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ASSETS & LIABILITIES MANAGEMENT

AT

THE UNION CO-OPERATIVE BANK LTD.

SUBMITTED BY

Mihir M. Vora

Enroll. No: 117320592033

L.D.R.P. INSTITUTE OF TECHNOLOGY & RESEARCH


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FLOW OF PRESENTATION

INDUSTRY OVERVIEW

BANK OVERVIEW

INTRODUCTION TO THE TOPIC

RESEARCH METHODOLOGY

DATA ANALYSIS & INTERPRETATION

FINDINGS & SUGGESTIONS

CONCLUSION


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INDUSRY OVERVIEW

The word Bank & Banking

History of Banking in India

Nationalisation of Banks in India

Present structure of Indian BanksReserve Bank of India

Public Banks Private Banks

Foreign Banks

Development Banks

Key Player in Indian Banking Sector


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INDIAN BANKING SCENARIO

BRANCH NETWORK AND EXPANSION

Rural Semi- Urban Urban Metropolitan TotalSBI &

Associates

355 394 339 161 1249

Nationalised

Banks

306

699

762

587

2354

Private Banks 97 395 328 343 1163

Foreign Banks 1 2 8 4 15

RRB

96

68

63

14

241


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Total Credit And Deposits Businesses In India


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BANK OVERVIEWType Urban Co-operative Bank

Established 15th

December, 1970

Key people Dr. Mahendrabhai H. Patel, Chairmen

Mr. D. D. Patel, Managing Director

Mr. R.K. Vyas, C.E.O.

Believes in Leadership through Customer Care

Products & Services Deposits Loans/Advances

C.B.S ATM Facility

Locker Facility RTGS/NEFT

(As on 31st March, 2012)

Deposits INR 168.70 cr Loans INR 87.81 cr

Revenue INR 1.78 cr Total Assets INR 222.87 cr


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RESEARCH METHODOLOGY

PROBLEM STATEMENT: Analyze and evaluate ALM techniques and strategies

followed by The Union Co-operative Bank Ltd.

OBJECTIVES:

To study the reasons for Asset and Liability

mismatches

To give an overview Indian Banking Industry.

Aim is to stabilize the short-term profits, long-term

earnings and long-term substance of the bank.


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DATA COLLECTION :

Secondary Data:

Database at UCB

Circulars of UCB

Books & Journals

Websites

RESEARCH METHODOLOGY(CONTD)


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LIMITATION OF THE STUDY:

Due to the constraint, limited study on the project has

been done. Access to data (ALM data in detail is not available)

As the Assets & Liabilities Management is one of the

crucial areas for any bank, some of the technicalities

are not revealed which may cause destruction to the

information.

RESEARCH METHODOLOGY(CONTD)


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WHAT IS ALM?

An attempt to match:

Assets and Liabilities

In terms of:

Maturities and Interest Rates Sensitivities

To minimize:Interest Rate Risk and Liquidity Risk

The ALM process rests on Three Pillars:

1. ALM Information Systems2. ALM Organization (ALCO)

3. ALM Process


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Risks Liquidity Risk

Interest Rate Risk

Foreign Exchange Risk

Credit Risk

Contingency Risk

Techniques

Gap Analysis

Duration Gap Analysis

Simulation

Value at Risk


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Assets-Liabilities Management

Liabilities

(Outflows)Assets

(Inflows)Capital Cash & Bank

BalancesReserves &

SurplusInvestments

Deposits AdvancesBorrowings Fixed AssetsOther

LiabilitiesOther Assets

Contingent liabilities

Assets- Repayment inflows into the banks

Cash 1-14 days buckets

Bank balance Excess balance over required CRR

SLR shown under 1-14 days buckets

Investments Respective maturity buckets

Advances Respective maturity buckets

Other assets Respective maturity buckets

Liabilities- Repayment outflows from the banks

Capital Over 5 years bucket

Reserves & Surplus Over 5 years bucket

Deposits Respective maturity buckets

Borrowings Respective maturity buckets

Other liabilities &

provisions

Respective maturity buckets

Contingent liabilities Respective maturity buckets

Balance Sheet of a Bank


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1 to 14 days

15 to 28 days29 to 3 months

Over 3 months and up to 6 months

Over 6 months and up to 1 year

Over 1 year and up to 3 yearsOver 3 years and up to 5 years

Over 5 years

Statement of Structural LiquidityEight Time Buckets T-1 To T-8

Up to 3 months

Over 3months and up to 6 monthsOver 6 months and up to 1 year

Over 1 year and up to 3 years

Over 3 years and up to 5 years

Over 5 yearsNon-sensitive

Interest Rate Risk ManagementMaturity Profile of IRR Into 7 Buckets

GAP = Total Rate Sensitive AssetsTotal Rate Sensitive Liabilities

Positive GAP ( RSA > RSL )

