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

FLOW OF PRESENTATION
INDUSTRY OVERVIEW BANK OVERVIEW INTRODUCTION TO THE TOPIC RESEARCH METHODOLOGY

DATA ANALYSIS & INTERPRETATION

FINDINGS & SUGGESTIONS CONCLUSION

INDUSRY OVERVIEW
The word Bank & Banking History of Banking in India Nationalisation of Banks in India Present structure of Indian Banks
Reserve Bank of India
Public Banks Private Banks Foreign Banks Development Banks

Key Player in Indian Banking Sector

INDIAN BANKING SCENARIO

BRANCH NETWORK AND EXPANSION

Rural SBI Associates Nationalised 306 & 355

Semi- Urban 394

Urban 339

Metropolitan 161

Total 1249

699

762

587

2354

Banks
Private Banks Foreign Banks RRB 97 1 96 395 2 68 328 8 63 343 4 14 1163 15 241

Total Credit And Deposits Businesses In India

BANK OVERVIEW
Type Established Key people Urban Co-operative Bank 15th December, 1970 Dr. Mahendrabhai H. Patel, Chairmen

Mr. D. D. Patel, Managing Director

Mr. R.K. Vyas, C.E.O. Believes in Products & Services Leadership through Customer Care Deposits C.B.S Locker Facility Loans/Advances ATM Facility RTGS/NEFT

(As on 31st March, 2012)

Deposits Revenue INR 168.70 cr INR 1.78 cr Loans Total Assets INR 87.81 cr INR 222.87 cr

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.

RESEARCH METHODOLOGY(CONTD)
DATA COLLECTION :
Secondary Data:

Database at UCB

Circulars of UCB
Books & Journals

Websites

RESEARCH METHODOLOGY(CONTD)
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.

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 Systems 2. ALM Organization (ALCO) 3. ALM Process

Risks
Liquidity Risk Interest Rate Risk Foreign Exchange Risk Credit Risk Contingency Risk

Techniques
Gap Analysis Duration Gap Analysis Simulation Value at Risk

Assets-Liabilities Management
Liabilities- Repayment outflows from the banks Capital Reserves & Surplus Deposits Borrowings Other liabilities Over 5 years bucket Over 5 years bucket Respective maturity buckets Respective maturity buckets & Respective maturity buckets

Balance Sheet of a Bank

Liabilities (Outflows) Capital

Assets (Inflows) Cash & Bank Balances

Reserves &

Investments

provisions Contingent liabilities Respective maturity buckets

Surplus
Deposits Borrowings Other Liabilities Contingent liabilities Advances Fixed Assets Other Assets

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 Advances Other assets Respective maturity buckets Respective maturity buckets Respective maturity buckets

Statement of Structural Liquidity

Eight Time Buckets T-1 To T-8

Interest Rate Risk Management

Maturity Profile of IRR Into 7 Buckets

1 to 14 days 15 to 28 days 29 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 years Over 3 years and up to 5 years Over 5 years

Up to 3 months Over 3months and up to 6 months Over 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 years Non-sensitive

GAP = Total Rate Sensitive Assets Total Rate Sensitive Liabilities Positive GAP Negative GAP Zero GAP ( RSA > RSL ) ( RSL > RSA ) (RSL=RSA)

Liquidity Risk Profile of a Bank

Structural liquidity statement:
Particulars Total Outflows Total Inflows Gap Cumulative Gap
(Rs in crore)

1D-14D 15D-28D 29D-3M 3M-6M 6M-1Y 1Y-3Y 3Y-5Y 28.01 16.13 -11.88 1.52 5.64 4.12 7.15 17.91 10.76 7.87 40.53 32.66 10.69 36.24 25.55 123.25 36.54 3.22 9.46

5Y+

Total

45.99 227.70 58.90 221.35 12.91 -6.35

-86.71 6.24

-11.88
-42.00 -20%

-7.76
271.00 -20%

3.00
150.00

35.66
415.00

61.21

-25.50 -19.26 -6.35

0.00
0.00

Gap % to Total
outflow Limit By RBI

239.00 -70.00 194.00 28.00

Banks are expected to place internal limits approved by their B.O.D.

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.

STRUCTURAL LIQUIDITY STATEMENT

Interest Rate Risk Profile of a Bank

Interest Rate Sensitivity
Particulars Total Liabilities Total Assets NET GAP Cumulative Gap E as % to B
Gap Position (RSA-RSL)
(Rs in crore)

Up to 3M 15.14 29.52 14.38 14.38 48.71

Changes in Int. Rates

3M-6M 76.30 40.53 -35.77 -21.39 -88.26

6M-1Y 10.69 36.24 25.55 4.16 70.50

1Y-3Y 46.20 36.54 -9.66 -5.50 -26.44

3Y-5Y 3.22 9.46 6.24 0.74 65.96

5Y+ ---50.51 50.51 51.25 100.0

Non sensitive 76.15 18.55 -57.60 -6.35 -310.51

Total 227.70 221.35 -6.35 0.00 -2.87

Changes in Int. Income(1)

Changes in Int. Paid(2)

Changes in Nll(1-2)

+ve +ve -ve -ve Zero Zero

Increases Decreases Increases Decreases Increases Decreases

Increases Decreases Increases Decreases Increases Decreases

> > < < = =

Increases Decreases Increases Decreases Increases Decreases

Increases Decreases Decreases Increases Neutral Neutral

Profitability Analysis of The Union Co-Operative Bank Ltd.

(Rs in crore)

Learning
PRODUCTS

Saving Deposits Fixed Deposits Kamdhenu Deposit

Current Deposits Recurring Deposits

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

Up to Rs. 2 lac Rs. 2 lac to Rs. 5 lac Above Rs. 5 lac

CREDIT/ADVANCES

Rs. 5 per transaction Rs. 15 per transaction Rs. 25 per transaction

Rs. 10 per transaction Rs. 30 per transaction Rs. 55 per transaction.

CREDIT APPRAISAL STANDARDS

Personal Loan Machinery Loan Cash Credit

Housing Loan Debt Equity Ratio Vehicle Loan Average DSCR Loan against Govt. security

2.33 : 1 1.5 to 2

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.

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.