Roadmap for ALM (Asset Liability Management)

Solution

TABLE OF CONTENTS
1. Introduction......................................................................................................................3
1.1
Analytical Tools.......................................................................................................3
1.2 Derived Cash flows from Simulation Manager.............................................................3
2
ALM solution First Release.......................................................................................4
3.1
Scope........................................................................................................................4
2..1
Enhancement of Functional Analysis for Structural
Liquidity.........................4
2.1.1.1 Behavioural Analysis / Studies for the purpose of Structural..........................4
2.1.1.2 Coverage Ratio Analysis..................................................................................6
2.1.1.3 Tolerance Analysis & Product Distribution.....................................................6
2.1.1.4 Static Liquidity Ratios.....................................................................................7
2.1.1.5 Cost To Close...................................................................................................7
2.1.1.6 Large Customer Ranking.................................................................................7
2.1.1.7 Net Demand and Time Liabilities (NDTL) Report..............................................7
2.1.1.8 Roll Over and Prepayment Analysis...............................................................8
2.1.2
Enhancement of Functional Analysis for Interest Rate Sensitivity.....................8
2.1.2.1 Weighted Average Yield & Weighted Average Cost Distribution....................9
2.1.2.2 Net Interest Income Analysis...........................................................................9
2.1.2.3 Tolerance Analysis & Product Distribution.....................................................9
2.1.2.4 Behavioral Analysis / Studies for the purpose of Interest Rate
Sensitivity
Statement of SB Account.................................................................................................9
2.1.2.5 Duration Gap Analysis and Report on Market Value of Equity....................10
2.1.2.6 Top IR Products.............................................................................................10
2.1.2.7 Break Even Rate(BER)..................................................................................10
2.1.2.8 Value at Risk (VaR).......................................................................................10
2.1.3
Scenario Analysis / Simulation Manager...........................................................11
2.1.3.1 Earning at Risk (EaR)....................................................................................11
2.1.3.2 Market Value Of Equity.................................................................................12
2.1.3.3 Contingency Funding Plan............................................................................12
2.1.3.4 Statement of Short Term Dynamic Liquidity and Back Testing....................12
2.1.3.5 Statement of Integrated Dynamic Liquidity and Projected Balance Sheet13
3
ALM Solution Second Release................................................................................13
3.1
Scope......................................................................................................................13
3.1.1
Inclusion of Interest Derivative Products and Option...................................13
3.1.2
Forecasting of Rate of Interest.......................................................................14
3.1.3
Volatility Calculator.......................................................................................14
3.1.4
Calculation of Fair Values of Financial Instruments.....................................15
4
ALM Solution Third Release...................................................................................15
4.1
Scope......................................................................................................................15
4.1.1
Integration of and Oracle Risk Manager ALM
Solution........15

1. Introduction
Primary objectives of

ALM solution is to

Provide analytical support to decision-makers

Automate tedious task of compiling ALM data received from various
business centers
Generate ALM reports

1.1

Analytical Tools

ALM solution will provide comprehensive set of analytical tools for Asset Liability
Management. Great emphasis will be given to graphical analysis with a drill
down facility.
Analytical tools provided by
categories,

ALM solution will be broadly based on following

Liquidity Risk Management

Interest Rate Risk Management
Net Interest Income (NII) and Net Interest Margin (NIM) Computation :
Earning at Risk Analysis (EaR)
Duration Gap Analysis
Value at Risk (VaR) analysis
Tolerance Analysis
Cost To Close Analysis
Comparative Analysis
1.2 Derived Cash flows from Simulation Manager

ALM solution will extend its analytical features provided for current cash flow
positions to a set of derived cash flows. Various types of derived cash flow
analysis will be supported through Simulation Manager wherein the set of user
defined scenarios will generate derived cash flows.
In this context the main objectives of the Roadmap for ALM solution are:
1. To enhance the Functional Product Features
2. To support the Pillar II implementation of Basel II from the perspective
of Interest rate Risk in the banking Book and Stress Testing.

