Download - 1905-121
A Project Report
On
“ASSET – LIABILITY MANAGEMENT”
AT
ANDHRA PRADESH STATE FINANCIALCORPORATION ,HYDERABAD.
Project submitted in partial fulfillment for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
BY
PATHAN AYUB KHAN(19-05-121)
AVANTHI P.G COLLEGE(Osmania University)
Dilsukhnagar,Hyderabad.
2005-2007
1
DECLARATION
I here by declare that the Project Report titled “ASSET-
LIABILITY MANAGEMENT” submitted by me to the
Department of Business Management, Avanthi P.G College
is a bonafide work undertaken by me and it is not submitted
to any other University of Institution for the award of any
degree or diploma/certificate or published any time before.
PATHAN AYUB KHAN
(19-05-121)
2
ABSTRACT
All the banks and financial institutions have adopted the concept of
asset-liability management in their streams.
The main objective of asset – liability management is to manage the assets and
liabilities in such a way that net earnings are maximized and it deals with both sides of
the balance sheet.
To solve the problems of asset – liability management generally banks adopt:
gap analysis, duration analysis, trend analysis and ration analysis.
But APSFC has adopted the method of gap analysis to solve the problems created
in their assets and liabilities.
By doing gap analysis FIs can avoid risk and can earn more profits, it is used to
benefit from rising interest rate by having a positive gap or whether it is in a position to
benefit from declining interest rates by negative gap.
It should do generated by grouping rate sensitive assets, liabilities and off-
balance sheet position into time buckets according to residual maturity or next pricing
period.
3
ACKNOWLEDGEMENT
I wish to express my deep sense of gratitude to all those who have encouraged me by giving their valuable suggestions during the project period and motivated me towards my goal.
I wish to express my sincere thanks to Mr.AJEYA KALLAM (Managing Director) and Mr. A.YADAGIRI (Chief General Manager) of APSFC, Hyderabad.
Words alone can not express my deep regards and gratitude to Mr. S. SRINIVAS MANICSD of APSFC, Hyderabad, who taken keen interest in guiding me to undertake the project work.
I wish to express thank to my project guide Ms.SRAVANI, Faculty member of the
college for her valuable suggestions and guidance during the course of my project
work.
My inexpressible gratitude to my parents and friends who have provided me with all
the facilities and are always has supportive to me in completing my project work
successfully.
(PATHAN AYUB KHAN)
4
TABLE OF CONTENTS
CHAPTER TITLE PAGE
NOUMBER
List of Tables i
List of Graphs ii
1. Introduction 1-8
2. Review Of Literature 9-23
3. Company Profile 24-35
4. Data Presentation and Analysis 36-46
4.1 Data Presentation 36-46
4.2 Analysis and Interpretation 47-76
5. Summary and Conclusions 77
6. Findings 78
7. Suggestions and Recommendations 79
8. Annexure 80
9. Glossary 81
10. Bibliography 82
5
LIST OF TABLES
TABLES PAGE NUMBERS
Liquidity risk maturity pattern of 61
Rupee assets and liabilities
Liquidity risk maturity pattern ofRupee/foreign currency assets and 62Liabilities
Maturity Pattern of Interest rate riskSensitive rupee assets and 63Liabilities
Maturity Pattern of Interest rate riskSensitive 64
Interpretation on Liquidity Statement 65
Relationship between interest rateChanges and net interest income 75
6
LIST OF GRAPHS
GRAPHS PAGENUMBERS
TOTAL ASSETS 67
7
TOTAL LIABILITIES 68
MISMATCH OF ASSETS AND LIABILITIES 69
PERCENTAGE OF LIQUIDITY GAP 70
TOTAL LIABILITIES 71
TOTAL ASSETS 72
MISMATCH OF INTEREST RATE RISK 73
PERCENTAGE OF INTEREST GAP 74
8
INTRODUCTION
9
INTRODUCTION
The composition of assets and liabilities largely decide the solvency, liquidity and
profitability of a corporate entity, more so that of a financial institution. The components
of the liabilities determine the cost of funds. The mix of the assets influences the return
on investment. Therefore the asset liability management assumes great importance; also,
it is absolutely necessary to prevent the Asset - liability mismatch, both in term of
maturity (tenure) and relative costs (minimum or interest differential) particularly in the
control of increasing pressure on margins. In the case of state financial corporation, the
instrumentality of Business Plan and Resources Forecast (BPRF) and effective treasury
management techniques cab be gainfully utilized to make correction in the existing
imbalances in the resource mix and the avoidable misalignments between the profile of
liabilities and the portfolio of assets. While BPRF is introduced at the instance of
IDBI/SIDBI, the treasury management through complex, is an evolving art.
THE CRUX
The Asset - liability management broadly deals with both sides of the balance
sheet. It is primarily concerned with the market risk that arises from a financial
institutions structural position. These are interest rate and liquidity risks. The interest rate
risk arises from the possibility of change in profits caused by fluctuations in interest rates.
10
The delay in recoveries, a principle cause of liquidity risk, leads to possibility of lost
opportunities and damage due to honoring payment commitments. Both these risks are
obviously the result of mismatch between the FIs / Banks Assets and Liabilities.
In case of banks of FIs , the ALM positions are relatively liquid. Usually the
banking institutions hold the assets and liabilities until they mature. This practice of
course is changing of late. It is increasingly becoming to bundle banking products such as
loans into marketable securities and then sell them or trade them with other banks as well
as other traditional and new players in the financial markets.
This is especially true of asset-based securities i.e., mortgage loans, securitization
is a new phenomenon in the Indian context. But it has a vast scope. It can make or mar
the future of a financial institution. The stability, profitability, growth and image of a
financial institutions largely depend upon the ability and skill with which it can conduct
its ALM.
THE SCOPE
ALM in relation of SFCs covers a wide gamut of both sources and applications of
funds. The drying up of some of the conventional sources, the choice of the basket, rising
cost of funds available and the associated stringent conditions, growing competition for
the access to the sources and the need for arresting the erosion of net worth are the main
challenges in managing the liabilities. On the assets side, the key issues are the resource
11
allocation, the asset portfolio-mix, the yields, the recoveries, NPA management, write off
policies and above all the market and credit risk management
INSIGHT (Capacity of Understanding Hidden Truth)
The aggregates of either side of any balance sheet will automatically balance. This is pure
logic and no magic is involved. It is true in all cases, simply based on common sense, no
profound wisdom is necessary to know and appreciate this fundamental principle of
financial science. However, wisdom lies in understanding the inter-relationship between
categories of assets and their interface with liabilities. It is desirable to synchronize the
profiles of assets with the counterparts among liabilities, perhaps we may cal them their
shadows. True balancing involves intelligence matching risk mapping and contingency
arrangements.
12
OJECTIVE OF THE STUDY
1. To know how ALM is done at APSFC.
2. To study the procedure adopted for managing ALM in APSFC.
3. To understand the problems involved in maintaining and managing ALM.
4. To learn the liquidity risk management and analysis.
5. To learn the interest rate risk analysis and management.
6. To get better schemes and activities of APSFC.
13
NEED FOR THE STUDY
In the event of highly violated interest rates and liquidity crisis, financial
institutions/banks face the problem of real valuation of their assets and liabilities, this
mismatch of assets and liabilities may produced an effect on calculation of real worth of
the business there are some methods adopted by banks/financial institutions in order to
cover the problems of liquidity mismatch and interest rate risk, the present study focused
such measures taken mismatch and interest rate risk, the present study focused such
measures taken by APSFC for such Asset - liability management.
14
METHODOLOGY OF THE STUDY
The study of liquidity risk analysis and interest rate risk analysis and management is
bases on
1. Primary Data Collection
2. Secondary Data Collection
PRIMARY DATA COLLECTION
The sources of primary data collection were done by
- Chief Manager of ALM Cell
- Resource Person of ALM Cell
- Chief Manager of Finance and Accounting Department
- Primary data has been gathered by training programming, interviewing the
managers and other officials of the bank.
SECONDARY DATA COLLECTION
It was collected from books regarding journals, banking, magazines containing
relevant information about ALM. The secondary data collected was to understand how
effectively APSFC carries out ALM management.
15
The other main sources of Secondary Data: -
- Annual reports of APSFC
- Brochures of APSFC
- RBI guidelines for ALM management
- Indian Financial System By ‘M.Y.KHAN’
- Asset liabilities management by different authors.
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LIMITATIONS OF THE STUDY
In spite of utmost care taken for the smooth conduct of study while preparing this project,
this report suffers from certain setbacks.
1. This is the study conducted with in short period, so it may not be covering all the
aspects in detail.
2. The study has made an attempt for evaluating the performance of APSFC in
managing liquidity risk management and interest rate risk management.
3. Due to limitations of the sources the data collection could not be adequate.
17
REVIEW OF LITERATUE
18
REVIEW OF LITERATURE
ASSETS LIABILITY MANAGEMENT (ALM)
Asset - liability management practices which effect from April 1, 1999. While guidelines
on management of credit risk, market risk and operational risk will be issued later on,
The RBI has issued guidelines for the introduction of Asset - liability management
(ALM) as a part of the risk management and control system in banks. They are intended
to form the basis for initiating collection, compilations and analysis of dates required to
support the ALM System.
Over the last few years, the Indian Financial System markets have witnessed wide-
ranging changes at a fast pace. Intense competition for business involving both the assets
and liabilities together with increasing volatility in the domestic interest rates as well as
foreign exchange rates, has brought pressure on the management of banks to maintain a
good balance among measures. The bank management has to base their business decision
on a dynamic and integrated risk management system and process, driven by corporate
strategy. The banks are exposed to several major risks in the course of the business credit
risk, interest rate risk, foreign exchange risk, and equity/commodity price risk. Liquidity
and Operational risks. It is against this background that the RBI guidelines relating to
19
ALM focus on interest rate and liquidity risk management system in banks, which form
part of the ALM function.
