Asset Liability Management

The face of Indian financial sector changed forever with the initiation of economic reforms in 1991. Deregulation and integration has led Indian banks and financial institutions into competition both on the assets side as well as the liabilities side of the balance sheet, forcing them to assume greater and newer risks in their quest for higher returns. Accordingly, the need for bankers to be familiar with the risks to which they are exposed and the tools available for managing such risks assumes vital significance. The US savings and loan crisis in the early 1980s and the Asian crisis of the late 1990s strongly underscored the dangers confronting banks and financial institutions which choose to ignore the implications of interest rate risk and liquidity risk.

Asset-liability management (ALM) provides a macro-level framework and a sophisticated tool for modern risk management in banks. This is an authoritative work on the fundamentals of ALM. The book commences with an introduction to the types of risks confronting banks and goes on to describe the concept, rationale and implementation of asset-liability management:

• Risk management in banks

• Interest rate risk management

• Exchange rate risk management

• Liquidity risk management

• Credit risk management

• ALM implementation: including RBI guidelines.

The conceptual underpinnings are highlighted with numerous examples drawn from the Indian environment. The author guides the reader through both the basic and finer nuances of asset-liability management, lucidly and with easy felicity.