ALM solution First Release

3.1 Scope
2.1

Enhancement
Liquidity

of

Functional

Analysis

for

Structural

Behavioural Analysis / Studies for the purpose of Structural

Liquidity Statement

1.1.2.1

The Structural Liquidity of the Bank is prepared on fortnightly basis

by taking into account various inflows and outflows in different time
buckets. Since, the Saving Bank & Current
Deposits are
perpetual / Non Fixed maturity products and dont have any
periodic cash flows, Bank has to make the behavioural analysis of
the perpetual products so as to find core and volatile portion that
will be placed in various time buckets of the Structural Liquidity
Statement. Other perpetual / Non Fixed maturity products are
Cash Credit, Over Draft, Demand Loan(Food Credit), Suits filed,
Decreed, Protested Bills, Advances against Cash incentive & duty,
Advances against FCNR and PCFC.
The Trend Analysis methodology with Curve Fitting of
polynomial degree will be used for these non maturity products in
order to arrive at the inflows/outflows in different time buckets.
The following tables illustrate the output of the Curve Fitting method
for different perpetual products indicating the cash outflow/inflow in
different time buckets. In these tables, sample dummy data points
on weekly basis have been taken for the analysis.
Table 1: Classification of Saving Bank Deposits (non maturity heads) into Residual Maturity Buckets
(outflows)
(Using Curve fitting with Polynomial Degree 1) Based on weekly Data from FY 2001-02 to 2006-07
(No. of Sample Points : 260 (weeks) No. of years represented by data : 5.00

Data Points

Amount in
Bucket (Rs.
Cr)

%
to
Total(Core)

RSquared
%

t - Statistic

1-14 Days

N.A

689.94

8.68%

N.A

N.A

15-28 Days

N.A

689.94

8.68%

N.A

N.A

29 Days-3 Months

N.A

689.94

8.68%

N.A

N.A

3-6 months

N.A

689.94

8.68%

N.A

N.A

6m-1 year

N.A

689.94

8.68%

N.A

N.A

1 year-3 Years

156-319

1952.98

24.58%

96.84%

172.05

3-5 Years

1-260

2543.40

32.01%

97.40%

99.00

over 5 years

N.A
TOTAL(Outstanding
Balance as on the
Latest Week)

0%

N.A

N.A

7946.07

100%

Table 2: Classification of Current Account Deposits(non maturity heads)

into Residual Maturity Buckets(outflows) (Using Curve fitting with
Polynomial Degree 19):
Based on weekly Data from FY 2001-02 to 2006-07
(No. of Sample Points : 260 (weeks)

1-14 Days
15-28 Days
29 Days-3 Months
3-6 months
6m-1 year
1 year-3 Years
3-5 Years
over 5 years

Data Points
N.A
N.A
N.A
N.A
N.A
156-260
1-260
N.A
TOTAL(Outstandi
ng Balance as on
the Latest Week)

No. of years represented by data : 5.00

Amoun
t
in
Bucket
(Rs. Cr)
562.97
562.97
562.97
562.97
562.97
2178.28
3263.18
0

%
to
Total(Core
)
6.82%
6.82%
6.82%
6.82%
6.82%
26.38%
39.52%
0%

8256.34

100%

RSquared
%
N.A
N.A
N.A
N.A
N.A
98.28%
96.91%
N.A

t - Statistic
N.A
N.A
N.A
N.A
N.A
76.47
89.97
N.A

Table 3: Classification of CC,OD,DLFC & Other Advances(non maturity heads)

into Residual Maturity Buckets (inflows) : (Using Curve fitting with Polynomial
Degree 10)
Based on weekly Data from FY 2001-02 to 2006-07
(No. of Sample Points : 260 (weeks)

1-14 Days
15-28 Days
29 Days-3 Months
3-6 months
6m-1 year
1 year-3 Years
3-5 Years
over 5 years

Data Points
N.A
N.A
N.A
N.A
N.A
156-319
1-319
N.A
TOTAL(Outstanding
Balance as on the
Latest Week)

No. of years represented by data : 5.00

Amount in
Bucket
(Rs. Cr)
142.99
142.99
142.99
142.99
142.99
1716.83
3844.89
0

%
to
Total(Core)
2.28%
2.28%
2.28%
2.28%
2.28%
27.35%
61.26%
0%

6276.68

100%

R-Squared
%
N.A
N.A
N.A
N.A
N.A
92.80%
95.24%
N.A

t - Statistic
N.A
N.A
N.A
N.A
N.A
123.96
97.01
N.A

N.A: Not Applicable

Statistical methodology adopted for this behavioural analysis are :