The initial thrust of the ALM function would be to enforce the risk management
discipline that is, managing offer assessing the risk involved. The objective of good risk
management programs should be that their programs evolve into a strategy tool for bank
management.
In the normal course, FIs are exposed to credit and market risks in view of the asset
liability transformation. With liberalization in Indian Financial markets, over the last few
years and growing integration of domestic markets and the entry of MNCs for meeting
the credit needs of not only the corporates but also the retail segments, the risks
associated with FIs operations have become complex and large, requiring strategic
management. FIs are now operating in a fairly deregulated environment and are required
to determine interest rates on deposits, they can also offer deposits prescribe by the RBI;
they can also offer advances on dynamic basis. The interest rates on investments of FI in
government and other securities are also now market related. Intense competition for
business involving both assets and liabilities has brought pressure on the management of
FIs to maintain a good balance among spreads, profitability and long-term liability.
Imprudent liquidity management can put FIs earnings and reputation at great risk. The
management of FIs have to base their business decisions on a dynamic and integrated risk
management system and process driven by corporate stratey, FIs are exposed to several
major risks in the course of their business; credit risk, interest rate risk, equity/commodity
price risk, liquidity risk and operational risk. It is, therefore, important that FIs introduce
20
effective risk measure management systems that address the issues relating to interest rate
and liquidity risks
.
Financial institutions need to address these risks in a structural manner by upgrading their
risk management and adopting more comprehensive asset-liability management (ALM)
practices than has been done hitherto. ALM, among other functions, is also concerned
with risk management and provides a comprehensive and dynamic framework for
measuring, monitoring and managing liquidity and interest rates and equity and
commodity price risks of major operators in the financial system, which needs to be
closely integrated with the FIs business strategy. It involves assessment of various types
of risks and altering the asset-liability portfolio in a dynamic order to manage risks.
The RBI guidelines relate to interest rate and liquidity risks management system in FIs ,
which form parts of the Asset - liability management (ALM) function.
The initial focus of the ALM function would be to enforce the risk management
discipline that is managing business after assessing the risks involved. The objective of
good risk management systems should be that these systems would evolve into a strategic
tool for financial institution management.
21
The ALM Process rests in these pillars
1. ALM Information System
A. Management Information Systems
B. Information availability, accuracy, adequacy and expediency
2. ALM Organization
A. Structure and Responsibilities
B. Level of top Management involvement
3. ALM Process
A. Risk Parameters
B. Risk identification
C. Risk Measurement
D. Risk Management
E. Risk policies and tolerance levels.
ALM INFORMATION SYSTEM
22
ALM has to supported by a management philosophy that clearly specifies the risk
policies and tolerance limits. This framework needs to be built on sound technology with
the necessary information system as backup. Thus information is the key to the ALM
process. It however, recognized that varied business profiles of FIs in the public and
private sectors do not make the adoption on a uniform ALM system for all FIs feasible.
These are various method prevalent worldwide for measuring risks. These range from the
simple gap statement to extremely sophisticated and data intensive risk adjusted
profitability measurement methods. However, though the central element for the entire
ALM exercise is the availability of adequate and accurate information with expedience
and the systems existing some of the major FIs do not generate information in the manner
required for ALM. Collecting accurate data in a timely manner would be the biggest
challenge before the NBFC’s particularly those lacking full-scale computerization.
However, the introduction of a base information system of risk management, risk
measurement and monitoring has to be addressed urgnetly.
FIs have heterogeneous organization structures, capital base, asset size, management
profiles, business activities and geographical spread. Some of them have a large number
of branches and agents/brokers, where as some have unitary offices. Considering the
large number of branches and the lack of adequate support system to collect information
requires for the ALM.
Which analysis information on the basis of residual maturity and repricing pattern of
liabilities and assets, it would take time for FIs in the present state, to get the requisite
23
information. With respect to investment portfolio and funds management, in view of the
centralized nature of the functions, it would refined overtime as the FIs management
gains experience of conduction business within an ALM framework the spread of
computerization will also help FIs in accessing data.
ALM ORGANIZATION
a) Successful implement of the risk management process would required strong
commitment in the part of the senior management in the FIs to integrate basic
operations and strategic decision making with risk management. Th board of directors
of FIs should have overall responsibility for management of risks and should decide
its risk management policy and set limits for liquidity, interest rate and equity/price
risks.
b) The Asset – Liability Committee (ALCO) consisting of the FIs senior
management, including the Chief Executive Officer (CEO), 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 FIs ( on the assets and liabilities sides) in line with the FIs
budgets and decide risk management objectives.
c) The ALM supports groups consisting of operating staff should be responsible for
analyzing monitoring and reporting risk profiles to the ALCO. 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 FI internal limits.
24
The ALCO is a decision-making unit responsible for balance sheet
planning from the risk-return perspective, including the strategic management of interest
rate and liquidity risks. Each FIs should decide on the role of it ALCO, its responsibility
as also the decisions to be taken by it. The business and risk management strategy should
ensure that the FIs operate with in the limits parameters set by its board of directors. The
business issues than ALCO would consider, inter, should include product pricing for both
deposits and advances, desired maturity profile and mix of the incremental assets and
liabilities, prevailing interest rates offered by other peer NBFCs for similar
services/products and so on. In addition to monitoring the risk levels, the ALCO should
review the result of and progress in implementation of the decision made in the previous
meeting. The ALCO should also articulate the current interest rate view of the FIs and
base its decision for future business strategy on this view. With respect to the funding
policy, for instance, its responsibility would be to decide on the source and mix of
liabilities or sale of assets. Towards this end, it should develop a view regarding the
future direction of interest rate movements and decide on funding mixes between fixes
vs. floating rate funds, wholesale vs. retail deposits, money markets vs. capital markets,
funding domestic vs. foreign currency funding, and so on. Individual FIs should decide
the frequency of holding their ALCO meetings.
COMPOSITION OF ALCO
25
The size (number of members) of ALCO would depend on the size of the each
institution, business mix and organizational complexity. To ensure commitment of the
top management and timely response to market dynamics, the
CEO/CMD/President/Director should head the committee. The chief of investment, credit
resources management/planning funds management/treasury. International Business and
Economics research can be members of the committee. In addition, the head of the
technology division should also be an invitee building up of MIS and related
computerization. Large FI may even have sub-committee and support groups.
COMMITTEE OF DIRECTORES
The management committee or any other specific committee constituted by the
board of directors should oversee the implementation of the system and review its
function periodically.
The scope of the ALM function cab be described as follows:
1. Liquidity risk management
2. Management of market risks
3. Funding and capital planning
4. Profit planning and growth projection and
5. Forecasting and analyzing ‘what if scenario’ and preparation of
contingency plans.
26
PROCESS OF ALM
As ALM mainly focuses on risk management, which includes defining the risk,
identifying the risk, measuring the risk, monitoring the risk and managing the rik.
DEFINITION OF RISK
Risk is the potential loss of an asset due to different factors.
IDENTIFICATION OF RISK
ALM in a commercial bank of FIs is to decide what should be the risk
measurement parameters that the management would need to focus on. The
appropriateness of risk management parameters depends upon the degree of volatility in
the operating environment, availability of supporting data and expertise within the
bank/FIs and the expected market and business developments.
Generally, these are two major parameters, which banks/FIs all over the world
employ to measure their balance sheet risks viz., risk to the net interest income and
market value portfolio equity.
While the former seeks to measure the risk to the immediate profits that emanate
from cash flow mismatches occurring in the accounting years, the latter measures the risk
27
arising out of the maturity mismatches in its assets and liabilities over the future years.
These two parameters together attend to the short term and long-term balance sheet risk.
MEASURING THE RISK
Due to difficulty in measuring interest rate risk and also the controversies the
present in the understanding of the concept measurement of interest rate risk assumes
greater importance in the ALM function. It has observed that banks risk exposure
depends upon the volatility of interest rates and asset prices in the financial market, the
FIs maturity/gaps, the duration to measure and interest rate elasticity of its assets and
liabilities and the liability of the management to measure and control the exposure. In the
management of FIs assets and liabilities, interest risk management lays the foundation for
a good ALM.
RISK ANALYSIS
Interest rate risk can be analyzed in the following four methods.
1. Gap analysis
2. Duration analysis
3. Value at risk
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4. Simulation
Gap analysis is the most important basic technique used in analyzing interest
rate risk.It measures the difference between financial institution assets and liabilities and
off balance sheet position which will be re priced or will mature within a predetermine
period.(Gap is the difference between rate sensitive assets minus rate sensitive liabilities)
COMPONENTS OF RISK MANAGEMENT
Risk management may be defined as the process of identifying and controlling
risk. It is also described at times as the responsibility of the management to identify
measure, monitor and control various items of risk associated with FIs position and
transaction. The process of risk management has three clearly identifiable steps, viz., risk
identification, risk measurement and risk control.