Negative GAP ( RSL > RSA )

Zero GAP (RSL=RSA)


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Liquidity Risk Profile of a Bank(Rs in crore)

Particulars 1D-14D 15D-28D 29D-3M 3M-6M 6M-1Y 1Y-3Y 3Y-5Y 5Y+ TotalTotal Outflows 28.01 1.52 7.15 7.87 10.69 123.25 3.22 45.99 227.70Total Inflows 16.13 5.64 17.91 40.53 36.24 36.54 9.46 58.90 221.35Gap -11.88 4.12 10.76 32.66 25.55 -86.71 6.24 12.91 -6.35Cumulative Gap -11.88 -7.76 3.00 35.66 61.21 -25.50 -19.26 -6.35 0.00Gap % to Total

outflow -42.00 271.00 150.00 415.00 239.00 -70.00 194.00 28.00 0.00Limit By RBI -20% -20% Banks are expected to place internal limits approved by

their B.O.D.

Structural liquidity statement:

STRATEGY

The bank can raise fresh deposits of Rs 61.21 crore over 6 month to 1 years

maturities and invest it in securities of 1-29 days of Rs 19.64 crore and rest

matching with other out flows.


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STRUCTURAL LIQUIDITY STATEMENT


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Particulars Up to 3M 3M-6M 6M-1Y 1Y-3Y 3Y-5Y 5Y+ Nonsensitive Total

Total Liabilities 15.14 76.30 10.69 46.20 3.22 ---- 76.15 227.70

Total Assets 29.52 40.53 36.24 36.54 9.46 50.51 18.55 221.35

NET GAP 14.38 -35.77 25.55 -9.66 6.24 50.51 -57.60 -6.35Cumulative Gap

14.38

-21.39

4.16

-5.50

0.74

51.25

-6.35

0.00

E as % to B 48.71 -88.26 70.50 -26.44 65.96 100.0 -310.51 -2.87

Interest Rate Risk Profile of a BankInterest Rate Sensitivity (Rs in crore)

Gap Position

(RSA-RSL)

Changes in

Int. Rates

Changes in

Int. Income(1)

Changes in

Int. Paid(2)

Changes in

Nll(1-2)

+ve Increases Increases > Increases Increases

+ve Decreases Decreases > Decreases Decreases

-ve Increases Increases < Increases Decreases

-ve Decreases Decreases < Decreases Increases

Zero Increases Increases = Increases Neutral

Zero Decreases Decreases = Decreases Neutral

P fit bilit A l i f


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Profitability Analysis of

The Union Co-Operative Bank Ltd.

(Rs in crore)


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LearningPRODUCTS

Saving Deposits Current DepositsFixed Deposits Recurring Deposits

Kamdhenu Deposit

Deposit Insurance & Credit Guarantee Corporation of India Ltd. (D.I.C.G.C.)

RTGS / NEFT

Up to Rs. 2 lac Rs. 5 per transaction Rs. 10 per transaction

Rs. 2 lac to Rs. 5 lac Rs. 15 per transaction Rs. 30 per transaction

Above Rs. 5 lac Rs. 25 per transaction Rs. 55 per transaction.

CREDIT/ADVANCES CREDIT APPRAISAL STANDARDS

Personal Loan Housing Loan Debt Equity Ratio 2.33 : 1

Machinery Loan Vehicle Loan Average DSCR 1.5 to 2

Cash Credit Loan against Govt. security


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FINDINGS

Gap Model and Duration Model are used.

The Assets & Liabilities Management committee (ALCO)

By the use of ALM, the financial position of bank and employee benefits becomes

more transparent.

Strategies are not properly developed.

SUGGESTIONS

Simulation model and value at risk model

Co-ordinate with one of the many consultancy firms

Introduce various deposits products & services for customer

Advertisement is considered as the major aspect in overall business of any

organization.


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Conclusion

Assets & Liabilities Management is the core activity of

any bank and important parameter for managing various

risks associated with ALM.

A bankers task is to indentify/assess the risk

factors/parameters & manage them on continuous basis.

Maturity Assets & Liabilities.

Financial position of bank and employee benefits.


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