Asset & Liability Management is a dynamic process of planning, Organizing & Controlling of Assets & Liabilities and their volume, mixes, maturities, yields and costs in order to maintain liquidity and NII - Net Interest Income.
ALM is continuously arranging and rearing the assets and liabilities of the bank without infringing the liquidity and safety of the bank and with the purpose of maximizing the bank's profit. The process of ALM depends upon the availability, accuracy, adequacy data and understanding the balance sheet.
ALM is a risk management technique which is designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes in to consideration interest rates, earning power and degree of willingness to take on debt. It is also called "Surplus Management".
In today Banking Industry the responsibility of Assets and Liability Management is to manage the financial risk which arises due to:
Mismatch between Assets and Liabilities
Interest Rate Risk
Liquidity Risk
Forex risk
Asset Management - Banks follows Asset management tool for proper control over the composition of banks assets to provide adequate liquidity and earnings and meet other goals of the bank. It says how liquid are the assets of the Bank.
Liability Management - Banks follows Liability management tool for proper control over the composition of bank liabilities to provide adequate liquidity and to meet other goals. It says how easily can the bank generate loans from market.
The objective of the ALM is to manage:
Mismatch between Assets & Liabilities -
Asset-Liability mismatches can occur in different areas. A bank could have substantial short-term liabilities (such as deposits), long-term assets (such as fixed rate mortgages), these can be measured by the duration gap. This measure sometimes also called a maturity mismatch. A bank could have all of its liabilities as floating 'interest rate bonds', but assets as fixed rate instruments.
To measure the direction and extent between Asset - Liability by using 'GAP Analysis'. This GAP Analysis derives the difference between the amounts of RSA - Rate Sensitive Asset and RSL - Rate Sensitive Liabilities.
Mismatches can be Positive or Negative.
+ve mismatch - excess liquidity can be deployed in money market instruments, creating new assets & investment swaps etc.
-ve mismatch, it can be finance from market borrowings, Bills rediscounting, Repos & deployment of foreign currency converted into rupee.
Interest Rate Risk -
Banks follow this method to know what is the impact on a bank's future earnings and the market value of its equity due to changes in interest rates by RBI or changes in the Market interest rates.
Liquidity Risk -
Banks follow this method to know whether they are having sufficient assets to meet the liabilities at a given time.
Forex Risk -
Banks follow this method to know the impact or to know the risk in foreign exchange assets and liabilities due to changes in exchange rates among Multi-currencies.
COMPONENTS OF ASSETS & LIABILITIES IN BANK'S BALANCE SHEET & MANAGEMENT:
Bank Liabilities:-
The sources of fund for lending and investments activities constitute liabilities side of balance sheet.
Capital
Reserves and Surplus
Deposits
Borrowings
Other Liabilities and Provisions
Contingent Liabilities
Bank's Assets:-
Funds mobilized by bank through various sources.
Cash and Bank balances with RBI
Balances with other banks
Money at Call & Short notice
Investments
Advances
Fixed Assets
Other Assets
Banking business involves the identifying, measuring, accepting and managing the risk. One of the most important risk-management functions in banking is Assets Liability Management.
ALM is concerned with strategic balance sheet management involving risks caused by changes in interest rates, exchange rate, and credit risk and liquidity position of bank. With profit becoming a key-factor, it has now become imperative for banks to move towards integrated balance sheet management where components of balance sheet and its different maturity mix will be looked at profit angle of the bank.
ALM is a System of Internal control of Assets and Liabilities. ALM technique impacts on wealth of the Organization.
ALM is about management of Net Interest Margin (NIM) to ensure that its level and riskiness are compatible with risk/return objectives of the bank. It is more than just managing individual assets and liabilities. It is an integrated approach to bank financial management requiring simultaneous decision about types and amount of financial assets and liabilities it holds or its mix and volume. In addition ALM requires an understanding of the market area in which the bank operates. ALM is required to match Assets & Liabilities and minimize liquidity as well as market risk.
Assets liability Management tool that helps a bank's in taking investment/disinvestment decisions, in maintaining the required SLR - Statutory Liquidity Ratio, CRR - Credit Reserve Ratio and some other ratios as per Reserve Bank of India guidelines. It generates the SLP / IRS / MAP reports and also it supports risk management modules like data analysis, graphical analysis and Interest rate simulation.
SLP - Structural Liquidity Profile
IRS - Interest Rate Sensitivity
MAP - Maturity and Position
Guidelines by RBI in Managing Assets & Liabilities:
ALM has evolved since the early 1980's.