CONTROL RISK
After identification and assessment of risk factor, the next step involved is risk
control, the major alternatives available in risk control are
1. Avoid the exposure
2. Reduce the impact by deducing frequency of severity
3. Avoid concentration in risky area
4. Transfer the risk to another party
29
5. Employ risk management instruments to cover the risks
RISK IN FINANCIAL INSTITUTIONS
Risk in financial institutions are many and are broadly classifies into three
categories
They are as follows:
1. Balance sheet risks
2.Transaction risks
3.Operating and liquidity risk
I.BALANCE SHEET RISK
The balance sheet generally arise out of the mismatch between currency, maturity
and interest rate structure of assets and liabilities resulting in
1. Interest rate mismatch risk
2. Liquidity risk
3. Foreign exchange risk
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II. INTEREST RATE MISMATCH
It is the impact of the change in interest rate on the net interest income of the bank
and value of the assets and liabilities. For example,
(a) When fixed deposits are accepted on the fixed rate basis and the amount is lent on
floating rate basis, any download revision of interest rate on advances will result in
the reduction of income stream for the bank FIs . But interest rate on deposits cab be
changed only when they fall due or pre closed by the depositor.
(b) A bonds (investments asset of the bank) price falls down as interest rate rise.
2.LIQUIDITY RISK
Liquidity is the potential inability to meet the banks/FIs as they become due. It
rises when FI are unable to generate cash to cope with the declines in deposits or increase
in loans. It originates the mismatches in the maturity of assets and liabilities as well as
uncertainity of future cash flows.
3.FOREIGN EXCHANGE RISK
The risk that a long (over bought) or short (over sold) position in the foreign
currency might have to be closed out at a loss duet to an adverse movement in exchange
rates.
II.TRANSACTIONS RISKS
The transaction risk essentially involves two types of risks. They are
31
1. Credit risk
2. Price Risk
1. CREDIT RISK
Credit risk is the risk resulting from uncertainty in a counter in a counter parties
ability or willingness to meet its contractual obligations. For ex, “ A bank or financial
institutions makes a loan to a client because it is possible that the client will fail to make
timely Principle or interest payments. That bank or financial institutions faces credit
risks”.
Traditionally the credit risk refers to the risk that a borrower or counter party will
fail to meet its obligations. Lending, from credit cards to corporate loans, from credit
cards to corporate loans, is the largest and most obvious source of credit risk. But credit
risk in some guise exists throughout banking activities, both on and off the balance sheet
form acceptances, inter bank transaction, trade financing, foreign exchange, guarantees
and settlements.
2.PRICE RISK
Price risk, which include the risks of loss due to change in values of assets and
liabilities. The factors contributing price risks are
1. Market risk
2. Issuer risk
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3. Instrument risk
1.MARKET RISK
Market risk may be defined as the possibility of the loss to financial institution
caused by changes in market variables. The financial institution defines market risk as the
risk that the value on and off balance sheet position will be adversely affected by
movements in the equity and interest rate of markets, currency, exchange rate and
commodity prices.
2.ISSUER RISK
The financial strength and standing of the institute/sovereign that has issued the
instrument can affect price as well as reliability. The risk involved with the instruments
issued by corporate bodies would be an ideal example.
3.INSTRUMENT RISK
The nature of instrument creates risks for the investor. With many hybrid
instruments in the market and with fluctuations in market conditions, the prices of various
instruments ma react differently form one another.
33
COMPANY PROFILE
34
ANDHRA PRADESH STAT FINANCIAL CORPORATION which is
considered to be the premier financial institution providing financial assistance, to
35
various industrial projects located in different part of the state. APSFC is also considered
as the top financial corporation in the country.
Andhra Pradesh State Financial Corporation (APSFC) was established in 1956
under State Financial Corporation Act, 1951 with the amalgamation of erstwhile state
financial corporation of Hyderabad and Andhra States.
APSFC main objective of extending financial assistance for setting up industrial
units in Tiny, small scale and medium scale sectors and service enterprises. APSFC is
jointly promoted by IDBI and Government of Andhra Pradesh.
APSFC, an ISO 9001-2000 Organization, offers liberal financial assistance for
acquiring fixes assets like Land, Building and Machinery, working capital term loans for
existing units and seed capital assistance to smaller projects. The term loan assistance
from the corporation is available up to Rs.500 lakhs per project and if offered through
various schemes of assistance to suit to the requirements of the individual enterpreneur.
For extremely deserving units, APSFC offers financial assistance up to Rs. 2000 lakhs on
case to case basis. The corporation is also proposing to extend financial assistance in joint
financing with SIDBI for bigger projects.
A GOLD LETTER DAY FOR APSFC
Andhra Pradesh State was formed on 1st November, 1956. The Andhra Pradesh
legislative assembly and the Andhra Pradesh high court were also constituted on the same
day, the Andhra Pradesh State Financial Corporation come into existence with the
amalgamation of the rest while Andhra State financial corporation and Hyderabad state
36
financial corporation with the mandate to promote and develop small and medium
industries. 1st November, 1956 is thus a gold letter day for Andhra Pradesh State
Financial Corporation.
CAPITAL STRUCTURE OF APSFC
APSFC started with paid up equity capital of Rs.150 Crores in 1956, which now
stands at Rs.92.22 crores against an authorized capital of Rs. 500 Crores. The
Government of Andhra Pradesh hods 68.4% and IDBI 31.13% equity while the
remaining share of 0.29% is held by LIC and individual shareholders.
LENDING NORMS
1. Financial assistance to industrial and service sector units.
2. All the projects satisfying the definition of SME sector are eligible for loans
irrespective of project cost.
3. Financing for industrial activities which include
- Manufacturing/Processing industries
- Service sector-information technology, nursing homes, transport of goods and
passengers on road etc.
- Tourism-hotels, restaurants and tourist resorts.
37
- Commercial complexes, residual complexes etc.
- Working capital term loans to existing good working units.
- Line of credit for existing SFC assisted units.
- Loan repayment period normally ranges up to 8 years and the moratorium
period ranges up to 2 years.
THRUST AREAS FOR 2006-2007
1.Food Processing industries
2. Information technology/IT related activities/services
3.Bio-technology oriented projects
4. Agro based industries
5. Pharmaceuticals
6. Automobile components
7. Infrastructure development projects
8. Hospitals, nursing homes, assistance to practicing doctors.
9. Service oriented activities
10. Export oriented industries
11. Tourism related activities
12. Construction activities
13. Apparels/textiles industries
14. Non-fund based activities viz. Insurance products
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15. GDI relief bonds fixed deposits.
OBJECTIVES OF APSFC
1.To industrialize the state through balanced regional development and dispersal of
industries.
2. To supply promotion and development of tiny, small and medium scale industries and
service sector units by extending need bases credit to them.
3. Nurtures enterpreneurship and encourages fast generation credit to them.
4. To act as a catalyst for generation of employment.
MILESTONE ACHIEVEMENT OF APSF
1. So far sanctioned 6098 crores for 86384 units in Andhra Pradesh as on 31/3/2006.
2. Disbursed 4150 crores to 66516 units 70% to tiny/SSS sector as on 31/3/2006.
3. Recovered Rs.4895 crores to including interest since inception till 31/3/2006.
4. Establish unblemished repayment track record since inception.
5. Has consistent record of earning operating profit throughout its history.
6. Created total investment of around 14219 crores.
7. Generated direct and indirect employment to about 8.57 lakh persons.
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8. Channeled a significant share of assistance aroudn 70% to tine, small scale industries.
9. Enjoying 60% of market share in term lending business in Andhra Pradesh.
10. Industriliazed backward areas by extending of assistance around 70% of its assistance
to industries coming up in noticed backward areas.
SCHEMES OF APSFC
The corporation is operating different schemes of financial assistance. Some of
the important schemes are:-
1. Good enterpreneur scheme
2. Assistance to tourism related activities
3. Assistance to hotels/motels/restaurants
4. Assistance to hospitals/nursing homes/electro-medical equipments
5. Assistance for setting up industrial estates
6. Scheme for qualified professionals
7. Single window scheme of professionals
8. Scheme for construction of commercial/residential complexes
9. Schemes for textile industry under technology up-gradation fund for SSSI
units.
10. Marketing assistance scheme
11. Seed capital assistance under Mahila Udam Nidhi scheme(MUN)
12. Seed capital assistance under National Equity Fund Scheme(NEF)
40
13. Scheme for ex service man (SEMFEX)
14. Scheme for assistance to self help groups of women under DWACRA.
15. Working capital scheme for good enterpreneurs/enterprises.
16. Assistance to civil contractors.
17. Assistance to practicing doctors.
18. Line of credit scheme for good enterpreneurs
19. Credit linked capital subsidy scheme for technology up-gradation of SSI units.
20. Financial assistance to export oriented industrial service enterprises.
Details of some of the important schemes are as under:
JOINT FINANCING WITH SIDBI
APSFC is actively considering venturing into joint financing to assist the medium
and large-scale enterprises for both new and existing; units means of tie up with SIDBI
and other financial institutions. Corporation is coming out with a strategic alliance with
SIDBI for extending joint finance for the loans over Rs. 500 crores for SSI, SME
infrastructure units, service sector units, tourism, pharma, construciton of roads and
bridges under BOT scheme.
MODERNIZATION SCHEME
41
Under modernization scheme, existing tiny, small and medium scale units, which
are in operation atleast for 5 years are eligible for finance on machinery. In case of
replacement/renovation, the machinery should have been in use in the recent for a period
of at least 5 years. Mere replacements of machinery of solely for expansion are not
covered under this scheme.
Financial Assistance for modernization can be considered in the following aspects:
Up-gradation of the technical/manufacturing process
Export orientation
Import substitution
Energy saving in the process
Anti pollution measures
Conservation/substitution of scare raw materials
For acquiring DG sets of Standard make.
