...management techniques and to establish a link between risk exposures and capital. Effective management of risk has always been the focus area for banks owing to the increasing sophistication in the product range and services and the complex channels that deliver them. The challenge for the banks is to put in place a risk control system that minimizes the volatility in profit and engenders risk consciousness across the rank and file of the organization. Sound risk management will ensure a healthy bottom line for the bank as risk taken by the bank will be commensurate with return and will be within an approved risk management policy. As all transactions of the banks revolve around raising and deploying the funds, Asset-Liability Management (ALM) gains more significance as an initiative towards the risk management practices by the Indian banks. The present paper discusses the various risks that arise due to financial intermediation and by highlighting the need for asset-liability management; it discusses the Gap Model for risk management. Introduction As Alan Greenspan,...
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...Asset - Liability Management System in banks - Guidelines Over the last few years the Indian financial markets have witnessed wide ranging changes at 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 spreads, profitability and long-term viability. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of banks has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Banks are exposed to several major risks in the course of their business - credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risks. 2. This note lays down broad guidelines in respect of interest rate and liquidity risks management systems in banks which form part of the Asset-Liability Management (ALM) function. The initial focus of the ALM function would be to enforce the risk management discipline viz. managing business after assessing the risks involved. The objective of good risk management programmes should be that these programmes will evolve into a strategic tool for bank management. 3. The ALM process rests on three pillars: • ALM information systems => Management Information System => Information availability...
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...and the new information technology initiatives that beneficially affect asset-liability management. The rise in conglomerate financial services and their implications for asset-liability management are also being described. The research article which is descriptive in nature has been able to successfully describe the concept and application of ALM technique. Before going into the details of what ALM concept is all about, the article briefly discusses the banking reforms that took place in India in the last two decades and tries to emphasize on the changes that have happened in the Indian Banking Sector. ALM Concept ALM is a comprehensive and dynamic framework for measuring, monitoring and managing the market risk of a bank. It is the management of structure of balance sheet (liabilities and assets) in such a way that the net earnings from interest is maximized within the overall risk-preference (present and future) of the institutions. The ALM functions extend to liquidly risk management, management of market risk, trading risk management, funding and capital planning and profit planning and growth projection. Benefits of ALM • It is a tool that enables bank managements to take business decisions in a more informed framework with an eye on the risks that bank is exposed to. • It is an integrated...
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...Working Group on the Issues and Concerns in the NBFC Sector Report and Recommendations RESERVE BANK OF INDIA August 2011 2 ABBREVIATIONS AND ACRONYMS AFC ALM BIS CIC-ND-SI Asset Finance Company Asset Liability Management Bank for International Settlements Systemically Important Non-Deposit Taking Core investment Company Capital Market Exposures Certificate of Registration Commercial Paper Capital to Risk Weighted Assets Ratio Commercial Real Estate Financial Companies Regulation Bill Foreign Direct Investment Investment Company Inter Corporate Deposits Infrastructure Finance Company Initial Public Offering Insurance Regulatory and Development Authority Joint Parliamentary Committee Know Your Customer Loan Company Liquidity Coverage Ratio Lender Of Last Resort Micro Finance Institution CME CoR CP CRAR CRE FCRB FDI IC ICD IFC IPO IRDA JPC KYC LC LCR LOLR MFI 3 M&A NBFC NBFC-ND-SI Mergers and Acquisitions Non Banking Financial Company Systemically important Non Deposit taking Non Banking Financial Company Deposit taking Non Banking Financial Company Non Deposit taking Non Banking Financial Company Non Banking Financial Institutions Non-convertible debentures Net Owned Funds Non-Performing Asset Over-the-counter Public Financial Institution Priority Sector Lending Reserve Bank of India Residuary Non Banking Company Return on Assets Return on Equity Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Scheduled Commercial Bank...
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...The Indian Banking Sector On the Road to Progress G. H. Deolalkar G. H. Deolalkar is formerly Managing Director of State Bank of India. 60 A STUDY OF FINANCIAL MARKETS Overview of Banking and Financial Institutions The Banking Sector The banking system in India is significantly different from that of other Asian nations because of the country’s unique geographic, social, and economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the same time, the country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35 percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and rural centers. The country’s economic policy framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path of growth-led exports rather than the “exportled growth” of other Asian economies, with emphasis on self-reliance through import substitution. These features are reflected in the structure, size, and diversity of the country’s banking and financial sector. The banking system has had to serve the goals of economic policies enunciated in successive fiveyear development plans, particularly concerning equitable income distribution, balanced...
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...Risk management in banking sector Table of content Particulars | Page no. | Executive summary | | Introduction | | Literature review | | Research methodology | | Sampling techniques | | Tools of analysis | | Data analysis & findings | | Conclusions | | Scope for further research | | Reference | | Executive Summary Today, The Indian Economy is in the process of becoming a world class economy. The Indian banking industry is making great advancement in terms of quality, quantity, expansion and diversification and is keeping up with the updated technology, ability, stability and thrust of a financial system, where the commercial banks play a very important role, emphasize the very special need of a strong and effective control system with extra concern for the risk involved in the business. Globalization, Liberalization and Privatization have opened up a new methods of Financial transaction where risk level is very high. In banks and financial institutions risk is considered to be the most important factor of earnings. Therefore they have to balance the Relationship between risk and return. In reality we can say that management of financial institution is nothing but a management of risk managing financial risk systematically and professionally becomes an even more important task. Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront...