1. R2 symbolises the % in variation in Deposits is accounted by the 260 Data
Points( 5 Yaers Data).
2. t-Statistic if more than 10, reflects that the Core Portion exists
significantly.
3. It is assumed that Core Portion does not exist over 5 years period.
4. After finding out the Core Portion in 1-3 Years & 3-5 Years bucket through
Curve Fitting approach, the rest of the balance is equally distributed from 1-14
Days bucket to 6m-1Year bucket.
2.1.1.2

Coverage Ratio Analysis

Coverage Ratio (CR) indicates inflow as a percentage of outflows i.e. for every
unit of outflow, number of units of inflow. Coverage Ratio Analysis is a what-if
analysis that displays impact on coverage ratio due to change in inflow or
outflow. Inflow and outflow may be changed through text entries in each maturity
bucket. Coverage ratio analysis will be made through both textual and graphical
representation.
2.1.1.3

Tolerance Analysis & Product Distribution

Liquidity mismatch upto a certain limit is tolerable, perhaps desirable in some

situations. In many situations, net of anticipated deposits and anticipated loans
disbursements are expected to cover this gap. This limit is called tolerance limit.
Tolerance limit is expressed as Net Gap and Cumulative Gap as a percentage
of outflow in each time bucket. Tolerance Analysis provides facility to set and
monitor these limits. Tolerance Analysis indicates the limit set by the Bank in
each time bucket( both positive and negative limits set by the bank) and
compares with the actual position as on the MIS date.
When there is a stressed bucket during tolerance analysis, to locate items
contributing to stress, drilldown to products in a maturity bucket will be displayed.
In this case top Inflow products and top Outflow products for selected maturity
bucket along with their corresponding Inflow and Outflow amounts will be
displayed. Both textual report and graphical report can be viewed for the selected
maturity bucket. A dropdown box may provided to change maturity bucket and
view the top products in the selected maturity bucket.
Distribution Report will provide distribution of inflows, cumulative inflows
distribution, distribution of outflows, cumulative outflows distribution, Net Gap
distribution, Cumulative Gap distribution and coverage ratio in percentage in
each time bucket.

2.1.1.4

Static Liquidity Ratios

The following ratios can be generated from the solution so as to enable the Bank
to frame ALM Policy and set target thereof. Going forward, ALM solutions will be
able to generate the trend of these ratios over the past years on different MIS
dates.
Table 4: Static Liquidity Ratio
Short Term Borrowing to Total Assets (Ceiling)
Short Term Borrowing to Total Deposits(Ceiling)
Purchased funds to Total Assets (Ceiling)
Net Loans to Total Assets (ceiling)
Core Deposits to Net Advances (Floor)
Investment in Short Term assets (maturing within
one year) to purchased funds (Floor)
Commitment Ratio(Off Balance Sheet Exposure to
Net Worth) (Ceiling)
Cash in Hand to Deposits(Ceiling)

2.1.1.5

Cost To Close

Cost to close analysis is for calculating cost to bridge liquidity gap. This is a very
useful analysis to understand impact of funding Liquidity gap. Gap may be
positive or negative. If gap is negative, then money has to be borrowed from the
market. If gap is positive, then money invested realizes yield. Here the users can
key-in the expected market rates and see the 'Cost To Close'.
2.1.1.6 Large Customer Ranking
Reports on Customer Ranking in terms of large liquidity providers and large
liquidity users will be incorporated. The customer raking report will indicate the
name of the customer, amount, and maturity date and product type.
2.1.1.7

Net Demand and Time Liabilities (NDTL) Report

Regulatory authorities directs bank to maintain minimum cash balance with

central banks and have minimum investments in government issued instruments.
These have to be maintained based on bank's Net Demand and Time Liabilities
(NDTL). Minimum cash balance to be maintained is called Cash Reserve Ratio
(CRR) and minimum investment to be maintained is called Statutory Liquidity
Ratio (SLR). Further, CRR and SLR to be maintained have to be distributed
across maturity buckets based on maturity profiles of NDTL.
ALM solution will calculate actual statutory ratio i.e CRR and SLR based on Net
Demand and Time Liabilities (NDTL) and compare with the required ratio that
has to be maintained across maturity bucket. It will list items contributing to
NDTL and percentage distribution in NDTL.

