Asset Liability Management

Presented by,
BINEESH BABU
S4 MBA

Components of a
Bank Balance sheet
Liabilities

Assets

1.
2.
3.
4.
5.

1.

Capital
Reserve & Surplus
Deposits
Borrowings
Other Liabilities

2.
3.
4.
5.
6.

Cash & Balances with

RBI
Bal. With Banks &
Money at Call and
Short Notices
Investments
Advances
Fixed Assets
Other Assets

Contingent Liabilities

Components of Liabilities
1.Capital:

Capital
represents
owners
contribution/stake in the bank.
-. It serves as a cushion for depositors and
creditors.
-. It is considered to be a long term sources
for the bank.

Components of Liabilities
2. Reserves & Surplus
Components under this head includes:

I.
II.
III.
IV.
V.

Statutory Reserves
Capital Reserves
Investment Fluctuation Reserve
Revenue and Other Reserves
Balance in Profit and Loss Account

Components of Liabilities
3. Deposits
This is the main source of banks funds. The
deposits are classified as deposits payable on
demand and time. They are reflected in
balance sheet as under:
I.
Demand Deposits
II. Savings Bank Deposits
III. Term Deposits

Components of Liabilities
4. Borrowings
(Borrowings
include
Refinance
/
Borrowings from RBI, Inter-bank & other
institutions)
I. Borrowings in India
i) Reserve Bank of India
ii) Other Banks
iii) Other Institutions & Agencies
II. Borrowings outside India

Components of Liabilities
5. Other Liabilities & Provisions

It is grouped as under:
I.
II.
III.
IV.

Bills Payable
Inter Office Adjustments (Net)
Interest Accrued
Unsecured Redeemable Bonds
(Subordinated Debt for Tier-II Capital)
V. Others(including provisions)

Components of Assets
1. Cash & Bank Balances with

RBI
I. Cash in hand
(including foreign currency notes)
II. Balances with Reserve Bank of India
In Current Accounts
In Other Accounts

Components of Assets
2. BALANCES WITH BANKS AND MONEY AT
CALL & SHORT NOTICE
I. In India
i) Balances with Banks
a) In Current Accounts
b) In Other Deposit Accounts
ii) Money at Call and Short Notice
a) With Banks
b) With Other Institutions
II. Outside India
a) In Current Accounts
b) In Other Deposit Accounts
c) Money at Call & Short Notice

Components of Assets
3. Investments

A major asset item in the banks balance sheet.

Reflected under 6 buckets as under:
I. Investments in India in : *
i) Government Securities
ii) Other approved Securities
iii) Shares
iv) Debentures and Bonds
v) Subsidiaries and Sponsored Institutions
vi) Others (UTI Shares , Commercial Papers, COD &
Mutual Fund Units etc.)
II. Investments outside India in **
Subsidiaries and/or Associates abroad

Components of Assets
4. Advances
The most important assets for a bank.
A. i) Bills Purchased and Discounted
ii) Cash Credits, Overdrafts & Loans
repayable on demand
iii) Term Loans
B. Particulars of Advances :
i) Secured by tangible assets
(including advances against Book Debts)
ii) Covered by Bank/ Government Guarantees
iii) Unsecured

Components of Assets
5. Fixed Asset
I.

Premises

II.

Other Fixed Assets (Including furniture and fixtures)

6. Other Assets
I. Interest accrued
II. Tax paid in advance/tax deducted at source
(Net of Provisions)
III. Stationery and Stamps
IV. Non-banking assets acquired in satisfaction of claims
V. Deferred Tax Asset (Net)
VI. Others

Contingent Liability
Banks obligations under LCs, Guarantees,
Acceptances on behalf of constituents and
Bills accepted by the bank are reflected under
this heads.

Banks Profit & Loss

Account
I.

II.

A banks profit & Loss Account has the

following components:
Income: This includes Interest Income and
Other Income.
Expenses: This includes Interest Expended,
Operating Expenses and Provisions &
contingencies.

Components of Income
1. INTEREST EARNED
I.
II.
III.

Interest/Discount on Advances / Bills

Income on Investments
Interest on balances with Reserve Bank
of India and other inter-bank funds
IV. Others

Components of Income
2. OTHER INCOME
I. Commission, Exchange and Brokerage
II.
Profit on sale of Investments (Net)
III. Profit/(Loss) on Revaluation of Investments
IV. Profit on sale of land, buildings and other
assets (Net)
V. Profit on exchange transactions (Net)
VI. Income earned by way of dividends etc. from
subsidiaries and Associates abroad/in India
VII. Miscellaneous Income

Components of Expenses
1. INTEREST EXPENDED
I.
II.
III.

Interest on Deposits
Interest on Reserve Bank of India / Inter-Bank
borrowings
Others

Components of Expenses
2. OPERATING EXPENSES
I. Payments to and Provisions for employees
II.
Rent, Taxes and Lighting
III.
Printing and Stationery
IV.
Advertisement and Publicity
V.
Depreciation on Bank's property
VI.
Directors' Fees, Allowances and Expenses
VII. Auditors' Fees and Expenses (including Branch Auditors)
VIII. Law Charges
IX. Postages, Telegrams, Telephones etc.
X. Repairs and Maintenance
XI.
Insurance
XII. Other Expenditure

Assets Liability
Management
It is a dynamic process of Planning,
Organizing & Controlling of Assets
& Liabilities- their volumes, mixes,
maturities, yields and costs in order
to maintain liquidity and NII.

Significance of ALM
Volatility
Product Innovations & Complexities
Regulatory Environment
Management Recognition

THANK YOU