ASSET AND LIABILITY MANAGEMENT OF SBI

PRESENTED BY:SUBRATA PAUL ROBIN SARMA AKHILESH KARN TRIDIP DUTTA DEBAJIT KASHYAP RATNADIP SUMAN BORA DHRUBA JYOTI DAS PALLAV BORA BIRAJ Ch. KALITA

A BRIEF INTRODUCTION ABOUT SBI

The SBI is the country's oldest bank and a premier in terms of balance sheet size ,number of branches, market capitalization and profit.
The origin of SBI was from IMPERIAL BANK OF INDIA(amalgamation of Bank of Bengal, Bank of Bombay & Bank of Chennai) in the year 1955 of 1st July. The SBI is the India's largest public sector bank, which is the number 1 position in the banking industry and is the 4th largest PSU in India.

It is the only Indian bank to feature in the Fortune 500 lists.

The name of the chairman of SBI is Mr Pratip Chaudhuri & the entire team consists of three MDs and the ten directors.

WHAT IS ALM? (ASSET LIABILITY MANAGEMENT)

It is a process of adjusting bank liability to meet loan demands, the liquidity needs and safety requirement . OR
It is a dynamic process of Planning, Organizing & Controlling of Assets & Liabilities- their volumes, mixes, maturities, yields and costs in order to maintain liquidity .

Asset Liability Management of SBI Asset Management How Liquid are the assets of the Bank
Liability Management How easily can the Bank generate loans from market

Components of a Bank Balance sheet

Liabilities
1. 2. 3. 4. 5. Capital Reserve & Surplus Deposits Borrowings Other Liabilities

Assets
1. Cash & Balances with RBI 2. Bal. With Banks & Money at Call and Short Notices 3. Investments 4. Advances 5. Fixed Assets 6. Other Assets

What are Banking Assets

1.Cash & Bank Balances with RBI I. Cash in hand (including foreign currency notes) II.Balances with Reserve Bank of India

2. BALANCES WITH BANKS AND MONEY AT

CALL & SHORT NOTICE
I. In India i) Balances with Banks a) In Current Accounts b) In Other Deposit Accounts ii) Money at Call and Short Notice a) With Banks b) With Other Institutions II. Outside India a) In Current Accounts b) In Other Deposit Accounts c) Money at Call & Short Notice

3. Investments
It includes:
I. Investments in India (i) Government Securities (ii) Other approved Securities
(iii) Shares (iv) Debentures and Bonds ( v) Subsidiaries and Sponsored Institutions ( vi) Others (UTI Shares , Commercial Papers, COD & Mutual Fund Units etc.) 2. Investments outside India in Subsidiaries and/or Associates abroad

4. Advances
The most important assets for a bank. i) Bills Purchased and Discounted ii) Cash Credits, Overdrafts & Loans repayable on demand iii) Term Loans

5. Fixed Asset
I. II. Premises Other Fixed Assets (Including furniture and fixtures)

6. Other Assets I. Interest accrued II. Tax paid in advance/tax deducted at source (Net of Provisions) III. Stationery and Stamps

Liabilities of Bank
1. Capital:

Capital represents owners contribution/stake in the bank.

- It serves as a cushion for depositors and creditors. - It is considered to be a long term sources for the bank.

2. Reserves & Surplus

Components under this head includes: I. Statutory Reserves II. Capital Reserves III. Investment Fluctuation Reserve IV. Revenue and Other Reserves V. Balance in Profit and Loss Account

3. Deposits This is the main source of banks funds. The deposits are classified as deposits payable on demand and time. They are reflected in balance sheet as under: I. Demand Deposits II. Savings Bank Deposits III. Term Deposits

4. Borrowings (Borrowings include Refinance / Borrowings from RBI, Inter-bank & other institutions) I. Borrowings in India i) Reserve Bank of India ii) Other Banks iii) Other Institutions & Agencies II. Borrowings outside India

5. Other Liabilities & Provisions It is grouped as under: 1. 2. 3. 4. Bills Payable Interest Accrued Unsecured Redeemable Bonds (Subordinated Debt for Tier-II Capital) Others(including provisions)

Aim & Objective of ALM

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.

It is aimed to stabilize short-term profits, longterm earnings and long-term substance of the bank.

SIGNIFICANCE OF ALM OF SBI

Volatility. Product Innovations & Complexities. Regulatory Environment. Management Recognition.

NEED FOR ALM

Thrust to expand banking. Integration of Indian banking to the world. Changes in the global scene.

About ALM
ALM is an integral part of the financial management process of any bank. ALM is concerned with strategic balance sheet management involving risks caused by changes in the interest rates, exchange rates and the liquidity position of the bank. While managing these three risks forms the crux of ALM, credit risk and contingency risk also form a part of the ALM . Cont

 ALM can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management

The stages of ALM

The ALM stages rests on Three Pillars: 1. ALM Information Systems 2.ALM Organization 3.ALM Process

ALM INFORMATION SYSTEM

Decision Support and Reporting Tool Comparison between different Branches Product Analysis Risk Planning and Management Flexible Design Strategic Planning of the Asset-Liability Mix

2. ALM ORGANISATION
ALM organization consists of staff members including CEO.

A Support Group of Operational Staff

Strong Commitment of Senior Management

ALM ORGANIZATIONAL STRUCTURE

Board of Directors

Management Committee Asset Liability Committee(ALCO) Asset Liability Management Cell Finance Planning Department Credit Analysis Credit risk Management INVESTMENT AND LOAN DEPARTMENT Treasury

Functions of ALCO
ALCO develops ,implements and manages banks annual budget for profit plan and risk management programme. Timely, accurate data and analysis is a must for ALCOSS success.

ALM PROCESS OF SBI

ALM involves: Quantification of risks. Conscious decision making with regard to asset liability structure in order to maximise interest earnings with in the frame work of perceive risks.

Implementation of Asset /Liability management

Organizing a Planning team. Developing a strategic plan. Establishing Asset/Liability committee. Developing an annual budget or profit plan. Developing a process for reviewing performance

Developing Strategic plan

It comprises the following: Initiate Planning Process. Assign responsibility for developing overall plan. Review the component and recommend actions to board of directors.

SUCCESS OF ALM
The success of ALM depends on the following: 1. Awareness for ALM in the Bank staff at all levelssupportive Management & dedicated Teams. 2. Method of reporting data from Branches/ other Departments. (Strong MIS). 3. Computerization-Full computerization, networking. 4. Insight into the banking operations, economic forecasting, computerization, investment, credit. 5. Linking up ALM to future Risk Management Strategies.

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