2.1.1.8

Roll Over and Prepayment Analysis

This analysis enables to calculate the roll over of Principal amounts and
corresponding interest flows for selected products of a bank. Rollover /
Prepayment amounts begin after the selected maturity bucket. If user selects 114 days as the maturity bucket, then rollover will start from the 15th day. Rollover
/ prepayment percentage in each maturity bucket is independent of other maturity
buckets and amounts.
These two reports may be integrated to provide Integrated Roll Over and
Prepayment report.
Currently, ALM solution captures prepayment analysis of loan products and
Early exercise Option for Term Deposits, and Roll Over analysis is not featured.
The Roll Over and Prepayment Analysis may be made for both loan and
deposit products and the Early Exercise option may be removed from the
solution.

2.1.2 Enhancement of Functional Analysis for Interest Rate Sensitivity

Changes in interest rate affect a Banks earning by changing its net interest
income and level of other interest sensitive income and operating expenses.
Changes in interest rate also affect underlying value of banks assets, liabilities
and off-balance sheet instruments because present value of future cash flows
(and in some cases, cash flow themselves) change when interest rate changes.
Accordingly, an effective risk management process that maintains interest rate
risk within sensible levels is essential to safety and soundness of banks.
Simplest techniques for measuring a banks interest rate risk explores begin with
a maturity schedule that distributes interest rate sensitive assets, liabilities and
Off Balance positions into time buckets according to their maturity. These
schedules can be used to generate simple indicators of interest rate risk
sensitivity of both earnings and economic value to changing interest rates. When
this approach is used to assess interest rate risk of current earnings, it is typically
refereed to as gap analysis. Size of gap for a given time band that is, Asset
Liabilities plus Off Balance Sheet exposes that reprice or mature within that time
band gives an indication of banks risk exposure.
The enhancements of functional analysis are given as under:

2.1.2.1

Weighted Average Yield & Weighted Average Cost Distribution

The weighted average interest rate on assets (yield) and weighted average
interest rate on liabilities (cost) distributed across maturity buckets and also at
aggregate level to be incorporated in form of tabular and graphical format. The
average spread (difference between average yield and average cost) distributed
across maturity buckets are also to be incorporated.
2.1.2.2

Net Interest Income Analysis

NII analysis can be carried out based on 3 criteria. They are:

1. Aggregate
2. Product (Assets and Liabilities)
3. Product Category
In addition, interest computation can be performed till a particular date or for all
dates.
ALM solution will provide NII tool for computing and analyzing Net Interest
Income of institution. Net Interest Income is computed by taking yield and cost of
assets and liabilities across maturity buckets. NII analysis will have two reports.
First report will show Average Yield, Average Cost and Spread across maturity
buckets. Second report (NII report) shows the Net Interest Income computed
across maturity buckets. It gives details about interest income, interest cost , net
interest income and net interest Margin in respective maturity buckets.
Further, textual report and graphical report of NII breakup for interest
computation can be can be viewed for different time buckets indicating the Inflow
Amount, Yield and Income Interest for different Inflow Subtype items and Outflow
Amount, Cost and Interest Cost for different Outflow Subtype items.
2.1.2.3 Tolerance Analysis & Product Distribution
Tolerance Analysis & Product Distribution for Interest Rate Sensitivity Position will
be same as Structural Liquidity as explained in Section 2.3.
2.1.2.4

Behavioral Analysis / Studies for the purpose of Interest Rate

Sensitivity Statement of SB Account

Trend Analysis may be carried out to calculate the Interest Paying Core Portion
( as %of total outstanding balance) of the SB Account and Non Sensitive (on
Interest paying) Portion of the Saving Bank Account.