WORKING CAPITAL TERM LOANS
Existing profit making units, which are in operation for a minimum period of 2/3
years, are eligible for finance under this scheme. The unit should have been earning net
profit for the last 2 years and cash profit for one year. The unit should be regular in
making payments to the corporation and other institutions i.e. banks, the unit should have
paid at least 25% of original term loan availed from the corporation. There should not be
42
any accumulated losses in the unit for considering working capital term loans. The main
proposal is to meet additional working capital requirements / execute specific orders.
The overall DER should not be more than 2:1 for working capital term loans of
above Rs 500 lakhs. The net worth should be 100% to 125% of the working capital term
loan applied to the corporation. The turnover of the unit should be around 400% of the
working capital term loan applied by the unit. The unit has to offer collateral property .
ASSISTANCE FOR PURCHASE OF EXISTING ASSETS
Corporation is extending financial assistance for purchase of existing assets.
Corporation will provide financial assistance for purchase of existing assets with residual
life for carrying out permitted industrial activities except for electronic/electro medical
equipment/computer unit and other allied units where obsolescence rate is very high.
Financial assistance provided under this scheme is for purchase of existing asset and not
for change of management of company/concern for carrying out the permitted industrial
activity.
EXPANSION SCHEME
Under expansion scheme program, any tiny, small and medium scale industry,
which is in operation of at least for 5 years are eligible for finance. Financial assistance
can be considered for expansion of any existing industry under special scheme like MUN
scheme, NEF scheme, SES scheme, GES a++, SSES, ERS and scheme for export
oriented.
43
Units service enterprise in addition to under general loan scheme. Mer
replacement of machinery without expansion of capacity is not covered under this
scheme.
The corporation is also extending financial assistance for setting up cinema
theaters/acquiring new equipment by the existing cinema theaters at selected centers.
The Government of India has allotted special fund under SME fund and the
Corporation is extending financial assistance under SME fund.
FINANCIAL ACTIVITIES/SCHEMES OF APSFC
ACTIVITY PURPOSE REMARKS
GENERAL LOANS To meet part of cost of land, buildings, plant and machinery and other fixed assets.
Loan is considered @ 75% on eligible assets .
SCHEME FOR TOURISM RELATED FACILITIES
For setting up of:
-Development of amusement parks
-Cultural centers/conventional centers
-Travel, transport and
-Tourism service agencies
Cost of project:
Maximum of Rs. 20 crores
-Approvals from tourism development agencies.
ASSISTANCE FOR SETTING UP OF INDUSTRIAL ESTATE
For such of land, cost of land development, cost of stamp duty etc., for development of infrastructural facility such as approach roads, drainage, water, supply system, power distribution lines, central effluent industrial sheds/multistoried industrial buildings etc.
Cost of project not exceeding Rs.12 crores.
ASSISTANCE FOR ACQUIRING ELECTRO-MEDICL EQUIPMENT
For acquiring electro-medical and other related equipment
Loan eligiblity
@75% on cost of
eligible electro
medical equipment.
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SINGLE WINDOW SCHEME
For acquiring fixed assets and to meet short term working capital requirements.
-Overall DER not to exceed 2:1
-Promoters contribution shall not be less than 35%
-Collateral security requirement as per norms.
NATIONAL EQUITY FUND SCHEME
For new units and for existing projects including outlay on modernization /expansion.
Project cost:
Not exeeding Rs 50 lakhs.
Promoters Contribution: Minimum of 10 % of fixed assets and 100% of WC margin.
MAHILA UDYAM NIDHI SCHEME
New unit/expansion/modernization/ technology up-gradation.
Project cost not exceeding Rs 10 lakhs SIDBI seed capital up to 25% of project cost with 1% service charge
SUPER ENTERPRENEURS SCHEME
For acquiring fixes assets required for expansion, modernization, diversification, part of equipment/other business needs/takeover of loans.
-Minimum limit for sanction in Rs.5 lakhs.
-Loan eligibility 85%
-Total DER 2:1
WORKING To meet additional working For working capital term loans
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CAPITAL TERM LOANS
capital requirements to execute specific orders.
of above Rs 5 lakhs, overall DER not more than 2:1
SEMFEX SCHEME For setting up industries, hotels, tourism related activities, gas tankers, tippers and payloads for which seed capital assistance is availabel.
Project cost shall not exceed Rs.15 lakhs
Minimum promoter’s contribution is 10% of the project cost.
BRANCHES REACH AND OUTREACH
The corporation with its head office at Hyderabad in 1956 had only one branch at
Vijayawada. During 1972-1973, the corporation opened two branches at Vishakapatnam
and in Tirupathi. In 1975-1976, the corporation opened 6 one man offices in 6 districts.
Now it has a network of 25 branches in overall covering all the 23 districts of Andhra
Pradesh and one extra branch in Rangareddy and Medak district. Our spanking new head
office building i.e., North block was constructed during 1976 and South block
constructed during 1978 in Chirag ali lane, Abids. It as ample parking place, the location
and scope for further expansion will enable the corporation to undertake new activities
for the development SME sector.
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DATA PRESENTATION
47
MANAGEMENT OF LIQUIDITY RISK AND INTEREST
RATE RISK
LIQUIDITY RISK
Measuring and managing liquidity needs are vital for the effective operations of
financial institution. By ensuring a FIs ability to meet its liabilities as then become due,
liquidity management can reduce the probability of an adverse situation developing. The
institution of liquidity tanscends individual institutions, as liquidity shortfall in one
institution can have repercussion on the entire system. The FIs management should
measure not only the liquidity position of FIs on an ongoing basis but also examine how
liquidity requirements are likely to evolve under different assumptions. Experience show
that assets commonly considered as liquid, like government securities and other money
48
market instrument, could also become liquid when the market and players are
unidirectional. Therefore, liquidity has to tracked through, the use of the maturity or cash
flow mismatches. For measuring and managing net funding requirements, the use of
maturity ladder and calculation of cammulative surplus or deficit of funds at selected
maturity dates are adopted as a standard tool.
The time buckets are distributed as under:
Less than one month
Over 1 month to 3 months
Over 3 months to 6 months
Over 6 months to 12 months
Less than or equal to 1 year
More than 1 year and up to 3 years
More than 3 years and up to 5 years
More than 5 years and up to 7 years
More than 7 years and up to 10 years
More than 10 years
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Financial Institution holding public deposits are required to invest up to a
prescribed percentage (15 % as on date) of their public deposits in approval securities, in
terms of the liquid asset requirements of sections 45-IB of the RBI Act, 1934. FIs are
required to invest up to 80 percent of their deposit in the manner prescribed in the RBI
directors issued under the act, as detailed in an earlier section. There is no such
requirement for FIs that are not holding public deposits. Thus various FIs including SFCs
would be holding in their investment portfolio, securities that could be broadly
classifiable as ‘mandatory securities’ (under obligation of law) and ‘ non-mandatory
securities’. In case of FIs not holding public deposits, all the investment and in case of
FIs holding public deposits, the surplus securities would fall in the category of non-
mandatory securities.
FIs holding public deposits may place mandatory securities in any time – bucket
suitable to them. The listed non-mandatory securities may be placed in any of the “lesss
than one month” , over 1 month to 3 months, “Over 3 months to 6 months” and “over 6
months to 12 months” buckets, depending upon the defeasance period proposed b Fis.
Unlisted non-mandatory securities (e.g., equity shares, securities without a fixed
term of maturity and so on) may be placed in the “more than 10 years” buckets, where as
unlisted non-mandatory securities having a fixed term of maturity may be placed in the
relevant time bucket, as per residual maturity. The mandatory securities and listed
securities may be marked to market for the purpose of the ALM System. Unlisted
securities may be valued as per RBIs prudential norms directions.
50
The statements 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. A
maturity liability is cash outflows while a maturity asset is a cash inflow while
determining the likely cash inflows/outflows.
Liquidity Problems may be created due to any of the following reasons:
a) Funding Risk:
Failure to replace net outflow of funds weather due to withdrawal of retail
deposits on non-renewal of wholesale deposits.
b) Time Risk:
Non-receipt of expected inflow of funds eg, where borrowers fails to meet their
commitments, besides irregularly in advances which present delay in fulfilling
commitments by borrowers, the growth of non-performing assets also leads to
immediate liquidity problem. Non-performing assets cut into profitability as well.
ALM process if it fails to take NPA problems can not succeed.
c) Call Risk:
51
It represents sudden demand for money owing to contingent L become due. If
contingent liabilities start developing, the may create huge drain on liquidity.
d) Opportunity Risk:
A FI can only grow if its customers are also prospering (succeeding) request for
funds from important and valuable clients can only be profitably serviced if
adequate liquidity is available.
Approaches to control Liquidity
1.Maintenance of adequate liquidity remains sinquonon for banks and other financial
institutions.
2.Once maturity of assets exceeds those of liabilities there is inevitable liquidity risk.
3.Minimum criteria to remain liquid is the ability both to meet commitments when due
and to undertake new transactions when desirable.
4.Confidence to rise, mobilize or roll over the deposits from existing clients. This
confidence may be found to be misplaced when liquidity prevails as existing clients at
that stage may be in the grip of liquidity cirsis.
5. To avail of export refinance facility(ERF) and collateralized lending facility(CLF)
and the additional collateralized lending facility(ACLF).
52
6. FIs should make a number of assumptions according to their Asset – liability profiles,
while determining the tolerance levels. FIs may take into accounts all relevant factors
based on their asset-liability base, nature of business future strategy and so on. The
tolerance levels should be determines keeping all necessary factors in view and
further refined with experience gained in liquidity management.
