DBFI401 ALM AND TREASURY MANAGEMENT

Description

SESSION	JUL-AUG 24
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	IV
COURSE CODE & NAME	DBFI401 ALM TREASURY MANAGEMENT

 

 

Assignment Set – 1

 

 

1. As Manager of ALM department in a Bank,highlight your job role. 10

Ans 1.

Job Role as a Manager of ALM Department in a Bank

As the Manager of the Asset-Liability Management (ALM) department in a bank, my primary responsibility is to oversee the management of the bank’s balance sheet to ensure financial stability and profitability. ALM focuses on managing the risks arising from the bank’s asset and liability structure, particularly concerning

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2. Compare the major functions of ALM and Treasury.

Ans 2.

Comparison of Major Functions of ALM and Treasury

Focus and Objectives
The primary focus of ALM is to manage the risks associated with the bank’s balance sheet, particularly liquidity risk and interest rate risk. It aims to ensure the stability and sustainability of the bank’s operations by aligning assets and liabilities with strategic goals. Treasury management, on the other hand, deals with optimizing cash flow, managing short-term funding requirements, and generating returns on surplus funds. The

 

3. Following chart shows RBI guidelines for risk weights assigned to the housing loan

portfolio of Banks:

(a) Individual Housing Loans

(i) Up to Rs. 20 lakh  50%

(ii) Above Rs. 20 lakh and up to Rs. 75 lakh  50%

(iii) Above Rs.75 lakh  75%

(b) Commercial Real Estate – Residential Housing (CRE-RH) 75%

(c) Commercial Real Estate (CRE)  100%

Bank XYZ has an exposure as under:

Individual Housing Loans (Max loan Amount ₹ 20 lakh) ₹100 crores Individual Housing Loans (Loan Amount more than ₹ 75 lakh) ₹200 crores Commercial Real Estate Residential Housing ₹500 crores

Calculate the value of risk weighted assets for above portfolio of the Bank.      10       

Ans 3.

Calculation of Risk-Weighted Assets (RWA)

To calculate the Risk-Weighted Assets (RWA) for Bank XYZ’s housing loan portfolio, we apply the Reserve Bank of India’s (RBI) prescribed risk weights to the respective loan categories. Below is a step-by-step explanation of the process:

Step 1: Formula for

 

Assignment Set – 2

 

 

4. Identify components of Indian Financial System.Write short notes on any two components

Ans 4.

Components of the Indian Financial System

The Indian Financial System consists of various components that work together to facilitate financial activities, economic growth, and stability in the economy. It can be broadly categorized into four major components: Financial Institutions, Financial Markets, Financial Instruments, and Financial Services. Each

 

 

5. Making use of different variables, develop Investment management strategies for an individual investor.

Ans 5.

Investment Management Strategies for an Individual Investor

Investment management strategies are essential for individuals to achieve financial goals, manage risks, and maximize returns. These strategies involve the selection, allocation, and management of investment portfolios based on an investor’s financial objectives, risk tolerance, and time horizon. Below are the key

 

 

6. Relate Term Structure of Interest rates with Yield Curves.Elaborate on different shapes of yield curve and implications on the overall decision making of a ALM executive working in a Bank.

Ans 6.

Term Structure of Interest Rates and Yield Curves

The term structure of interest rates describes the relationship between the maturity of a debt instrument and its associated interest rate or yield. It reflects how interest rates change over time for bonds of similar credit