Asset-Liability Management in the Indian Commercial Banks

Asset-Liability Management (ALM) is a comprehensive and dynamic framework for measuring, monitoring and managing the market risk of a bank. All transactions of the banks revolve around to raise and to deploy the funds, ALM gains more significance as an initiative towards the risk management practices by the Indian banks. ALM helps in proper planning, directing, controlling the flow, level, mix and rates on the assets and liabilities can be made with the changing scenarios. However, in the Indian context, the banking industry did not feel the importance of the ALM system till the interest rate was regulated by RBI. But with the globalization and liberalization of the Indian economy and deregulation of interest rate and increase in competition in the financial market, the Indian banking industry is now realizing the importance of the ALM function. The present study attempts to evaluate the changing perspectives of the banks in identifying and facing the risks and maintaining Asset Quality so as to ensure profitability with the help of ALM techniques. It also tries to assess the effectiveness of Asset Liability Management as a strategy vital to the progress and development of the Indian banking sector in particular and the economy in general.