Currency Risk:
Floating exchange rate arrangement has brought in its wake pronounced volatility,
adding a new dimension to the risk profile of FIs balance sheets having foreign assets and
liabilities. The increased capital flows across free economics, following deregulation,
have contributed to increase in the volume of transactions Large cross border flows
together with volatility has rendered FIs balance sheet unable to exchange rates
Interest Rate Risk:
Deregulation of interest rates and the operational flexibility given to financial
institution in pricing most of the assets and liabilities imply the need for the financial
system to hedge the interest rate risk, defined as the risk where changes in market interest
rates might adversely affects on FIs financial condition. The change in interest reates
affects FIs in a larger way. The immediate impact of changes in interest rates is on FIs
earnings (i.e., reported profits), by changing its net interest income (NIT). A long term
impact of changing interest rates is in FIs market value of Equity (MVE) or net worth, as
the economic value of FIs assets, liabilities and off balance sheet positions yet affected
due to various variations in market interest rates. The interest rare risk when viewed form
thee tow perspectives is known as the “earning perspective” and “economic value
53
perspective” respectively. The risk from the earnings perspective can be measured as
changes in the net interest income (NIT) or net interest margin(NIM).
These are many analytical techniques for measurement and management of
interest rate risk, to begin with the traditional gap analysis is considered as a suitable
method to measure the interest rate risk. It is the intention of the RBI to move over to
modern techniques.
FIs should make a number if assumptions according to their asset liability
profiles. While determining the tolerance levels, FIs may take into account all relevant
factors based on their asset liability base nature of business, future strategy and son on.
The tolerance levels should be determined keeping all necessary factors in view and
furthur refined with experience gained in liquidity management.
In order to enable FIs to monitor their shoret-term liquidity on a dynamic basic
over tine horizon spanning from less than one month, over 1 to 3 months FIs should
estimate their short term liquidity profiles on the basis of business projects and other
commitments for planning purpose.
Interest rate risk gaps in time buckets:
Over 1 month to 3 months
Over 3 months to 6 months
Over 6 months to 12 months
Less than or equal to 1 year
More than 1 year and up to 3 years
54
More than 3 years and up to 5 years
More than 5 years and up to 7 years
More than 7 years and up to 10 years
More than 10 years
The gaps or mismatch risk can be measured by calculation gaps over different
time interval, as on a given data. Gap analysis measures mismatch between interest rate
sensitive liabilities and rate sensitive assets (including off-balance sheet position)
Asset and Liabilities is normally classified as interest sensitive if:-
1. With in the time interval under considerations, there is a cash flow.
2. The interest rate resets/reprises contractually during the interval.
3. Dependent on the RBI changes in interest rate/bank rates.
4. It is contractually pre payable or withdrawn before the state maturities.
5. Grouping rate sensitive assets and liabilities and off-balance sheet positions into time
bucket according to residual maturity or nest pricing period should regnerate the gap
report.
6. The gap is the difference between the rate sensitive assets (RSA) and rate sensitive
liabilities (RSL) for each time bucket. The positive gap indicates that is has more RS
than RSL where as the negative gap indicates that I has more RSL than RSA.
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7. The gap reports indicate the weather the institution is in a position to benefit from
rising interest rates by having a position gap (rsa>rsl) or weather it is in position to
benefit from declining interest rates by negative gap (rsl>rsa). The gap a therefore be
used as a measure of interest rate sensitive.
Sources of Interest Rate Risk:
As financial intermediaries, financial institutions encounter interest rate risk in
several ways. These can be described as follows:
a) Re-Pricing Risk: This risk arises from holding assets and liabilities with different
principal amounts, maturity or re-pricing dates, there by creating exposure to
unexpected changes in the interest rates.
b) Yield Curve Risk: Re-pricing mismatches can also expose a bank to changes in the
slope and shape of 4the yield curve. Yield curve risk arises when unanticipated shifts
of the yield curve adverse effects on a banks income or underlying economic value.
For instance, the underlying economic value of a long position in 10 years
government bonds hedged by a short position in 5 years government notes could
56
declare sharply if the yield curve steepens, even if the position is hedged against
parallel movements in the yield curve.
c) Basis Risk: Another important source of interest rate risk (commonly referred as
basis risk) arises from imperfect correlation in the adjustment of the rates and paid on
different instruments with otherwise similar re-pricing characterstics. When interest
rates change, thee differences can give risk to unexpected changes in the cash flows
and earnings spread between assets and liabilities.
d) Option Risk: An additional and increasingly important source of interest rate risk
arises from the option embedded in may FIs assets and liabilities. Formally, an
options provides the holder the right, but not the obligation, to buy or sell in some
manner after the cash flow of an instrument of financial contract.
GENERAL
The classification of various assets and liabilities into different time – bucket for
preparation of gap reports (liquidity and interest rate sensitive) FIs that are better
equipped to reasonably estimated the behavioral pattern of various components of
assets and liabilities, on the basis of the past data/empirical studies could classify
them in the appropriate time-buckets, subject to approval from the ALCO borad of
directors. A copy of the note approved by the ALCO may be sent to the registered
office of the company is located. These notes may contain ‘what if scenario’ analysis
under various assumed conditions and the contingency plans to face various adverse
developments.
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The present framework does not capture the impact of premature closures of
deposits and prepayments of loans and advances on the liquidity and interest rate risk
profile on Fis. The magnitude of premature withdrawal of deposits at times of
volatility in market interest rate is quite substantial. Fi should therefore evolve a
suitable mechanism supported by empirical studies and behavioral analysis to
estimate the further behavioral of assets, liabilities and off-balance sheet items to
changes in market variable and estimate the probabilities of the options.
A scientifically evolved internal transfer pricing model of assigning values on the
basis of current markets rates to funds provided and funds used is an important
component for effective implementation of the ALM system. The transfer price
mechanism can enhance the management of margin, that is lending or credit spread.
The funding or liability spread and mismatch spread. It also helps centralizing interest
rate risk at one place. Which facilities 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.
Interest Rates:
APSFC provides competitive rates of interest on its loans and the rate of interest
ranges from 10 to13.5 % depending upon quantum of loan; sector and schemes full
particulars may be noted from the printed interest rates sheet.
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59
ANALYSIS AND
INTERPRETATION
ANALYSIS AND INTERPRETATION
There are four different types of analysis:
1. Gap Analysis
2. Duration Analysis
3. Trend Analysis
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4. Ration Analysis
1.GAP ANALYSIS:
Maturity/pre-pricing schedules can be used to generate simple indicators of the
interest rate risk sensitivity of both earnings and economic value to changing interest
rates. When this approach is used to asses the interest rate risk of current earnings. It
is typically referred to as gap analysis. Gap analysis was one of the first methods
developed to measure FIs interest rate risk exposure and continues to be widely used
by Fis. To evaluate earnings exposure, interest rate sensitive liabilities in each time
band are subtraced from the corresponding interst rate sensitive asset to produce a re-
pricing gap for that time band. This gap can be multiplied by as assume change in
interest rate to yield an approximation of the change in the interest rate income that
would result from such as interest rate movement. The size of the interest rate
movement used in the analysis can be used on a variety of factors, including historical
experience. Simulation of potential future interest rate movements and the judgement
of bank management. A negative or liability sensitive gap occurs when liabilities
exceeds assets (including off-balance sheet positions) in a given time band. This
means that an increase in market interest rates could cause a decline in net interest
income. Conversely, a positive or assets–sensitive. Gap implies that the FIs net
interest rate income could decline as a result of decrease in the levels of the interest
rates.
LIMITATIONS OF GAP ANALYSIS: -
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Although gap analysis is a very commonly used approach to assessing interest
rate risk exposure, it has a number of shortcomings. First, gap analysis does not take
it account of variation in the characterstics of different position with a time band. In
particulars all positions with in a given time band are assumed to mature or reprice
simultaneously a simplification that is likely to have greater impact on the precision
of the estimates as the degree of aggregation with in a time band increases, moreover
gap analysis ignore differences in spreads between interest rates that could arise as
the level of the market interest rates changes. In addition, it does not take into account
any changes in the timing of payments that might occur as a result of changes in the
interest rate environment. Thus, it fails to account for differences in the sensitivity of
income that may arise form option-related positions, for these reasons gap analysis
provides only a rough approximation to the actual change in net interest income
would result from the chosen change in the pattern of interest rates. Finally, most gap
analysis fail to capture variability in non interest revenues and expenses, potentiality
important sources of risk of the current income.
2.CURRENT ANALYSIS
A maturity/re-pricing schedule can also used to evaluate the effects of changing
interest rates on FIs economic value by applying sensitivity weights to each time
band. Typically, such weights are based on estimates of the duration of the assets and
liabilities that fall into each time band. Duration give a small change in the level of
interest rates. Duration may also be defined as the weighted average of the time until
62
expected cash flows from a security will be receive, relative to the current price of the
security. The weights are the present values of each cash flow divided by the current
price. In its simples form, duration measures changes in economic value resulting
from a percentage change of interest rates under the simplifying assumptions that
changes in value are proportional to changes in the level of interest rates and that the
timing of payments is fixed.
Modified duration is standard duration divided by 1+r, where is the level of
market interest rate is elasticity. As such, it reflects the percentage change in the
economic value of the instrument for a given percentage change in the economic
value of the instrument for a given percentage change in 1+r. as with simple duration,
it assumes a linear relationship between percentages changes in value and percentage
changes in interest rates / in other words, modified duration = Macaulay
duration/(1+r), where Macaulay duration = cft(t)/(1+r) /cft/(1+r) to the power t
Cft = rupee value of cash flow at time t
T = number of periods of time until the cash flow payment
Y = periodic yield to maturity of the security generating cash flow and
K = the number of cash flows.
