Recent concerns about asset-liability mismatches have been proactively addressed through liquidity provisions by the Reserve Bank, the regulator said.
However, the present study has had a few demerits also because the study data was secondary in nature, and it included only select private banks and not public and foreign banks. We have no references for this item.
According to the central bank, a study suggests that NBFCs operate a passive strategy for managing asset-liability mismatches by covering gaps in the wholesale funding markets, rendering them vulnerable to liquidity risks.
But they have used structural liquidity report for calculating interest rate risk; there is a huge difference between these two reports. It also reveals that derivative users as a group have lower mean and median exposure than non-users, and derivative usage reduces exposure.
The traditional ALM programs focus on interest rate risk and liquidity risk because they represent the most prominent risks affecting the organization balance-sheet as they require coordination between assets and liabilities. For example, the assets and liabilities for private banks for year have been reclassified and presented in Tables 1 and 2.
To the extent that cash-flow assets and liabilities are denominated in different currencies. ALM intervenes in these issues of current business activities but is also consulted to organic development and external acquisition to analyse and validate the funding terms options, conditions of the projects and any risks i.