2.1.2.5

Duration Gap Analysis and Report on Market Value of Equity

The Market Value of Equity(MVE) measures the Interest Rate Risk (IRR) from the
Economic value Perspective. The market value of Equity is calculated from the
9

Duration Gap Analysis (DGA) of the Rate Sensitive Assets (RSA) and Rate
Sensitive Liabilities (RSL). Duration of RSAs and RSLs in each time bucket is to
be calculated taking the appropriate discount rate. Duration of RSAs and RSLs
will indicate the weighted Duration.
At present
ALM solution is computing duration of each product. However,
Duration Gap is not being calculated for each time bucket or at aggregate level.
DGA would be calculated for each time bucket as well as aggregate level which
in turn will provide input to compute the MVE for the balance sheet of the bank.
2.1.2.6

Top IR Products

ALM solution will provide analysis to display products that have the top
weighted average yield/cost in each maturity bucket for both Rate Sensitive
Assets and Liabilities. A graphical representation of the same can also be
viewed.
2.1.2.7

Break Even Rate(BER)

Break Even Rate represents the rate at which the Net Interest income(NII) would
be zero. This defined as Interest Expenses minus Interest Income divided by
difference in outstanding RSA and outstanding RSL.
BER = (Interest Expenses Interest Income) / Abs (RSA RSL)
ALM solution will provide Break Even Rate Analysis for each time bucket.
Positive BER indicates bank has to lend and negative BER indicates has to
borrow at this rate to make NII zero.

2.1.2.8

Value at Risk (VaR)

VaR for the Banking Book will be part of the ALM solutions for measuring IRR in
the banking Book. The following parametric models can be used for generating
scenarios of interest rates
1. Black Karansky
2. Hull-White 1-factor Model
3. Cox, Ingersoll and Ross.
Historical data on interest rates will be used for estimating the parameters of the
respective models. The models will be simulated using the stochastic term in
each of the respective functions.

10

These multiple values of interest rates will In turn be used in the EAR/MVE model
to estimate the distribution of values. VaR / CVaR will be calculated based on the
estimated distributions.

2.1.3 Scenario Analysis / Simulation Manager

At present, Simulation Manager captures simulation under four
categories of Scenarios.
1. Change in Inertest Rate
2. Product Switch \ Product Roll Over
3. Currency Change
4. New Business
Going forward the scope of SM will be broadened to capture the following
enhancements.
2.1.3.1

Earning at Risk (EaR)

The impact of change in the Rate of Interest on the Banks earning by changing
the NII /NIM is EaR. This is the Interest Rate Risk on the Banking Book. It
provides a What-if analysis on NII. It facilitates visualization of impact of
movement in interest rates resulting in repricing of assets and liabilities. It shows
the change in NII for any change in Yield or Cost across maturity bucket. Both NII
and NIM impact are shown.
There are two ways to envisaged change in NII. First is by changing yield and/or
cost curves i.e if it is envisaged a positive change of 50 basis points in the yield
in the first maturity bucket (RSA) and/or 25 basis points in the cost in the second
maturity bucket (RSL). Second is by changing the specified portion of rate
Sensitive Assets and/or Liability( Repriced portion of the asset and/or liability)
when there is a change in market rate.
Corresponding change in NII and NIM due to this what-if analysis will be reflected
in the Earning at Risk (EaR) analysis Report generated from Simulation
manager.
Interest rate movement can be be set either in terms of percentage of yield
change and cost change or in terms of basis points of yield change and cost
change.
The earning impact can be discounted at a appropriate discount rate to get
discounted EaR (DEaR).
2.1.3.2

Market Value Of Equity

11

MVE may be added as a scenario type in Interest Rate and Earning analysis
cube. The change in MVE for a given shock in the interest rate is to be
viewed in each time bucket and also at aggregate level by taking all the time
buckets into account.
Table 5 : Change in MVE (Rs. Crore)
Change in Interest Bucket 1
Rate( in bps)
-100 bps
-50 bps
50 bps
100 bps

2.1.3.3

0.12
0.07
- 0.08
- 0.11

Bucket 2

All Buckets

0.15
0.03
-0.05
-0.09

22.65
12.52
8.54
19.34

Contingency Funding Plan

Banks have to prepare Contingency Funding Plan to withstand Liquidity Crisis

under Banks Specific Crisis as well as Market Crisis Scenario. The Plan also
evaluates the ability of the Bank to withstand a prolonged adverse liquidity
environment.