3.TREND ANALYSIS
This is a statistical tool with his we can find out the position of anything in
financial institution, I did the trend analysis of “cumulative mismatch of last one year
as percentage to working funds”, by this, it is possible to know that how that
fluctuations in working funds take place in the one year mismatches.
4.RATIO ANALYSIS
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The liquidity ratios are very useful in the liquidity risk management analysis.
Because with the ratios we can analyze the liquidity positions of the company by
taking the past data and we can interprete the findings. Here in financial institution,
we should also given by the RBI on the bank, by observing the limits and of findings
we can analyze as FIs is with in the limits or not.
The ratios, which are used in financial institutions, are
Current assets/current liabilities
Total loans/ total assets
Total assets/ total liabilities
Total advances/total liabilities
Quick ratio.
The ratios, which helps to find out liquidity position of all financial institution.
Liquidity and Interest rate analysis:
This is the only tool, which is used in the ALM process to manage the liquidity
risk, by doing the gap analysis, FIs can avoid risks and can earn more profits, and this is
used to analyze the gaps in between the inflows and outflows of the statement for every
fortnight. By doing the gap analysis the FIs can know about in ;which bucket the risk.
This gap raised due to the changes in the values of the assets and liabilities and changes
in their interest rates. For measuring and managing net funding requirements the use of
64
maturity ladder and calculation of cumulative surplus / deficit of funds at selected
maturity data is suggested for adoption by FI. The maturity profile is used to measure the
future cash flows of banks different buckets.
Value At Risk (VOR): -
VOR is defined as an estimate of potential loss in position or asset/liability or
portfolio of assets/liabilities over a given holding period at a given level of certainity or
unexpected happening the probability of suffering a loss.
BUCKTING:
The time columns used in the below statement, are called as the time buckets.
These buckets are mainly divided in to three types short – term, medium – term and long
term. Allocating the items of inflows and outflows in these column is called as bucketing.
Over 1 month to 3 months
Over 3 months to 6 months
Over 6 months to 12 months
Less than or equal to 1 year
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More than 1 year and up to 3 years
More than 3 years and up to 5 years
More than 5 years and up to 7 years
More than 7 years and up to 10 years
More than 10 years
To analyze the statement a person should have to get grip on the various items of
liquidity statement. Various items are covered in the statement under the inflow and
outflows.
Methods to bucket:
The nature of the each item is different with others. So few models are used to
find out under which bucket it will come. Like residua maturity, behaviouralization.
Residual Maturity:
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This is the type where the item due date is taken as a base to bucket. Based on
maturity date and the strting date of the item time period is calculated. Statements
preparation data should also be considered.
Behaviourlization: -
This is the another model which also used for the statement preparation.
Behaviorlizaiton means finding out the behavior in the future based in the past data. For
this, statistical tools should be used like regression analysis methods, moving averages,
trend analysis and various methods are used. In financial institution, behaviorlizaiton is
used to various item in them cash credit is in item.
A MATURITY PROFILE – LIQUIDITY
Head of Accounts Time Bucket Category
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A.OUTFLOWS
1.Capital Funds
a) Equity capital, non-redeemable or In the ‘over 10 years’ time bucket
perceptual preference capital, reserves,
funds and surplus.
b) Preference capital – redeemable / non- As per the residual maturity of the
perceptual share
2. Gifts, grants, donations and beneficiations. In the over 10 years time bucket.
However, if such gifts, grants, etc
Aretiedto specifications.
Slotted in the time bucket as per purpose / end use specified.
3.Notes, bonds and debentures.
a)Bonds/debentures with embedded call /put As per the residual period for the
options (including zero-coupon/deep earliest exercise date for the
discount bonds) embedded option
4.Deposits
a) Term deposits from public As per the residual maturity
b) Inter-corporate deposits These, being institutional/wholesale
Deposits, should be slotted as per their residual
maturity
(c) Certificates of deposits As per the residual maturity
5.Borrowings
(a) Term money borrowing As per the residual maturity
(b) From the RBI the government and others As per the residual maturity
6.Current liabilities and provisions:
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(a) Sundry creditors As per the due date or likely timing of cash
outflow
(b)Expenses payable (other than interest) As per the likely time of cash outflow
(c) Advance income received, receipts In the ‘over 8yerrs’ time bucket, a
from borrowers pending adjustment these do not involve any cash outflows
B.INFLOWS
1.Cash In 1to 30/31 days time-bucket
2.Remittance in transit In 1 to 30/31 days time bucket
3.Balances with banks (in India only)
(b) Deposit accounts As per the residual maturity
4.Inventments (net of provisions)
(a) Mandatory investments As suitable to the bank
(b) Non-mandatory unisted securities
(e.g. shares, etc) “over 5 years”
(c) Non-mandatory unisted securities
having a fixed As per the residual maturity
Term maturity
(e) Venture capital units In the ‘over 5 year’ time bucket
5.Advances (performing):
(a) Bills of exchange and promissory
notes discounted As per the residual usance of the underlying
And rediscounted bills
(b) Term loans (rupee loans only) The cash inflows on account of the interest
and principal of the loan may be slotted in
respective time buckets, as per the timing of
the cash flows, as stipulated in the original/revised
repayment schedule.
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(c) Corporate loans/short term loans As per the residual maturity
6. Assets on lease cashflows from lease transaction may be slotted in
respective time buckets as per
the timing of the cashflow.
7. Fixed assets (excluding leased assets) In the ‘over 5 years’ time-bucket
8. Other assets
(a) Intangible assets and items not
representing cash inflows. In the ‘over 5 years’ time bucket
(b) Other item (such as accrued income,
other receivable, In respective maturity buckets, as per
Staff loans ,etc) the timing of the cash flows
C.CONTINGENT LIABILITIES
(a) Letters of credit\guarantees Based on the past trend analysis of the
(outflow through development) developments vis-à-vis, the outstanding
amount of guarantees, the likely developments
shouldbe estimated and this amount could be
distributed in various time buckets
on a judgmental.
(b) Loan commitments pending disbursal In the respective time buckets as peer the sanctioned
(outflow) disbursement schedule
(c) Lines of credit committed to\by other As per usance of the bills to be received under the
lines of credit
institutions, lines of credit committed to/by
other institutions (outflow/inflow)
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D.FINANCING OF GAPS
The negative gap (i.e., where outflows exceed inflows) in the 1 to 30/31 days time bucket
should not exceed the prudential limit of 15 percent of outflows of each time bucket and
the cumulative gap, up to the one year period, should not exceed 15 percent of the cumulative
cash out flows of the one year period. In case these limits are exceeded, the measure proposed for bringing
the gaps within the limit should be shown by a footnote in the relative statement.
Interest Rate Sensitivity
_____________________________________________________________
Head of Accounts Rate Sensitivity of Time Bucket
Liabilities
1. Capital, reserves and surplus non-sensitive
2.gifts, grants and beneficiations non-sensitive
3.Note, bonds and debentures:
(a) Floating rate sensitive; reprice on the roll-over/repricing date
should be slotted in respect time buckets, as per
repricing dates.
(b) Fixed rate, including zero coupons sensitive; repricing in maturity. To be placed in
respective time buckets, as per the residual maturity
of such instruments
(c) Instruments with embedded options sensitive; could reprice on the exercise date of the
option, particularly in rising interest rate scenario. To
be replaced in the respective time buckets, as per the
next exercise date.
4.Deposits
(a) Deposits/borrowings
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(i) Fixed rate sensetive; could reprise on maturity or in case of
premature withdrawal being permitted
(ii) Floating rate sensitive; reprice on the contractual roll-over date be
slotted in the respective time buckets, as per the next
repricing date.
(b) ICDs(Inter-Corporate Deposits) sensitive; reprice on maturity to be slotted as per the
residual maturity, in the respective time buckets.
5.Borrowings:
(a) Term-money borrowings sensitive; reprice on maturity. To be slotted as per
residual maturity in the relative time bucket.
(b)Borrowings from others
(i) Fixed rate sensitive; reprice on maturity. To be slotted as per
residual maturity in the relative time bucket.
(ii) Floating rate sensitive; reprice on the roll over/repricing date. To
be placed as per residual period, to the repricing date,
in the relative time bucket.
6.Repos/bills rediscounted/forex swaps (sell/buy) sensitive; reprices on maturity. To be placed as per
residual maturity, in respective buckets
ASSETS
1.cash Non – sensitive
2. Remittance Non – sensitive
3.Balances with other banks in India
a) In current A/C Non – sensitive
b)In deposits accounts, money at Sensitive, reprices on maturity.
call and short notice and other To be places as residual maturity
placements in respective time buckets.
72
4.Investmetns
a) Fixed income securities Sensitive on maturity. To be slotted as
pre residual maturity. However, the bonds/
debentures valued by applying NPA norms
due to non servicing of interest, should be
shown, net of provision made.
b) Floating rate securities Sensitive; re-price on the next re-pricing
date.To slotted as per residual time to the
repricing date.
c) Equity shares, convertible, Non - sensitive
preference shares, shares
of subsidiaries / joint ventures,
venture capital untis.
5) Advances (performing)
a) Bills of exchange, promissory Sensitive on maturity. To be slotted as per
discounted and rediscounted the residual usance of the underlying bills.
b)Term loans/corporate loans/short
term loans/(rupee loans only)
i) Fixed rate Sensitive on cash flow/maturity
i) Floating rate Sensitivity only when PLR or risk premium
is changed by the banks.
6.Non performing loans:
a) Sub-standard To be slotted as indicated at item B-7
b) Doubtful and loss
73
7. Assets on lease Cash flows on lease assets are sensitive to
change interest rates. The leased asset cash
flows to be slotted in time buckets as per of
the cash flows.
