MRP PROJECT

STUDY ON ASSET LIABILITY

MANAGEMENT IN BANKING
GANIYA MEGHANA
(2111510016)
INTRODUCTION:

• Asset liability management is a crucial process that helps financial institution manage
their assets and liabilities effectively.
• DEFINITION: it is the process of managing the assets and liabilities of a financial
institution to mitigate risks, optimize profitability, and ensure compliance with
regulations.
 Achieving of desired financial objectives while maintaining a reasonable level of risk
 Improved decision making
 Optimize profitability
 Comply with regulations
ABSTRACT:

• This project explains about asset liability management in banking sector

• operates under the principle of managing assets and liabilities to achieve
financial stability and profitability.
• The project will analyze various techniques and strategies employed by
banks to manage their assets and liabilities effectively
• This research project aims to examine the importance of asset liability
management in the banking sector and it’s impact on financial
performance
LITERATURE REVIEW:

• Md. Salim Uddin, & Anamul Haque (2016): The study has been conducted to investigate
the impacts of ALM policy on the profitability of sample banks working in Bangladesh.
• Dr. Anurag b Singh*; ms. Priyanka Tandon (2012) :The research paper discusses about
issues in asset liability management.
• Prabhakar 1, Dr. S. Mathivannan 2, J. Ashok kumar 3(2017) : this research told about the
RBI of the country focused and advised banks for taking concrete steps in minimizing
the mismatch in the asset-liability management.
• S. P. Joshi1 & Dr. R. V. Sontakay (2017) : The survey helps for emerging banks to decide
the different ALM process used by the banking industries and to select the efficient
process out of the reported techniques.
• Shetty (2016): The Study Revealed That Banks Have Been Exposed To Liquidity
Risk.The Study Also Indicated That Hdfc Bank And Icici Bank Have Better Alm
Framework In Practice
• Ranjan and Nallari (2004): used canonical analysis to examine asset-liability
management in Indian banks. They found that state bank of India and associates had the
best asset-liability management in that sample period
OBJECTIVES:

 To know how asset liability management meet financial goals in banks.

 To identify the issues and risk associated with the asset and liability trend in
Indian banking system.
 To Evaluate the impact of Asset Liability Management on profitability of banks.
 To investigate challenges and opportunities associated with implementing ALM
practices in the banking industry
RESEARCH DESIGN

STATEMENT OF THE PROBLEM:

The State Bank of India (SBI) is one of the largest banks in India with a significant impact
on the country's financial system. As a financial institution, SBI manages a complex portfolio
of assets and liabilities to achieve its strategic objectives while mitigating risks. However,
effective asset liability management (ALM) is critical for banks like SBI to maintain
stability, profitability, and sustainability in a dynamic and volatile financial environment.
The problem is that there is a limited understanding of the ALM practices in SBI, and there is
a gap in the existing literature regarding the comprehensive analysis of the ALM framework,
policies, and strategies employed by SBI. Thus, there is a need for a research design that
aims to investigate the ALM practices in SBI, identify challenges and opportunities, and
provide recommendations for improvement.
Significance of the Research:
This research design will provide valuable insights into the ALM practices
of SBI, contributing to the existing literature on ALM in the banking sector.
The findings of this research could help SBI and other financial institutions
in India and beyond to improve their ALM framework, policies, and
strategies, and make informed decisions to manage their assets and liabilities
effectively.
OBJECTIVES OF THE STUDY:

 To find out how SBI is managing and mitigating interest rate risk with the help of
duration analysis
 To study impact of asset liability management on profitability of banks.
 To study how SBI is placing cash inflows and outflows in maturity ladder with the help
of structural liquidity statement.
 To know how SBI optimizing net interest income by using gap analysis
SCOPE OF THE STUDY:
Scope of the study is related to assets and liabilities under the financial management in SBI
Bank. The project involves analysing SBI's ALM policy, guidelines, and procedures to
understand the framework within which the bank manages its assets and liabilities. It can
also include evaluating the effectiveness of ALM practices in managing interest rate risk,
liquidity risk, credit risk, and other relevant risks
RESEARCH METHODOLOGY
Analytical research can be utilised in the study by taking the annual reports
given by the organisation. This project involves analysing how company will
manage with the risk and mismatching of assets and liabilities with the help
of doing gap analysis and duration analysis. The study and conclusion made
about the subject are based primarily on secondary data that was gathered
through company websites.
SOURCE OF DATA
 Secondary data
 Balance sheets of SBI
 Text books and journals
 Websites
 Articles
■Sampling design:
Last 5 years balance sheets are been considered in the study i.e. 2018-2022
■Tools and techniques:
 Gap analysis
 Duration analysis
 Structural liquidity statement
Limitations of the study:
 data collected is based on the secondary data
 the study is concerned with the available data gathered from annual
reports of SBI
 the time period taken for doing research is limited.
 Shows the growth of the capital and liabilities

Capital and liabilities

Capital and Liabilities:

Total Share Capital 892.46 892.46 892.46 892.46 892.46
Equity Share Capital 892.46 892.46 892.46 892.46 892.46
Reserves 255,817.73 229,405.38 207,352.30 195,367.42 193,388.12
Net Worth 256,710.19 230,297.84 208,244.76 196,259.88 194,280.58
Deposits 4,051,534.12 3,681,277.08 3,241,620.73 2,911,386.01 2,706,343.29
Borrowings 426,043.38 417,297.70 314,655.65 403,017.12 362,142.07
Total Debt 4,477,577.50 4,098,574.78 3,556,276.38 3,314,403.13 3,068,485.36
Other Liabilities & Provisions 229,931.84 181,979.66 163,110.10 145,597.30 167,138.08
Total Liabilities 4,964,219.53 4,510,852.28 3,927,631.24 3,656,260.31 3,429,904.02
SHOWS THE GROWTH OF ASSETS

Total asset
Assets        
Cash &
Balances 257,859.21 213,201.54 166,735.78 176,932.42 150,397.18
with RBI
Balance
with
Banks, 136,693.11 129,837.17 84,361.23 45,557.69 41,501.46
Money at
Call
2,733,966.5 2,449,497.7 2,325,289.5 2,185,876.9 1,934,880.1
Advances
9 9 6 2 9
Investment 1,481,445.4 1,351,705.2 1,046,954.5 1,060,986.7
967,021.95
s 7 1 2 2
Gross
37,467.49 38,067.41 38,023.39 38,508.94 39,200.71
Block

Revaluatio
23,377.87 23,577.35 23,762.67 24,653.94 24,847.99
n Reserves

Net Block 14,089.62 14,490.06 14,260.72 13,855.00 14,352.72

Capital
Work In 240.67 351.83 415.89 688.63 791.54
Progress
Other
339,924.86 351,768.68 289,613.55 266,327.70 226,994.20
Assets
Total 4,964,219.5 4,510,852.2 3,927,631.2 3,656,260.3 3,429,904.0
Assets 3 8 5 1 1