The Contingency Liquidity Plans are the liquidity stress tests

designed to quantify the likely impact of an event on the Balance Sheet.

The

Banks Specific Crisis will capture two scenarios (A)Local Liquidity Crisis (B)
Where there is a nation wide name problem or down grade of Credit Rating if the
Bank is publicly rated, should be considered. The Reports must consider the
impact of accelerated run off of large liquidity providers. The indicative format of
the report is annexed.
2.1.3.4

Statement of Short Term Dynamic Liquidity and Back Testing

In order to estimate the liquidity on dynamic basis the bank has to prepare
Statement of Dynamic Liquidity by giving due importance to 1) Seasonal Pattern
of Deposits/Loans. 2) Potential Liquidity needs for meeting new loan demands,
unavailed credit limits, loan policy, potential deposits losses, investment
obligations, statutory obligations etc. This report is aimed at depicting short-term

12

cash flow and segregates it across three maturity buckets. The indicative format
of this report is annexed.
The projected figures in the short term dynamic liquidity report will be backtested
against the actual data and the variation of the actual data from the projected
figure will indicate the level of accracy of the projection. This will help the bank in
fine tuning the projection for further projection.

2.1.3.5

Statement of Integrated Dynamic Liquidity and Projected Balance

Sheet

A dynamic liquidity report shows the future cash inflow and outflow for a bank.
This can be viewed as an extension of the structural liquidity report. Both these
reports liquidity are integrated to generate the Integrated Dynamic Liquidity
report. The Integrated Dynamic Liquidity report will indicate the projected balance
Sheet as on a future date.

ALM Solution Second Release

3.1

Scope
3.1.1 Inclusion of Interest Derivative Products and Option

Interest Derivative Products like Interest Rate Swap, Interest Rate Futures,
Forwards and Option ( Modelling) are to be included in the solutions. The
position conversion of these products is to be built up in the solutions based upon
the hedging strategy in order to calculate the interest rate sensitivity portion.
All derivatives which have a forward component should be considered as a
combination of two positions in bonds. Accordingly, banks should compute the
actual modified duration for each item of the derivatives portfolio and plot them
as assets (receivables) or liabilities (payables) in the appropriate time buckets.
Interest Rate Swaps could be considered as a combination of a short position
and long position. The notional of the fixed and floating leg of an Interest Rate
Swap could be shown in the respective maturity bucket based on the maturity
date for the fixed leg and the reset date for the floating leg. Suppose, a bank
receives 5-year fixed and pays floating MIBOR, then the fixed leg of the swap
could be shown as positive in the 5-7 year bucket and the floating leg would be
shown as a negative in <1 month bucket.

13

Forward rate agreements could also be considered as a combination of a short

position and long position. For instance, a long position in a September three
month FRA (taken on June 1), can be bucketed as a long position, with a
maturity of six months and a short position with maturity of three months. The
amount to be shown in the Statement of interest rate sensitivity is the notional of
the FRA.
Interest Rate Futures could be treated in a similar manner as a Forward Rate
Agreement. Thus, the notional of the interest rate future should be shown in the
relevant buckets in the Statement of Interest Rate Sensitivity.
The delta times the notional value amount (based on the strike price) could be
shown in the respective maturity bucket as an outflow / inflow based on the
option. For instance, if a bank has a USD 1 mio. long call Rupee dollar option
(where in the bank buys the USD against INR) at a strike price of Rs.44.00 at the
end of 2 months and say the delta of this option is 0.45. For the purpose of
bucketing in the Statement of Interest Rate Sensitivity, the bank may take Rs
1.98 crore (viz. 1mio * 44 * 0.45) as an outflow in the 1-3 month time bucket. For
the purpose of computing the modified duration, the bank may use the MIFOR
curve for the discounting rate.
3.1.2 Forecasting of Rate of Interest
To take a view on the change in the Rate of Interest, ARIMA (Auto Regressive
Integrated Moving Average) model can be used as forecasting technique.
ARIMA would make historical time series data stationary through unit root test
before forecasting the short term interest rate.
3.1.3 Volatility Calculator
ALM solution may facilitate the calculation of Volatility for different Cash
Flows over a range of dates. Volatility is calculated by
1. Calculating differences in balances,
2. Calculating rate of change of these differences with respect to previous
difference and
3. Determining average of these rates of changes
The Cash flow data can be selected by Selecting the range of dates to retrieve
cash flows stored in database.