8.Fixed assets (excluding assets on lease) Non sensitive
9.Other assets
a) Intangible assets and items not Non sensitive
representing cash flows.
b) Other items (e.g. accured income, Non sensitive
staff loans etc.)
Andhra Pradesh State Financial Corporation, Hyderabad
Liquidity Risk – Maturity Pattern of Rupee Assets and liabilities
Items Less Over Over Over TotalThan 1 1 to 3 3 to 6 6 to 12month months months months
74
2006-2007Rupee assets - 1.Cash & cheques on hand 2,180.26 2,180.26 2.Remittances in transit 11.70 11.70 3.Balances with RBI 3.63 3.63 4.Balances with other banks 1,595.96 1,595.96 5.Short term deposits 5,220.00 5,220.00 6.Investments - 7.Loans & Advances - a)Standard assets 3,100.00 6,500.00 9,500.00 17,695.86 36,795.86 b)Substandard assets - - - c)Doubtfull - - 8)Fixed assets - 9)Other assets 10.00 20.00 30.00 60.00 120.00 10)Interest on std assets 3,500.00 4,000.00 8,500.00 16,000.00 Foreign Currency assets -
Total Assets 15,621.55 6,520.00 13,530.00 26,255.86 61,927.41
Rupee Liabilities Share capital - Reserves - Long term liabilities - I)Bonds 715.00 715.00 II)STL - III)Refinance-SIDBI/IDBI 779.89 779.89 2,594.04 4,153.82 Interest on borrowings 53.44 1,828.13 2,036.13 3,963.82 7,881.52 Fixed Deposits 30.00 49.92 3,619.13 1,298.39 4,997.44 Current Liabilities 1,000.00 1,000.00 1,500.00 2,246.59 5,746.59 Disbursements 4,000.00 7,000.00 11,000.00 22,000.00 Provision for int on CFD 242.09 242.09 Provision for retirement benefits - - Total Liabilities 6,820.42 9,878.05 18,935.63 10,102.84 45,736.94
SURPLUS/DEFICIT 8801.13 -3358.05 -5405.63 16153.02 16190.47Cumulative surplues/deficit 8801.13 5443.08 37.45 16190.47
Andhra Pradesh State Financial Corporation, Hyderabad
Liquidity Risk – Maturity Pattern of Rupee/Foreign Currency Assets and liabilities
Items Less than More than 1
More than 3
More than More than 7 More than Toal
or equal to year & yeas and 5 yrs and yrs and upto 10 years
75
upto up up1 year 3 years to 5 years to 7 years 10 years
2006-2007 2007-09 2009-2011Rupee assets - 1.Cash & cheques on hand 2,180.26 - - 2,180.26 2.Remittances in transit 11.70 - 11.70 3.Balances with RBI 3.63 - 3.63 4.Balances with otherbanks 1,595.96 - 1,595.96 5.Short term deposits 5,220.00 - 5,220.00 6.Investments 54.25 54.25 108.50 7.Loans & Advances - - a)Standard assets 36,795.86 40,436.10 21,651.13 7,974.15 95.34 0 106,952.58 b)Substandard assets 6,518.72 356.82 287.46 0.08 7,163.08 c)Doubtfull 9,138.43 - 11.17 9,149.60 8)Fixed assets - 2084.45 2,084.45 9)Other assets 120.00 180.00 180.00 180.00 256.95 341.55 1,258.50 10)Interest on std assets 1,600.00 12,228.00 4,637.00 1,565.00 1,605.00 1050 22,685.00 Foreign - Currency assets - -
- Total Assets 61,927.41 52,844.10 32,986.85 19,214.40 2,244.75 3541.5 172,759.01
- Rupee Liabilities - Share capital - 15555.99 15,555.99 Reserves - 2014.75 2,014.75 Long term liabilities - 212.38 212.38 I)Bonds 715.00 4,045.0
0 3,485.00 10,497.00 - 0 18,742.00
II)STL - - III)Refinance-SIDBI/IDBI 4,153.82 22,659.78 24,187.74 18,689.52 4,448.74 0 74,139.60 Interest on borrowings 7,882.00 13,209.00 9,075.00 4,120.00 - 0 34,286.00 Fixed Deposits 4,997.44 2,244.23 75.00 - - 0 7,316.67 Current Liabilities 5,746.59 - - - - 0 5,746.59 Disbursements 22,000.00 - - - - 0 22,000.00 Provision for int on CFD 242.09 - 242.09 Provision for retirement benefits
- 110.00 110.00 165.00 115.04 215 715.04
Total Liabilities 45,736.94 42,268.01 36,932.74 33,471.52 4,563.78 17998.12 180,971.11 -
SURPLUS/DEFICIT 16190.47 10576.01 -3945.89 -14257.12 -2319.03 14456.62 (8,212.10)Cumulative surplues/deficit 16190.47 26766.56 22820.67 8563.55 6244.52 -8212.1
Maturity Pattern of Interest Rate risk sensitive Rupee Assets and liabilities
76
Items Less than Over 1 to over 3 to Over 6 to Total Insensitive
Grand Total
one month 3 months 6 months 12 months asset/1 year liability
2006-2007 Rupee assets - 0 01.Cash & cheques on hand - - - 2180.26 2,180.26 2.Remittances in transit - - 11.7 11.70 3.Balances with RBI - - 3.63 3.63 4.Balances with other banks - - 1595.96 1,595.96 5.Short term deposits 5,220.00 52,220.00 52,220.00 6.Investments - - - 7.Loans & Advances - - a)Standard assets 3,100.00 6,500.00 9,500.00 17,695.86 36,795.86 0 36,795.86 b)Substandard assets - - - 0 - c)Doubtfull - - 0 - 9)Other assets 10.00 20.00 30.00 30.00 12.00 0 120.00 10)Interest on std assets 3,500.00 - 4,000.00 8,500.00 16,000.00 0 16,000.00 Foreign - Currency assets - -
- Total Assets 11,830.00 6,520.00 13,530.00 26,255.86 58,135.86 3791.55 58,135.86
- Rupee Liabilities - Share capital - 0 - Reserves - 0 - Borrowings 0 - I)Bonds 715.00 - - - - 715 715.00 II)STL - 0 - III)Refinance SIDBI/IDBI 779.89 - 779.89 2,594.04 4,153.82 0 4,153.82 IV)Interest on borrowings 53.44 1,828.13 2,036.61 3,963.82 7,882.00 0 7,882.00 Undisbursed liabilities 4,000.00 7,000.00 11,000.00 - 22,000.00 0 22,000.00 Fixed Deposits 30.00 49.92 3,619.13 1,298.39 4,997.4
4 0 4,997.44
Current Liabilities 1,000.00 1,000.00 1,500.00 2,246.59 5,746.59 0 5,746.59 Provision for int on CFD 242.09 - - - 242.09 0 242.09
- Total Liabilities 6,820.42 9,878.05 18,935.63 10,102.84 45,736.9
4 0 45,736.94
- SURPLUS/DEFICIT 5009.58 -3358.05 -5405.63 16153.05 12398.92 3791.55 Cumulative surplues/deficit 5009.58 1651.53 -3754.1 12398.92 0 16190.47
Maturity Pattern on Interest Rast Risk Sensitive Rupee Assets and liabilities
Impact of 1 % interest rate on mid April 2006
77
Less than 1 month 5009.58 X 11.5
months/12
X 0.01 48.00
> 1 month&upto 3months -3358.05 X 10 months/12 X 0.01 -27.98
>3months&upto 6months 5405.63 X 7.5months/12 X 0.01 33.78
>6months&upto12month 16153.02 X 3 months/12 X 0.01 40.38
TOTAL 94.18
Interpretation on liquidity statement: -
Using the gap analysis method is prepared the liquidity statement under the
guidance of manager and is found the following information. The total outflows over 10
years period = 180371.11 lakhsl
78
The total inflows over 10 years period = 172759.01
Bucket Periods Cumulative
outflows
Cumulative
inflows
Cumulative
mismatch
Less than one month 6820.42 15621.55 8801.13
Over 1 month to 3 months 16698.47 22141.10 5443.08
Over 3 months to 6 months 35634.10 35671.55 37.45
Over 6 months to 12 months 45736.88 61927.41 16190.47
Less than or equal to 1 year 91473.88 123854.82 16190.47
More than 1 year & up to 3 years 133741.89 176698.92 26766.56
More than 3 years & up to 5 years 170674.15 209685.77 22820.67
More than 5 years & up to 7 years 204146.15 228900.17 8563.55
More than 7years & up to 10 years 208709.93 231144.92 6244.52
More than 10 years 226708.05 234686.42 8212.10
The total outflows over 1 year period = 45736.94 lakhs
The total inflows over 1 year period = 58135.86 lakhs
79
Bucket period Cumulative
outflows
Cumulative
inflows
Cumulative
mismatch
Less than 1 month 6820.42 11830.00 5009.58
Over 1 to 3 months 16698.47 18350.00 1651.53
Over 3 to 5 months 35634.47 31880.00 -3754.10
Over 6 to 12 months 45736.94 58135.86 12399.01
Less than or equal to 1 year 91473.88 116271.72 24797.93
LESS THAN ONE MONTH 15621.55OVER 1 TO 3 MONTHS 6,520.00 OVER 3 TO 6 MONTHS 13,530.00 OVER 6 TO 12 MONTHS 26,255.86 LESS THAN OR EQUAL TO 1 YEAR 61,927.41 MORE THAN 1 YEAR AND UPTO 3 YEARS 52,844.01
80
MORE THAN 3 YEARS AND UPTO 5 YEARS
32,986.85
MORE THAN 5 YEARS AND UPTO 7 YEARS
19,214.40
MORE THAN 7 YEARS AND UPTO 10 YEARS 2,244.75 MORE THAN 10 YEARS 3,541.50
INTERPRETATION:
From the above graph it is clear that the percentage of total assets is
more in less than or equal to one year period.