The RBI in its guidelines has asked Indian banks to used traditional techniques like Gap Analysis for monitoring the interest rate risk and liquidity risk and also Duration, Simulation, Value at Risk in the future to know the position and to manage the risk.
7th October 1999, Risk management to manage Interest rate risk, Liquidity risk, Foreign exchange risk & Operational risk.
December 2000, Capital Adequacy Guidelines to manage credit and market risk.
-ve Gap in bucket rates i.e. 1-14 days and 15-28 days should not exceed 20% of the cash flows.
Initially Gap Analysis to apply in the first stage of implementation & to indicate the financing gaps.
Disclosure to Balance sheet on maturity pattern on Deposits, Borrowings, Investments & Advances w.e.f 31.03.01
Purpose of Assets Liability Management in Banks:
An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable risk/reward ratio.
Review the interest rate structure and compare the same to the interest/product pricing of both assets and liabilities.
Examine the loan and investment portfolios in the light of the foreign exchange risk and liquidity risk that might arise.
Examine the credit risk and contingency risk that may originate either due to rate fluctuations or otherwise and assess the quality of assets.
Review, the actual performance against the projections made and analyse the reasons for any effect on spreads.
Aim is to stabilize the short-term profits, long-term earnings and Long-term substance of the bank. The parameters that are selected for the purpose of stabilizing asset liability management of banks are:
Net Interest Income (NII)
Net Interest Margin (NIM)
Economic Equity Ratio (EER)
Managing the bank's response to changing interest rates
Banks int. revenues Bank int. costs Mkt value of bank assets Mkt value of bank libility's
Bank's Net Interest Margin Bank's Net worth (equity)
Bank's investment value, profitability, and risk
COMPANY
PROFILE
INTRODUCTION:
YES BANK is an outcome of the professional entrepreneurship of its Founder, Rana kapoor and the support of his highly competent top management team. Rana Kapoor has proven track record as a professional entrepreneur in successfully establishing and managing Rabo India Finance private Limited, a Joint venture with Rabo Bank, Netherlands. YES BANK has received the only Greenfield license awarded by the RBI in the last 14 years.
YES BANK won the prestigious Emerging Markets Sustainable Bank of the Year Award at the Financial Times /IFC, Washington Sustainable Banking Awards held on June 3, 2008 in London. YES BANK was the only Indian Bank to have won this award out of 182 entries from 129 institutions across 54 countries.
YES BANK was awarded the Financial Insights Innovation Award (FIIA) for the Most Innovative e-Payments solution on February 29, 2008, in Singapore. YES BANK was the only Indian Bank to receive this accolade from amongst 150 nominations across Asia pacific.
YES BANK has been ranked overall #1 amongst 56 banks on the key parameter of Credit Quality and overall THIRD among New Private Sectors Banks, in the Financial Express - E&Y Survey of India's Best Banks of 2007, announced on March 31, 2008. The Bank also has been ranked #1 on Growth in its category (overall#1 on Growth).
YES BANK has also been ranked SECOND among Medium Size Banks and the Fastes Growing Bank in its category, at the Business Today - KPMG Survey of India's Best Banks of 2007.
Earlier, YES BANK was ranked # 2 among NEW Private Sector Banks, at the Financial Awards for India's Best Bank for 2006, and ranked # 3 the Business world survey of India's Best Listed Public and Private Banks for 2006, while emerging #1 on Growth, Efficiency and Safety. The Bank has also been selected as a Founding Member of the Community of Global Growth Companies at the World Economic Forum, Davos. Further, the Bank has been included as Chairman's Circle member of the US-India Business Council (USIBC). YES BANK us the first and only Indian signatory to the Carbon Disclosure Project (CDP) to address the highly pertinent issue of Climate Change.
The Bank completed it maiden IPO of 70 million shares in July 2005 raising INR 3,150 million of capital at a price of INR 45 per share. The additional shares offered represented 25.93% of the Bank's paid-up capital. The paid-up capital of the Bank currently stands at INR 2,967 million
The total net worth of the Bank as at June 30, 2008 is INR 13,742 million.
Key Highlights & Milestones:
Nov '03 - Incorporation of YES BANK Limited.
June '05 - Maiden Public offering of equity shares by the Bank.
Nov '05 - Rana Kapoor, MD & CEO adjudged Start-up Entrepreneur of the
Year at the E & Y Entrepreneur Award 2005.
