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aB a


Presented By:
Pratik Rawat
Nandkumar Khengate
Anish Prabhu
Pratheesh Kumaran
Pranav Joshi
  


0 `

ercial Banks are those banks which performs

all kinds of banking functions such as:
a) Accepting Deposits,
b) Advancing Loans,
c) Credit Creation &
d) Agency Functions
0 Ôhese banks collect money from those who have it
to spare or who are saving it out of their incomes,
and it lends this money to those who require it for
the purpose of making profit.
  
 


`apital and iabilities
è) Capital
i) Authorized Capital
ii) Issued Capital
iii) Subscribed Capital
iv) Called-up Capital
v) Paid-up Capital
2) Reserve Fund and other reserves
3) Deposits and other accounts
4) Borrowing from other banks
5) Bills for collection being bills
receivables
6) Acceptances, endorsements and other
obligations as per contra
Pr perty and assets
è) Cash in hand and with Central Bank
2) Balance with other banks
3) Money at call and short notice
4) Bills Discounted
5) Investments
6) Advances
7) Bills for collection being bills
receivables as per contra
8) Acceptances, endorsements and other
obligations as per contra
9) Fixed Assets


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0 asset iability Manage
ent is the ongoing
process of formulating, implementing,
monitoring and revising strategies related to
assets and liabilities in an attempt to achieve
financial objectives for a given set of risk
tolerances and constraints.
0 ALM is the èst Step in the long term strategic
planning process. Ôherefore, it can be considered
as a planning function for an intermediate term.
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ALM focuses on following 4 challenges:
è) Understanding the risk that a bank is exposed to due to
the composition of its assets and liabilities.
2) Forecast the future composition of the bank͛s balance
sheet and its risk exposure.
3) Determine and attribute interest-related profits to
individual assets and liabilities, business units or
activities through Funds Ôransfer Pricing.
4) Forecast capital requirements and manage the balance
sheet in a way to maximize shareholder value.

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tep 1:
Ôhe bank/financial statements and
internal management reports
should be reviewed to assess the
asset/liability mix.
tep 2:
It is to be determined that whether
bank management adequately
assesses and plans its liquidity needs
and whether the bank has short-term
sources of funds.
è) Ôotal liq͛ty Position
2) Current liq͛ty Position
3) Ratio of NPA to ÔA
4) Ratio of loans to
deposits
5) Ratio of short term
demand deposits to
total deposits
è) Review of int. mgmt
reports
2) Assessing the bank͛s
ability to meet liquidity
needs

tep 3:
Ôhe banks future development and
expansion plans, with focus on
funding and liquidity management
aspects has to be looked into.

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tep 4:
½xamining the bank͛s internal
audit report in regards to quality
and effectiveness in terms of
liquidity management.

tep 5:
Reviewing the bank͛s plans of
satisfying unanticipated liquidity
needs.

tep 6:
Preparing an Asset/Liability
Management Internal Control
Questionnaire.


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1) iquidity Manage
ent:
Liquidity
0è) An Management
organisation has sufficient liquidity when it
2) can obtain
Asset sufficient funds either by increasing
Management
liabilities or by converting assets promptly & at a
3) reasonable
Liability Management
cost.
0 Liquidity is essential in all org. to compensate for
expected & unexpected balance sheet
fluctuations and to provide funds for growth.
0 Sound liquidity risk mgmt. should address both
internal and external factors.


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2) asset Manage
ent:
0 Liquid Assets enable a bank to provide funds
to satisfy increased demand for loans.
0 Ôhe importance of asset management is to
determine how saleable the banks assets are
in terms of both time & cost.
0 Ôo maximize profitability, management must
carefully weigh the full return on liquid assets
against the higher return associated with less
liquid assets.


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3) iability Manage
ent:
0 Liability needs can be met through the
discretionary acquisition of funds on the basis
of interest rate competition.
0 Marginal cost of liquidity & the cost of
incremental funds acquired are of paramount
importance in evaluating liability sources of
liquidity.