LESS THAN ONE MONTH 6820.42OVER 1 TO 3 MONTHS 9,878.05 OVER 3 TO 6 MONTHS 18,935.63 OVER 6 TO 12 MONTHS 10,102.84 LESS THAN OR EQUAL TO 1 YEAR 45,736.94 MORE THAN 1 YEAR AND UPTO 3 YEARS 42,268.01
81
MORE THAN 3 YEARS AND UPTO 5 YEARS
36,932.74
MORE THAN 5 YEARS AND UPTO 7 YEARS
33,471.52
MORE THAN 7 YEARS AND UPTO 10 YEARS 4,563.78 MORE THAN 10 YEARS 17,998.12
INTERPRETATION:
From the above graph it was depicted that total liabilities are less between more
than seven years and up to ten years.
LESS THAN ONE MONTH 8801.13OVER 1 TO 3 MONTHS (3,358.05)OVER 3 TO 6 MONTHS (5,405.00)OVER 6 TO 12 MONTHS 16,153.02 LESS THAN OR EQUAL TO 1 YEAR 16,170.47
82
MORE THAN 1 YEAR AND UPTO 3 YEARS 10,576.09 MORE THAN 3 YEARS AND UPTO 5 YEARS
(3,945.89)
MORE THAN 5 YEARS AND UPTO 7 YEARS
(14,257.10)
MORE THAN 7 YEARS AND UPTO 10 YEARS (2,319.03)MORE THAN 10 YEARS (14,456.60)
INTERPRETATION:
From the above graph liquidity risk statement analysis is mismatch of assets and
liabilities are same in period between over six months to twelve months and less than or
equals to one year.
LESS THAN ONE MONTH 129OVER 1 TO 3 MONTHS (33.00)OVER 3 TO 6 MONTHS (28.00)OVER 6 TO 12 MONTHS 159.00
83
LESS THAN OR EQUAL TO 1 YEAR 35.00 MORE THAN 1 YEAR AND UPTO 3 YEARS 25.00 MORE THAN 3 YEARS AND UPTO 5 YEARS
(10.00)
MORE THAN 5 YEARS AND UPTO 7 YEARS
(43.00)
MORE THAN 7 YEARS AND UPTO 10 YEARS (50.00)MORE THAN 10 YEARS (80.00)
INTERPRETATION:
From the above graph it is clear that percentage of liquidity gap is more in over
six months to twelve months and less in the period of more than 3 years and up to 5
years.
LESS THAN ONE MONTH 6,820.00 OVER 1 TO 3 MONTHS 9,878.05 OVER 3 TO 6 MONTHS 18,935.63
84
OVER 6 TO 12 MONTHS 10,102.84 LESS THAN OR EQUAL TO 1 YEAR 45,736.94
INTERPRETATION:
From the above graph it was depicted that the interest rate risk sensitive of total
liabilities less in the Lavendar region with amount of 6820.42 lakhs.
LESS THAN ONE MONTH 11,830.00 OVER 1 TO 3 MONTHS 6,520.00
85
OVER 3 TO 6 MONTHS 13,530.00 OVER 6 TO 12 MONTHS 26,255.86 LESS THAN OR EQUAL TO 1 YEAR 58,135.86
INTERPRETATION:
From the above graph it is clear that interest risk sensitive of total assets are more
in less than or equal to 10 years with amount of 58135.86 lakhs.
LESS THAN ONE MONTH 5,009.58
86
OVER 1 TO 3 MONTHS (3,358.05)OVER 3 TO 6 MONTHS (5,405.63)OVER 6 TO 12 MONTHS 16,153.02 LESS THAN OR EQUAL TO 1 YEAR 12,398.92
INTERPRETATION:
he above graph is indicating the mismatch of interest rate risk is negative in over
1 to 3 months period and over 3 to 6 months period.
87
LESS THAN ONE MONTH 73.00 OVER 1 TO 3 MONTHS (33.00)OVER 3 TO 6 MONTHS (28.00)OVER 6 TO 12 MONTHS 159.00 LESS THAN OR EQUAL TO 1 YEAR 27.00
INTERPRETATION:
From the above graph it is clear that the percentage of interest gap is more in over
6 to 12 months and less negative in over 3 to 6 months period.
88
Relationships between interest rate changes and net interest income: -
GAP Interest rate change Impact on nii
POSITIVE Increases Positive
POSITIVE Decreases Negative
NEGATIVE Increases Negative
NEGATIVE Decreases Positive
- To set limits on the maximum cumulative outflows and inflows. The limit of
inflows is needed to control positive gapping.
- Sub limits should be imposed on long term gaps (over 1 year). Then risks to
earnings increase as gaps lengthen in maturity because of uncertain interest
rate risk levels, which are affected by future economic, political and
regulatory developments.
- Limits should be established for each currency in which financial institutions
has transaction. A total limit for the aggregate of all currencies should be set.
89
Measuring the interest rate risk - duration gap method:
Seeks to measure the adverse impact of interest rate changes in
- Market value of the equity or
- The economic value of portfolio equity
- The economic the gap in the duration between assets and liabilities.
- Duration gaps in the difference between duration of assets and effective
duration of liabilities
- Effective duration of liabilities is raised by duration of liabilities multiplied by
owns to assets ratio.
The table given shows the relationships:
Nature of duration gap Direction of interest
rate movement
Impact on FIs net worth
Positive duration gap Rise
Fall
Decrease
Increase
Negative duration gap Rise
Fall
Increase
Decrease
Zero duration gap Rise or fall No change
The resultant or positive duration gap is managed with the help of derivatives
products like forward tare agreements, interest rate, swaps etc.
90
SUMMARY AND CONCLUSIONS
91
SUMMARY AND CONCLUSIONS
1. ALM is a strategic approach of managing the balance sheet dynamics in such a way
that the net earnings are maximized and it ensure the level and risk ness with the risk
return objectives of banks/Fls.
2. The compositions of assets and liabilities largely decides the solvency, liquidity and
profitability of a corporate entity, the components of liabilities determines the cost of
funds and it broadly with both sides of balance sheet.
3. The reduction of liquidity risk by lengthen the maturity of liabilities implies less
profitability because ling tern funds to be more expansive than short term funds.
4. It also implies fewer earnings opportunities from negative gapping.
5. The appropriate balance between liquidity and profitability is determined by top
managers assessment of the banks capacity to bear these risk..
92
FINDINGS
93
FINDINGS
RISKS
1. It is found that in APSFC the liquidity risk will not arise as far as RBI chest having
with it.
2. After the deregulation only this risk analysis came into the main picture.
3. To deal with the market risk ALM works.
4. ALM is the process, which is using manly to liquidity risk and interest rate risk.
5. The changes in the interest rate always has a effect in the risk management.
6. Interest rate risk can influence more the business than the liquidity risk in market.
7. Dealing with liquidity risk is easier than dealing with the interest rate risk.
8. The statistical tools, which used for the liquidity risk are easier than the interest rate
risk tools.
9. The information comes from the head office regarding forex risk, which discussed in
ALCO.
94
SUGGESTIONS AND
RECOMMENDATIONS
95
SUGGESTIONS AND RECOMMENDATIONS
1. There are no RBI Stipulations regarding off balance sheet items
2. Maturity patterns stipulations by RBI are not framed properly.
3. The methods of date acquisition for managing the liquidity risk management and
interest rate risk management should improved.
4. Better analysis required day by day date of the branches and more methods should be
applied.
5. The F1 should have package which is required to organized the bucket format which
can be directly sent to zonal office.
6. To renewal or unveiled loans, premature closured these should be done on each
branch basis.
96
ANNEXURE
97
ALM STRUCTURE
ALM
GENERAL
ASSET/LIABILITY MANAGEMENT
SPECIFIC
LIABILITY ASSET
MANAGEMENT MANAGEMENT
FINANCIAL
98
BALANCE INCOME AND
SHEET EXPENDITURE
MANAGEMENT MANAGEMENT
GLOSSARY
99
GLOSSARY
ALM ASSET LIABILITIES MANAGEMENT
ALCO ASSET LIABILITIES MOMMITTEE
IRR INTEREST RATE RISK
ERF EXPORT RERINANCE FACILITY
CLF COLLATERALISED LENDING FACILITY
ACLF ADDITIONAL COLLATERALISED LENDING FACILITY
NIT NET INTEREST INCOME
MVE MARKET VALUE OF EQUITY
NIM NET INTEREST MARGIN
RSA RATE DENSITIVE ASSETS
RSL RATE SENSITIVE LIABILITIES
VAR VALUE AT RISK
RBI RESERVE BANK OF INDIA
SFC STATE FINANCIAL CORPORATION
IDB INDUSTRIAL DEVELOPMENT BANK OF INDIA
SIDBI SMALL INDUSTRIES DEVELOPMENT BAMD OF INDIA
APSFC ANDHRA PRADESH STATE FINANCIAL CORPORATION
100
BIBLIOGRAPHY
101
BIBLIOGRAPHY
INDIAN FINANCIAL SYSTEM M.Y.KHAN
ASSET LIABILITY MANAGEMENT S.K.KHURANA
RBI GUIDELINES
APSFC ANNUAL REPORTS
WWW.ALMIS.COM
WWW.APSFC.COM
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103