Sept '06 - Foreign currency loan agreement with Wachovia Bank, N.A.
Dec '05 - Ranked No.3 in the Business world survey of India's Best Listed
Banks, including public and private banks.
Feb ' 07 - Won the RASBIC Award for Innovative recruitment and staffing
Programme and the Global HR Excellence Award for Innovative
HR Practices at the Asia Pacific HRM Congress 2007.
Apr '07 - Launch of Demat Account Services.
June'07 - Launch of Business Banking - Financial Advisory division to
provide complete end-to-end financial advisory services to
Emerging Corporates and Business Banking - customers
Aug '07 - Launch of YES - International Banking.
Sep '07 - Received licenses to open 57 new branches nationally and 125
offsite ATMs in Mumbai & NCR Taking the total licensed
network to 117 branches and 200 offsite ATMs.
Jan '08 - 60 Operational branches across 52 locations nationally and 75
offsite ATMs in Mumbai and NCR.
Feb '08 - YES BANK was ranked as the Top Deal Maker in the Life
Sciences sector by Merger market, a leading global news serice.
YES Bank was also ranked 8th overall by value of deals.
Apr '08 - 67 Operational branches across 57 locations nationally and 75
offsite ATMs & 2 National Operations Centers in Mumbai &
NCR.
June '08 - Awarded the 'Emerging markets Sustainable Bank of the year'
Award at the Financial Times/ IFC, Washington Sustainable Banking Awards.
July '08 - 101 operational branches across 82 locations nationally, 81 offsite
ATM' and 2 National Operations Centres.
BUSINESS STRATEGY:
Knowledge Banking & Responsible Banking
Knowledge Banking: One of the strengths and differentiating features of YES BANK is its Knowledge Banking approach. The Bank has identified certain focus sectors based on the following parameters:
Potential to add value in providing banking products
Recognition and appreciation fo knowledge as a differentiator
Growth potential of the sector
Opportunities for banking products and competitor activity
India's competitive position internationally, in the sector.
Responsible Banking: YES Bank has a vision to champion 'Responsible Banking' in India, where the concepts of Corporate Social Responsibility (CSR) and Sustainability are integrated in its Business Focus. YES BANK is committed to adding long term value to society, to differentiate itself in the market place based on a strong sustainability mandate and to build in flexibility and openness as part of its core strategy.
Business Lines: YES BANK has three distinct business segments to effectively service the differentiated needs of its target customers.
Corporate & Institutional Banking (C&IB)
Emerging Corporates Banking (ECB)
Business Banking
Indian Financial Institutions (IFI) Relation ship management
YES - International Banking
Retail Banking & Wealth Management
Product Lines: YES Bank offers a wide range of fee-based products to corporate and business banking customers to ensure a high degree of cross - sell to clients.
Financial Markets
Corporate Finance / Investment Banking / Business Banking - Financial Advisory
Transaction Banking
Private Banking
Developed Banking
Microfinance
TECHNIQUES OF
ASSET & LIABILITY MANAGEMENT
&
It's CALCUALTIONS
LIQUIDITY MANAGEMENT:
The ability of a bank to fulfill its obligations and after doing so having enough cash left to do its normal daily banking business. Control over a bank's liabilities (Usually through changes in interest rates offered) to provide the bank with adequate liquidity and meet other goals.
Liquidity management helps the bank in case of process of generating funds to meet contractual or relationship obligations in all times. It demonstrates the whether the bank is safe or not and whether the bank is capable of repaying its borrowings.
It enables the bank to meet its loan commitments, whether formal or informal.
It enables the bank to avoid the unprofitable sale of assets.
It demonstrates the bank when to lower the size of the default-risk premium the need to pay for the funds.
The objective of the Liquidity Management in bank is to meet its fund requirements and to acquire funds and use them profitably, especially to meet loan demand and focuses on a expansion of bank's asset.
Liquidity Management Measures:
Cash - flow approach: Compare Cash Inflows and Outflows for a shorter period say 30 to 45 days, which provides cash - flow measure of bank liquidity.
By observing net cash flows on a day by day basis we can find the liquidity risk.
Large - liability dependence: Need to calculate LLD - Large Liability Dependence. This ratio demonstrates the extent to which money supports the banks basic earning assets.
LLD = Large liabilities - Temporary investments
Earning assets - Temporary investments
Temporary investments - Interest bearing balances which are due from depository institutions, Security purchased, etc.
