Asset Liability Management in Banks: A Comparative Study of Selected Public and Private Sector India

With the onset of liberalization, Indian banks are presently more vulnerable to ambiguity and to international competition. This creates it subservient to have appropriate asset liability management system in place. Some banks are closed down due to mis- management of assets with liabilities, bad non-performing assets loss due to fluctuating interest rates, poor investment portfolio and many others. Various parameters related to asset, liability, loan, deposit, capital adequacy, liquidity which are having relevance to the sustenance of the banks are studied deeply with asset liability management as the background for 10 years for 10 private sector and 10 public sector banks. ABOUT THE AUTHORS Dr. Shikha Agarwal has obtained her master degree in Management (Finance) in 2004 from North Gujarat University, B.Ed. from MDU, Rohtak and completed PhD rom Jagan Nath University, Bahadurgarh, Delhi. She has more than ten years of teaching experience mostly to post graduate students and corporate employees. Presently, she is working with IIHS, Ghaziabad, as an Assistant Professor. Dr. Sushil Kumar, has obtained his master degree in Management (Finance) in 2005 from Guru Jambheshwer University of Science and Technology, Hisar, and Ph.D. in Management in 2018 from Chaudhary Devi Lal University, Sirsa. He has several years of teaching and more than seven years of corporate experience in banking and financial services. Presently, he is working with Jagannath University, Haryana, as an Associate Professor.

The Indian banking sector has undergone significant transformation with the onset of liberalization, globalization, and increasing international competition. These developments have created new opportunities for growth while simultaneously exposing banks to greater financial risks and uncertainties. In such an environment, an effective Asset Liability Management (ALM) system has become essential for maintaining the financial stability, liquidity, profitability, and long-term sustainability of banking institutions.

This book provides a comprehensive study of Asset Liability Management in the Indian banking sector, focusing on the comparative performance of 10 private sector banks and 10 public sector banks over a period of ten years. It examines the various financial parameters that influence the sustainability and performance of banks, with ALM serving as the central framework of analysis.

The study highlights the importance of effectively managing the relationship between a bank's assets and liabilities. Poor management of this relationship can expose banks to several risks, including liquidity risk, interest rate risk, credit risk, and market-related uncertainties. The book draws attention to instances where inappropriate asset-liability management, increasing non-performing assets (NPAs), fluctuating interest rates, weak investment portfolios, and other financial challenges have adversely affected banking institutions.

Several key parameters relating to assets, liabilities, loans, deposits, capital adequacy, liquidity, and investment management are examined in depth. Through the analysis of these indicators, the book seeks to understand the financial position and operational efficiency of public and private sector banks and to identify the significance of sound ALM practices in strengthening their financial performance.

The comparative approach adopted in the study provides valuable insights into the functioning of different categories of banks within the Indian financial system. By examining data over a ten-year period, the research offers a broader perspective on changes and trends in banking performance rather than relying on short-term observations. It also demonstrates how effective management of assets and liabilities can help banks respond to changing economic conditions, maintain adequate liquidity, manage interest rate fluctuations, and improve overall financial stability.

The book is particularly relevant in the context of an increasingly competitive banking environment, where institutions must balance profitability with financial safety. Sound Asset Liability Management enables banks to make informed decisions regarding lending, deposits, investments, liquidity management, and capital requirements. It can also contribute to better risk management and help banking institutions withstand financial pressures arising from changes in the economic and regulatory environment.

Overall, this book offers a systematic examination of Asset Liability Management and its relevance to the Indian banking sector. It will be useful for researchers, academicians, banking professionals, financial analysts, management students, policymakers, and anyone interested in banking and financial management. By bringing together a decade-long comparative analysis of public and private sector banks, the book provides meaningful insights into the challenges of banking operations and the importance of maintaining an appropriate balance between assets and liabilities for sustainable financial growth.

About the Authors

Dr. Shikha Agarwal holds a Master's degree in Management (Finance) from North Gujarat University, a B.Ed. from MDU, Rohtak, and a Ph.D. from Jagan Nath University, Bahadurgarh, Delhi. She has more than ten years of teaching experience, primarily with postgraduate students and corporate employees. She is presently working as an Assistant Professor at IIHS, Ghaziabad.

Dr. Sushil Kumar holds a Master's degree in Management (Finance) from Guru Jambheshwar University of Science and Technology, Hisar, and a Ph.D. in Management from Chaudhary Devi Lal University, Sirsa. He has several years of teaching experience along with more than seven years of corporate experience in banking and financial services. He is presently working as an Associate Professor at Jagannath University, Haryana.