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...RISK MANAGEMENT DEFINITION OF RISK: 1. Risk in finance is defined in terms of the variability of actual returns on an investment, around an expected return, even when those returns represent positive outcomes. 2. The decisions on how much risk to take and what type of risks to take are critical to the success of the business. 3. The essence of good management is making the right choices when it comes to dealing with different risks. 4. In banking, the risk is the possibility that a borrower or counterparty will fail to meet its obligations in accordance with the agreed terms, both in terms of time and quantity. 5. Risk does not come alone – the default of one firm may cripple affiliated firms such as suppliers, customers and banks. RISK MANAGEMENT: 1. Risk Management is a planned method of dealing with the potential loss or damage. It is an ongoing process of risk appraisal through various methods and tools. 2. Risk Management involves not only to protect oneself against some risks but also to decide which risks are to be exploited and how to exploit them. 3. Risk Management covers credit decision making, performance assessment, pricing, capital computation, provisioning etc. 4. Risk Management covers the following: a. It assesses what could go wrong b. It determines which risks are important to be dealt with c. It implements strategies to deal with those risks. 5. Risk Management is not – ...
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...CBM Course Outline For Session 2012 - 13 ------------------------------------------------- Batch: PGDM 2011 - 13 Term: IV ------------------------------------------------- ------------------------------------------------- Course: Commercial Bank Management (CBM) Credits: 3 ------------------------------------------------- ------------------------------------------------- Course Instructor: Prof. D N Panigrahi Objectives of the course: The course inputs are designed to accomplish the following objectives. * To help students to understand the role and functions of Commercial Banks, main strategic issues in retail and corporate banking and the risks faced by the Banking Industry in India. * To familiarise the students with the new Banking Practices and Processes including new banking technologies. * To familiarise the students with the legal and regulatory framework for banks in India. * To equip the students with the tools and techniques used in interpreting and evaluating the performance, profitability, productivity, and efficiency of the Commercial Banks. * To equip the students with the in-depth knowledge of Bank Financial Management Process including Treasury, Investment, Asset Liability Management & Risk Management. * To equip the students with the in-depth knowledge and skills in Credit Analysis & Appraisal Processes relating to the banks’ lending decisions like Working Capital Financing, Term Loan &...
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...Table of Contents EXECUTIVE SUMMARY ..................................................................... 3 CHAPTER-1 INTRODUCTION ................................................................ 4 1.1 Types Of NBFC‘s ...................................................................................... 5 1.2 Regulations of NBFC‘s ............................................................................... 6 1.3 Guidelines for new deposits ........................................................................ 8 1.4 Responsibilities .......................................................................................... 11 1.5 Current Scenario ....................................................................................... 12 CHAPTER-2 Literature review ....................................................................................... 14 2.1 Importance Of NBFC‘s .............................................................................. 15 2.2 Role of NBFC‘s ... ................................................................................. 16 2.3 On Global Crisis .................... .............................................................. 17 CHAPTER-3 RESEARCH METHODOLOGY ............................................................. 18 3.1 RESEARCH DESIGN ...............................
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...A Comparative Study Of NBFC in India 2010 Table of Contents EXECUTIVE SUMMARY .................................................................................................................. 3 CHAPTER-1 INTRODUCTION ......................................................................................................... 4 1.1 Types Of NBFC‘s ......................................................................................................................... 5 1.2 Regulations of NBFC‘s ................................................................................................................. 6 1.3 Guidelines for new deposits .......................................................................................................... 8 1.4 Responsibilities ........................................................................................................................... 11 1.5 Current Scenario ......................................................................................................................... 12 CHAPTER-2 Literature review ......................................................................................................... 14 2.1 Importance Of NBFC‘s ............................................................................................................... 15 2.2 Role of NBFC‘s .......................................................................................................................... 16 2.3 On Global Crisis .........
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...I. DOMESTIC DEPOSITS 1. Whether banks can accept interest free deposits? Banks cannot accept interest free deposits other than in current account. 2. What rate of Interest is paid by banks on savings bank accounts? With effect from October 25, 2011, saving bank deposit interest rate stands deregulated. Accordingly, banks are free to determine their savings bank deposit interest rate, subject to the following two conditions: (a) First, each bank will have to offer a uniform interest rate on savings bank deposits up to Rs.1 lakh, irrespective of the amount in the account within this limit. (b) Second, for savings bank deposits over Rs.1 lakh, a bank may provide differential rates of interest, if it so chooses, subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices. Further, Banks may ensure that interest rate is applied, as stated above, on the end-of-day balances of all domestic savings deposits accounts and no discrimination is made at any of its offices. Prior approval of the Board / Asset Liability Management Committee (if powers are delegated by the Board) may be obtained by a bank while fixing interest rates on such deposits. 3. Whether banks can pay interest on savings bank accounts quarterly? Banks can pay interest on savings bank accounts at quarterly or longer rests. 4. How is the computation of interest on savings...