Liquidity risk is financial risk arise due to uncertain liquidity. If credit ratings fall then a bank might lose its liquidity, liquidity risk take place due to unexpected cash outflows.
Liquidity risk refers to the risk that the institution might not be able to generate sufficient cash flow to meet its financial obligations.
Liquidity management helps the organization to accommodate the decreases in Liabilities and the increase funds in Assets. It plays a very important role in all organizations to compensate for expected and unexpected fluctuations in the Balance Sheet and to provide funds for the growth.
Liquidity of an institution depends on the institution - short term need for cash, cash in hand, available lines of credit, the liquidity of the institutions assets, the institutions reputation in the marketplace, credit rating
Banks need to maintain liquidity to meet its deposit withdrawal and to fund loan demands.
The difference between loans and deposits determine banks liquidity needs. It represents the ability to decreases in liability and to fund increases in assets.
It demonstrates the market place that the bank is safe and to know whether they are in position of repaying its borrowings.
It enables bank to meet its prior loan commitments, whether formal or informal.
It helps to smooth the maturity profile and to avoid bunching of debt services.
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Financing Gap
Loans - Deposits
979,445
(5,032,852)
(19,306,562)
(38,428,884)
Loans & Advances
7,609,790
24,070,924
62,897,348
94,302,704
Deposits
6,630,345
29,103,776
82,203,910
132,731,588
This formula says about the Gap between the Loans and Deposits. By observing the above calculation we can understand that in the beginning there were less deposits and more loans and later stages deposits are more than loans and advance. It seems than bank has more liquidity, bank can use these additional deposits to fund more loans to SME's and other Big organizations and bank has more liquidity but at the same time they have more risk.
Financing Requirement
Financing Gap + Liquid Assets
9,616,108
22,744,010
60,287,993
79,445,528
Financing Gap
979,445
(5,032,852)
(19,306,562)
(38,428,884)
Liquid Assets
8,636,663
27,776,862
79,594,555
117,874,412
cash&bal. with RBI
413,366
881,734
3,897,645
9,592,359
Balance with banks, Money at call & Short notice
116,930
1,274,077
9,030,755
6,683,301
Advances
7,609,790
24,070,924
62,897,348
94,301,704
other assets
496,577
1,550,127
3,768,807
7,297,048
The above calculation represents Financing Gap & Liquid Assets - bank has sufficient liquid assets, by this we can say that their liquidity position is good. In the beginning Financing Gap is negative but after the 1st year the Financing Gap is positive. After deducting the Finance gap from liquid assets, we can observe their Financing requirement.
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Deposits / Total assets
0.51873616
0.6991807
0.740345712
0.781582369
Deposits
6,630,345
29,103,776
82,203,910
132,731,588
Total Assets
12,781,729
41,625,543
111,034,492
169,824,184
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Loans / Deposits
1.14772157
0.8270722
0.765138155
0.710469191
Loans & Advances
7,609,790
24,070,924
62,897,348
94,301,704
Deposits
6,630,345
29,103,776
82,203,910
132,731,588
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Volatile Liabilities / Tot. Assets
0.83022641
0.8624181
0.929116044
0.922336067
Volatile Liabilities
10,611,729
35,898,621
103,163,928
156,634,970
Total Assets
12,781,729
41,625,543
111,034,492
169,824,184
volatile liabilities
Deposits
6,630,345
29,103,776
82,203,919
132,731,588
Borrowings
3,697,411
4,647,633
8,673,249
9,862,091
Other liabilities and provisions
283,973
2,147,212
12,286,760
14,041,291
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Liquid assets / Total Assets
0.67570381
0.6673033
0.716845311
0.694096737
Liquid assets
8,636,663
27,776,862
79,594,555
117,874,412
Total Assets
12,781,729
41,625,543
111,034,492
169,824,184
"Assets can be sold and payback the debts in case of Liquidity Position." The greater the liquid assets ratio the less liquidity. The liquidity position of YES Bank is good.
ASSET MANAGEMENT:
Control of the composition of a bank's assets to provide adequate liquidity and earnings and meet other goals.
Many banks tend to have little influence over the size of their total assets. Liquid assets enable a bank to provide funds to satisfy increased demand for loans. But banks, which rely solely on asset management, concentrate on adjusting the price and availability of credit and the level of liquid assets.
Asset Management includes -
Treasury bills, Federal agency securities, repurchase agreements, bankers' acceptances, negotiable certificates of deposits and Commercial paper.
