for the
year are Rs.1331766032. Therefore the assets are more than the liabilities. So there is a
positive gap of Rs. 500941700 i.e 37.61%
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COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2014-15
ASSETS
74
40000000
30000000
20000000
10000000
0
-10000000
-20000000
-30000000
-40000000
Interpretation:
The total current liabilities for the year are Rs.1368913 is less than the total assets for the
year are Rs.9123561. Therefore the assets are more than the liabilities. So there is a positive
gap of Rs. 4194099 i.e 45.96%
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FINDINGS
ALM technique is aimed to tackle the market risks. Its objective is to stabilize and
improve Net interest Income (NII).
Implementation of ALM as a Risk Management tool is done using maturity profiles and
GAP analysis.
ALM presents a disciplined decision making framework for s while at the same time
guarding the risk levels.
There has been a small reduction in Gross Sales and with the performance of prefab Division
the Gross Profit gap has narrowed and contributing to the EBIT. The Gross Profit has
increased considerably from 6584124 Cr in Last year to 968547 Cr in year. The interest
payment has increased by 6987Cr in the Current year and the Profit before Tax at 69857
when compared to 5874568 cr in Last year.
Perform Division realization has increased by 8% even the Turnover has come to 641.80 Cr
from 400.09 Cr in last year.
The profit After Tax has came 856996 Cr to 6584548 in Current year because of slope in
Cement Industry.
The PAT is in an increasing trend from 2014-2015 because of increase in sale prices and
also decreases in the cost of manufacturing. In 2016 and 2017even the cost of manufacturing
has increased by 5% because of higher sales volume PAT has increased considerably, which
leads to higher EPS, which is at 98.366 in 2016.
The company also increased considerably which investors in coming period. The company
has taken up a plant expansion program during the year to increase the production activity
and to meet the increase in the demand
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CONCLUSION
The purpose of ALM is not necessarily to eliminate or even minimize risk. The level of risk will
vary with the return requirement and entity’s objectives.
Financial objectives and risk tolerances are generally determined by senior management of an
entity and are reviewed from time to time.
All sources of risk are identified for all assets and liabilities. Risks are broken down into their
component pieces and the underlying causes of each component are assessed.
Relationships of various risks to each other and/or to external factors are also identified.
Regular measurement and monitoring of the risk exposure is required. Operating within a
dynamic environment, as the entity’s risk tolerances and financial objectives change, the existing
ALM strategies may no longer be appropriate.
Hence, these strategies need to be periodically reviewed and modified. A formal, documented
communication process is particularly important in this step.
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Suggestions
They should strengthen its management information system (MIS) and computer
processing capabilities for accurate measurement of liquidity and interest rate
Risks in their Books.
In the short term the Net interest income or Net interest margins (NIM) creates
economic value of the which involves up gradation of existing systems &
Application software to attain better & improvised levels.
It is essential that remain alert to the events that effect its operating environment
& react accordingly in order to avoid any undesirable risks.
HDFC requires efficient human and technological infrastructure which will future
lead to smooth integration of the risk management process with effective business
strategies.
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BIBILIOGRAPHY
Web sites
www.hdfc.com
www.investoros.com
www.financeindia.com
www.google.com
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