A

Synopsis
ON
“ASSET LIABILITY MANAGEMENT”
AT
“HDFC BANK LIMITED”
Submitted in partial fulfillment of the requirement for the award of
the degree of
"MASTER OF BUSINESS ADMINISTRATION",
By
SAMALA SUSHMA
Roll No: 1251-20-672-142

Under the guidance of

Dr. G.S. LEELA

Wesley Post Graduate College

(Affiliated to Osmania University)
SECUNDERABAD, Hyderabad.
2020-2022

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1.1 INTRODUCTION
Asset Liability Management (ALM) is a strategic approach of managing the balance sheet
dynamics in such a way that the net earnings are maximized. This approach is concerned with
management of net interest margin to ensure that its level and riskiness are compatible with
the risk return objectives.
If one has to define Asset and Liability management without going into detail about its
need and utility, it can be defined as simply “management of money” which carries value and
can change its shape very quickly and has an ability to come back to its original shape with or
without an additional growth. The art of proper management of healthy money is ASSET
AND LIABILITY MANAGEMENT (ALM).
The Liberalization measures initiated in the country resulted in revolutionary changes in
thesector. There was a shift in the policy approach from the traditionally administered market
regime to a free market driven regime. This has put pressure on the earning capacity of co-
operative, which forced them to foray into new operational areas thereby exposing
themselves to new risks.As major part of funds at the disposal from outside sources, the
management are concerned about RISK arising out of shrinkage in the value of asset, and
managing such risks became critically important to them. Although co-operatives are able to
mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed
deposits were not properly matched with the maturities of assets created out of them. The tool
called ASSET AND LIABILITY MANAGEMENT provides a better solution for this.
ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and
liability of an organization. This is a method of matching various assets with liabilities on the
basis of expected rates of return and expected maturity pattern
In the context of ASSET LIABILITY MANAGEMENT is defined as “a process of
adjusting s liability to meet loan demands, liquidity needs and safety requirements”.This will
result in optimum value of the same time reducing the risks faced by them and managing the
different types of risks by keeping it within acceptable levels.
RBI revises asset liability management guidelines
On February 6/2021
Guidelines on ALM system issued in February 1999(first revised), covered, inter alia, interest
rate risk and liquidity risk measurementreporting framework and prudential limits. Gap
statements are prepared by scheduling all assets and liabilities according to the stated or
anticipated re-pricing date or maturity date. As a measure of liquidity management, banks

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were required to monitor their cumulative mismatches across all time buckets in their
statement of structural liquidity by establishing internal prudential limits with the approval of
their boards/ management committees. As per the guidelines, in the normal course, the
mismatches (negative gap) in the time buckets of 1-14 days and 15-28 days were not to
exceed 20 per cent of the cash outflows in the respective time buckets.
In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its Asset
Liability Management guidelines. Banks have now been asked to calculate modified duration
of assets (loans) and liabilities (deposits) and duration of equity.
This was stated by the executive director of RBI, V K Sharma, and here today. He said that
this concept gives banks a single number indicating the impact of a 1 per cent change of
interest rate on its capital, captures the interest rate risk, and can thus help them move
forward towards assessment of risk based capital. This approach will be a graduation from
the earlier approach, which led to a mismatch between the assets and liabilities.
The ED said that RBI has been laying emphasis that banks should maintain a more realistic
balance sheet by giving a true picture of their non performing assets (NPAs), and they should
not be deleted to show huge profits. Though the banking system in India has strong risk
management architecture, initiatives have to be taken at the bank specific level as well as
broader systematic level. He also emphasized on the need for sophisticated credit-scoring
models for measuring the credit risks of commercial and industrial portfolios.
Emphasizing on a need for an effective control system to manage risks, he said that the
implementation of BASEL II norms by commercial banks should not be delayed. He said that
the banks should have a robust stress testing process for assessment of capital adequacy in
wake of economic downturns, industrial downturns, market risk events and sudden shifts in
liquidity conditions. Stress tests should enable the banks to assess risks more accurately and
facilitate planning for appropriate capital requirements.
Sharma spoke at length about the need to extend the framework of integrated risk
management to group-wide level, especially among financial conglomerates. He said that
RBI has already put in place a framework for oversight of financial conglomerates, along
with SEBI and IRDA. He also said that at the systematic level efforts are being made to
create an enabling environment for all market participants in terms of regulation,
infrastructure and instruments.

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1.2 NEED FOR THE STUDY:
The need of the study is to concentrate on the growth and performance by using asset and
liability management and to know the management of nonperforming assets .To know
financial position and to analyze existing situation which helps to improve the performance
of company. The prime importance of the study is to analyze the maintenance of the asset and
liability it helps to compete with the other cooperatives.
 To know financial position of HDFC BANK LTD
 To analyze existing situation of HDFC BANK LTD
 To improve the performance of HDFC BANK LTD
 To analyze competition between HDFC BANK LTD with other cooperative.

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1.3 SCOPE OF THE STUDY:
In this study the analysis based on ratios to know asset and liabilities management and to
analyze the growth and performance by using the calculations under asset and liability
management based on ratio of the company. It covers both a prudential and component and
an optimization role, within the limits of compliance.
 Ratio analysis
 Comparative statement
 Common size balance sheet.

1.4 OBJECTIVES OF THE STUDY

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

integrated risk management.

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

and outflow .

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

 To study reserves cycle of ASSET LIABILITY MANAGEMENT

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

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1.5 DATA COLLECTION
The study of Asset-Liability Management is based on
 Secondary data collection
SECONDARY DATA COLLECTION:
Collected from books regarding journal, and management containing relevant information
about ALM and Other main sources were
 Annual report
 Published report

PERIOD OF THE STUDY:

The data is obtained from the HDFC BANK LIMITED for the purpose of Assets and
liability. The information is gathered from different channels for a period of 45 days.

REFERENCE PERIOD:
For the present study, the data pertaining to financial year 2017-2021 was collected.
TOOLS FOR DATA ANALYSIS
 Return on assets (ROA) is a financial ratio that shows the percentage of profit a
company earns in relation to its overall resources. It is commonly defined as net
income divided by total assets.
Net Income
Return on assets (ROA) ══ -----------------------
Average total assets
 Return on equity (ROE) is a measure of the profitability of a business in
relation to the equity, also known as net assets or assets minus liabilities. ROE is
a measure of how well a company uses investments to generate earnings growth.
Net Income
Return on equity (ROE) ══ ------------------------------
Average stockholders’ equity
 Return on common equity ratio (ROCE) reveals the amount of net profit
that could potentially be payable to common stockholders.
Net Income
Return on common equity══ -------------------------------------

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 Average common stockholder’s equity
1.6 RESEARCH METHODOLOGY
The study is both descriptive and analytical in nature. It is a blend of primary data and
secondary data. The primary data has been collected personally by approaching the online
share traders who are engaged in share market. The data are collected with a carefully
prepared questionnaire. The secondary data has been collected from the books, journals and
websites which deal with online share trading.

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 1.7 LIMITATION OF THE STUDY:
1. The subject is based on past data of HDFC BANK LIMITED
2. The analysis is based on structural liquidity assertion and hole evaluation.
3. The study is mainly based totally on secondary facts.
4. There was a constraint with regard to time allocation for the research study i.e for only a
period of 45 days.
5. Detailed study of the topic was not possible due to limited size of the project.