Asset management is an attempt to earn the highest possible return on assets while minimizing the risk. By doing:-
To get borrowers with low default risk, paying high interest rates
Buy securities with high return, low risk.
Diversify
Manage liquidity
Assets Quality
Rs. In Crores
Rs. In Crores
Rs. In Crores
Loans / Total Assets
INR 24,070,924.00
INR 62,879,348.00
INR 94,302,704.00
INR 41,625,543.00
INR 111,034,492.00
INR 169,824,184.00
Loans / Total Assets
617203.1795
1612290.974
2418018.051
( Rs. In Thousands)
(Rs. In Thousands)
(Rs. In Thousands)
Non-performing loans / Total Loans
Nil
Nil
INR 126,699.00
Nil
Nil
INR 94,302,704.00
Non-perform loans/Total loans
Nil
Nil
0.001343535
Reserve for NPL
Nil
Nil
INR 24,370.00
Non-Performing Loans
Nil
Nil
INR 126,699.00
Reserve for NPL / NPL
Nil
Nil
0.192345638
(Rs. In Thousands)
(Rs. In Thousands)
(Rs. In Thousands)
Interest Earning assets
INR 39,728,622.00
INR 106,556,989.00
INR 161,515,426.00
Total assets
INR 41,625,543.00
INR 111,034,492.00
INR 169,824,184.00
Int earning assets/Total assets
0.954428919
0.959674666
0.951074353
Non-Int Earning Assets
INR 1,896,921.00
INR 4,477,503.00
INR 8,308,758.00
Total Assets
INR 41,625,543.00
INR 111,034,492.00
INR 169,824,184.00
Non-Int.Earg Asts / Total Assets
0.045571081
0.040325334
0.048925647
INTEREST RATE RISK MANAGEMENT:
Interest rate risk is the risk borne by an interest-bearing asset, which takes place due to changes in the interest rates. In general, as rates rise, the price of fixed rate bond will fall, and vice versa.
Unexpected changes in the Interest rates which results in effecting the Bank's profitability and Market value of the Equity and also change in the value/price of assets and liabilities.
Interest Rate Risk is liable to change in Net Interest Income (NII) or in variations in Net Interest Margin (NIM).
Gap: The gap is difference between the amount of assets and liabilities on which the interest rates are reset during a given period.
Embedded option: Withdrawal of deposits by customers before maturity date & Prepayment of loans and bonds.
Income statement ïƒ Impact on Net Interest Margin
Balance Sheet ïƒ Impact on Market Value Capital
Measuring the Interest Rate Risk:
Value at Risk
Measuring the mismatch of the interest sensitivity gap of assets and liabilities
Steps to be taken by Bank to control over Interest Rate Risk:
To calculate periodic GAPs over short time intervals.
By matching fund repriceable assets with repriceable liabilities.
By matching fund long-term assets with Non-Interest bearing liabilities.
By hedging Off-balance sheet transaction - Interest rate swaps & Financial futures.
2005-2006
2006-2007
2007-2008
2008-2009
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
(Rs. In thousands)
Interest Earned
299,787
1,901,800
5,876,094
13,108,257
Intrest Expended
118,489
997,390
9,741,086
4,162,566
Net Interest Income
Interest Earned - Interest Expended
181,298
904,410
(3,864,992)
8,945,691
Interest Earned
Interest/discount on advances/bills
231,147
1,361,194
4,226,396
9,303,666
Income on investments
62,430
475,269
1,510,449
3,668,225
Int. on balances with RBI
5,236
45,213
105,639
105,232
Other
974
20,124
33,610
31,134
299,787
1,901,800
5,876,094
13,108,257
Interest Expended
Int. on deposits
88,994
850,838
3,293,037
8,540,083
Int. on RBI borrowings
29,495
188,852
669,435
594,801
Others
-
7,462
200,094
606,202
118,489
1,047,152
4,162,566
9,741,086
Interest rates paid on liabilities is lesser than interest rates earned on assets.
Interest rates on Interest earning assets and bearing liabilities will not move at the same speed as market interest rates.
The greater the potential earnings - the greater is the amount of risk for bank.
When ever the market interest rise the bank income will decline.
