Asset Probability Management In Bank Essay

ASSET LIABILITY MANAGEMENT IN BANKS

BANK’S LIEN

Banks need to maintain certain ratios and quantity of money with them in their day to day operations. Asset Liability management is a dynamic process of organizing, planning and controlling of assets and liabilities along with their yields, returns and maturity to maintain certain parameters such as liquidity and NII (Net Interest Income). ALM tries to maintain and sustain long term profits and the short term earnings along with any long term prospects of the bank. The parameters that make up the concept of ALM are:

1. Net Interest Income(NII)

2. Net Interest Margin(NIM)

3. Economic Equity Ratio

Now we know that lending constitutes a major activity of a bank. The banking business revolves primarily

The valuables are received as a safe deposit or custody.

3. The entrustment of the goods is for a specific purpose which has already been stated to the bank.

4. The valuables or documents of title are left in the bankers’ hand inadvertently.

5. The account is in the name of a trust.

6. When the banker has only a contingent debt. Contingent debt is a different kind of debt which is dependent on future developments that are uncertain. In legal terms the word contingent means something that might or might not happen in the future. A contingent debt is not exactly a definitive liability as it is purely based on the outcome of an event. If I want to cite an example, a court verdict is the apt one.

Negative Lien

The term ‘negative lien’ is commonly used to refer to an undertaking given by the borrower to the bank that he (i.e., borrower) will not create any charge such as pledge, collateral, lien, or mortgage, over his moveable and immovable assets and properties including uncalled capital without taking prior permission of the bank. In negative lien the goods and securities not under the possession of the bank are considered. Negative lien does not require registration with the Registrar of Companies or similar other