3.1.4 Calculation of Fair Values of Financial Instruments

International Accounting Standard 39 (IAS 39) deals with Fair Valuation of
Financial Instruments. From the ALM perspective, the following aspects are
important:
14

Fair valuation of Financial Instruments: Currently, ALM Solution expects

all the balances of assets and liabilities as on a date as download,
development of IAS 39 functionality will calculate the fair values of the
financial instruments itself by using various pricing libraries. Thus, where
market prices are available, it will get the market prices from the relevant
source (e.g. Bloomberg, Reuters, etc.), and where market prices are not
available, it will calculate fair values using various pricing libraries and will
also arrive at the impairment. This will also get documented in the form of
Report.

Applicability of Hedge Accounting: The second important aspect of IAS 39

is application of Hedge Accounting. This involves whether the financial
instrument under consideration is to be treated as per Hedge Accounting
or as per normal Accounting. This has to be further captured in the form of
Report, which gives detailed information in respect of hedge instruments,
cash flow hedge and fair value hedge to the user.

ALM Solution Third Release

4.1 Scope
4.1.1 Integration of
Solution

and Oracle Risk Manager ALM

The functional features of Risk Manager which are not there in ALM Solution or
better than the existing features of ALM Solution will be incorporated.

15

CONTINGENCY LIQUIDITY PLAN (

POSITION AS ON

)
Banks specific Crisis

Market Crisis

Assumptions
1.
2.
3.
4.
5.

Withdrawal from SB deposits in first fortnight.

Withdrawals from Current Deposits in first fortnight.
Deposits closed on maturity.
Pre-mature closure (as % of deposits due for maturity in first three
months)*
Withdrawals from sanctioned limit(as % of outstanding Cash
Credit/Demand Loans and Overdrafts)

Computation of Liquidity requirements within first 14 days

1. Withdrawals from SB deposits.
2. Withdrawals from Current deposits.
3. Term Deposits withdrawn on maturity.
4. Pre-mature closure of deposits.*
5. Withdrawal from sanctioned credit (frozen)
6. Interest payable
7. Others
Total
Resources available
1. Cash (20% of outstanding cash in hand)
2. Investments maturing within 14 days
Term Money and Placement
Investments
3. Coupons receivable(Interest receivable)
4. Expected Inflow from advances (80% of expected maturity)
Total
Gap
Excess SLR (either Repo or outright sale)

Net gap after factoring excess SLR

Back stop availability

1.
2.

Call Borrowing Limit.

Lines of Credit

Net Gap

Statement Of Short-term Dynamic Liquidity

Code
Bank Name
As on

Currency :

16

Outflow Group

Subgroup

1 to 14 days

15 to 28 days

29 days to 3 Months

1 to 14 days

15 to 28 days

29 days to 3 Months

Net Increase in Loans and

Advances
Goods Advances
Food Advances
Foreign Bills
Net Increase in Investments
Approved Securities
Bonds/Debentures/Shares
Interbank Obligations
Balance in CA of Banks
Term Deposits Banks
Call deposits from Banks
Balance with Outside Banks
Others
Advance Tax
Fixed Assets
Misc Asset
OBS
IRS
Reverse Repos
TOTAL OUTFLOWS
Inflow Group

Subgroup

Net Cash Positions

Net Cash Positions
Public Deposits(less CRR
obligations)
Public Deposits(less CRR
obligations)
Interest On Investments
Interest On Investments
Inter-bank Claims
Balance with Banks Outside India
Balance with Banks Inside India
Others
Refinance Export Credit
OBS
IRS
Repos
TOTAL INFLOWS
C. Mismatch (B - A)
D. Cumulative Mismatch
E. C as a % to total outflows

17