Synopsis

The central idea of this project will be to study the concept of Asset Liability Management (ALM), its operation in Banks with special reference to Liquidity Risk and Interest Rate Risk. Ever since the initiation of the process of deregulation of the Indian banking system and gradual freeing of interest rates to market forces, and consequent injection of a dose of competition among the banks, introduction of asset-liability management (ALM) in the public sector banks (PSBs) has been suggested by several experts. But, initiatives in this respect on the part of most bank managements have been absent. As per this understanding, ALM is a system of matching cash inflows and outflows, and thus of liquidity management. Hence, if a bank meets its cash reserve ratio and statutory liquidity ratio stipulations regularly without undue and frequent resort to purchased funds, it can be said to have a satisfactory system of managing liquidity risks, and, hence, of ALM. Asset Liability Management is concerned with Strategic Balance sheet management involving risks caused by changes in interest rates, exchange rate and liquidity position of the bank. The project will concentrate on measurement of Liquidity and Interest Rate Risk exposure of Bank. Liquidity Risk and Interest Rate Risk exposure is measured by preparing Structural Liquidity Statement and Interest Rate Sensitivity Statement respectively. Bank usually follows a combination of Asset and Liability management approaches to manage Liquidity risk. The project will be divided into four phases: Conceptualization. Collection of Data. Liquidity Risk analysis. Interest Rate Risk analysis. Title of the study: Statement of project: Study on Asset Liability Management in Bank Identification of any mismatches called as gaps between Assets and Liabilities of banks that affect the performance of bank which would result in Liquidity Risk and Interest Rate Risk. the To study about Asset Liability Management system followed in the bank. To study various policies framed by RBI in relation with Asset Liability Management. To understand the procedure of bucketing the inflows and outflows according to maturity based on RBI guidelines.

Objective Project:

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To get an in-depth knowledge about Asset Liability Management procedure followed by the bank to overcome the mismatches called as gaps. To study the Liquidity Risk exposure of Bank. To study the Interest Rate Risk faced by Bank. Research Methodology: The study is based on descriptive research design, in order to get insight in to risk and the technique used to manage asset and liability of Bank. Descriptive research is used to obtain information concerning the current status of the phenomena to describe what exists with respect to variables or conditions in a situation. http://rbidocs.rbi.org.in/rdocs/pressrelease/pdfs/3204.pdf http://www.expressindia.com/fe/daily/19980207/03855464.html Effects of interest rate change and monetary policies of RBI on the ALM of bank.

References Hypothesis