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...non-banking company). QUES 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ? ANS 2. NBFCs are doing functions akin to that of banks, however there are a few differences: (i) a NBFC cannot accept demand deposits; (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks. QUES-3. Is it necessary that every NBFC should be registered with RBI? ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934. However, to obviate dual regulation, certain category of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking...
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...CONTENTS Managing Director & CEO’s Letter to Shareholders Board of Directors Snap Shot of Key Financial Indicators : 2008-2012 Highlights Directors’ Report Management’s Discussion & Analysis Auditors’ Report Balance Sheet Profit and Loss Account Cash Flow Statement Schedules Forming Part of Balance Sheet Schedules Forming Part of Profit and Loss Account Significant Accounting Policies Notes to Accounts Auditors’ Certificate on Corporate Governance Corporate Governance Auditors’ Report on Consolidated Financial Statements Consolidated Financial Statements Disclosures under the New Capital Adequacy Framework (Basel II Guidelines) Bank’s Network : List of Centres 3 4 5 6 7 17 31 32 33 34 36 42 43 51 86 87 109 110 151 169 1 MANAGING DIRECTOR & CEO’S LETTER TO THE SHAREHOLDERS I am delighted to report that your Bank has delivered another year of consistent growth in business volumes, revenues and profits during a period of slower GDP growth, tight liquidity and relatively high interest rates. The Bank has built its business upon the trust of millions of customers who avail of its products and services through a distribution network of 1,622 branches and 9,924 ATMs spread across 1,050 centres in the country. The retail deposit base continues to be the cornerstone of the growth strategy of the Bank and it has performed well in a challenging environment, reflecting the quality of our customer franchise. I am also happy to report that the Bank’s assets are healthy and growing...
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...CONTENTS Managing Director & CEO’s Letter to Shareholders Board of Directors Snap Shot of Key Financial Indicators : 2009-2013 Highlights Directors’ Report Management’s Discussion & Analysis Auditors’ Report Balance Sheet Profit and Loss Account Cash Flow Statement Schedules Forming Part of Balance Sheet Schedules Forming Part of Profit and Loss Account Significant Accounting Policies Notes to Accounts Auditors’ Certificate on Corporate Governance Corporate Governance Auditors’ Report on Consolidated Financial Statements Consolidated Financial Statements Business Responsibility Report Disclosures under the New Capital Adequacy Framework (Basel II Guidelines) Bank’s Network : List of Centres 3 4 5 6 7 16 29 31 32 33 35 41 42 50 88 89 111 112 155 167 185 1 MANAGING DIRECTOR & CEO’S LETTER TO THE SHAREHOLDERS It has been a challenging environment but despite the slowing momentum of growth in the economy, your Bank has reported another consistent performance - reflected in a steady growth of our customer base, widening reach through multiple channels, healthy growth of business and revenues and stable asset quality. It is also an affirmation of the Bank’s focus on a balanced growth strategy. The Bank’s retail businesses grew steadily during the year and there was credible growth of both retail deposits and loans, supported by an expanding network that is critical to the retail franchise. We added 325 branches and 1,321 ATMs in FY 2012-13. Your Bank continues to balance growth...
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...A Summer Training Project Report on “RISK MANAGEMENT BY INDUSIND BANK LTD.” Undertaken at INDUSIND BANK, AGRA 10th April to 10th June 2009 Submitted by SUBODH AGARWAL Enrollment no. : 4108163163 Management of Business Finance INDIAN INSTITUE OF FINANCE CORPORATE GUIDE: MR. ASHOK SHARMA ASST. MANAGER AGRA BRANCH, AGRA UTTAR PRADESH. ACKNOWLEDGEMENT Expressing gratitude is not just an exercise of formality rather doing so evokes the memories of my association with my mentors and mates. I thank Chairman Prof. J. D. Agarwal and Director Aman Agarwal for allowing me to carry out this project. I wish to express my sincere gratitude to my corporate guide, Mr. Ashok Sharma for guiding me to understand the concepts those were not clear to me. I learnt a lot from his professional sknowledge. SUBODH AGARWAL 4108163163 Management of Business Finance Preface As a part of Management of Business Finance (MBF) programme, a student has to pursue a project duly approved by the Director of the Indian Institute of Finance. I had the privilege of undertaking a project on “Risk Management by INDUSIND BANK LTD.” My project report is divided into seven chapters and they are given as under: Chapter 1 INTRODUCTION Chapter 2 Review of literature Chapter 3 Research Methodology Chapter 4 Analysis Chapter 5 Consist of Findings, Conclusion, Suggestions, Limitations SIGNATURE: Name: SUBODH AGARWAL Enrollment No.: 41O8163163 Management of Business Finance CERTIFICATE This...
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