As per ALM technique, NII - Net Interest Income of the Bank is the early stages is at decreasing stage and became negative, but at the end it recovered and became positive. The contribution from Interest/discount on advances/bills is more in converting the Negative NII to Positive NII
Gap Analysis
RSA - RSL
1,347,606
5,095,036
43,948,283
52,694,030
RSA - Rate sensitive Assets
11,675,362
38,846,445
134,825,451
195,287,709
Money at call
116,930
1,274,077
9,030,755
6,683,301
Advances
7,609,790
24,070,924
62,897,348
94,301,704
Investments
3,948,642
13,501,444
62,897,348
94,302,704
RSL - Rate sensitive Liabilities
10,327,756
33,751,409
90,877,168
142,593,679
Deposits
6,630,345
29,103,776
82,203,919
132,731,588
Borrowings
3,697,411
4,647,633
8,673,249
9,862,091
Positive Gap - which indicates a bank has more rate sensitive assets than liabilities, and increase in rates increases NII.
Negative Gap - which indicates a bank has more rate sensitive liabilities than assets, and increases in rates decreases NII.
The size of the GAP determines the size of change in Interest Rate that would drive Net worth to zero or vice versa.
MANAGEMENT FO EXCHANGE RATE RISK:
Foreign exchange risk - Risk arising out of adverse exchange rate movements during a period in which it has open position in an individual foreign currency.
Transaction exposure:- Change in the foreign exchange rate between the time the transaction is executed and the time it is settled.
Forwards - Agreement to buy or sell forex for a predetermined amount, at a predetermined rate on a predetermined date.
Open position: - The extent to which outstanding contracts to purchase a currency exceed liabilities plus outstanding contracts to sell the currency & vice versa.
Overnight position: - A limit on the maximum open position lift overnight, in all major currencies.
Day - light position:- A limit on maximum open position in all major currencies at any point of time during day. Such limits are generally larger than overnight positions.
LIMITATIONS:
I have done project on ALM in YES BANK Ltd. Begumpet - this branch deals with only Retail Banking & Wealth Management. Only current assets but not all assets of bank.
I have collected the Information from Bank Annual Reports & Quarterly reports and some information from the website of Bank.
No information available on the Bank Assets Management & Bank Liability Management.
I have collected Annual reports only for last five years because it incorporated in the year 2004.
I have collected information by discussion with 3 - 4 employees of the bank and known about their experience with the Bank.
Observations:
Not the value of assets might fall or that the value of liabilities might rise. It was that capital might be depleted by narrowing of the difference between assets and liabilities.
Percentage changes in assets or liabilities can result into large percentage changes in capital.
The assets & liabilities change only slightly, but those slight changes dramatically reduce the company's capital
ALM can manage both risks and increase economic value.
ALM Promotes identification and control of risks
ALM Improves capital and liquidity management
ALM Enhance internal and external communication
SUGGESTIONS:
Bank has to manage its debt in order to raise the required amount or resources subject to the lowest possible medium / long term cost and consistent with a prudent degree of risk.
To Increase short term deposit.
To reduce the interest rate on Long term loans
To open new branches
To Go for Advertisements - there are very less advertisements and they are advertising only in Business News channels, so I suggest them to advertise in the regional channels as well and to look for IMC tools in case of advertising.
CONCLUSION:
The operating income and cost of sales has been increase by 833.06 crs & 107.82 crs in the year 2008-2009 due to increase in the interest rate and continuous increase in the Interest Income from 926.06-2008 to 1,492.14-2009.
The net income interest has been increased in the year 2008-2009 by Rs.511.18 crs to Income tax paid by Yes bank and in the year 2008-2009 is Rs. 162.07 crs net surplus Rs. 243.60 crs has been increased due to decrease in the expenditure Rs. 107.82 crs of the yes bank.
By increasing the reserve size, the opportunity cost will increase and the interest margin will also increase.
Asset and Liability Management not only debt collection and controlling overdraft. Managing assets and liabilities means influencing the financial position of the bank. It improves operations as resources are released from Non-performing assets are not committed to settled unnecessary liabilities.
Abbreviations:
ALM - Assets Liabilities Management
NII - Net Interest Income
NIM - Net Interest Margin
RSA - Rate Sensitive Assets
RSL - Rate Sensitive Liabilities
VaR - Value at Risk
EER - Economic Equity Ratio
SLP - Structural Liquidity Profile
IRS - Interest Rate Sensitivity
MAP - Maturity and Position
SLR - Statutory Liquidity Ratio
IRR - Interest Rate Risk
CRR - Credit Reserve Ratio
IMC tools - Integrated Marketing Communication tools
