Asset Liability Management in Indian Banking Sector- An Overview

Commercial banks play an important role in a country¿s economic development. The main objective behind this process was to ¿gain control on the commanding heights of the economy¿ to spread banking facilities and thereby to create banking habit in economically backward areas of the country and open branches particular in rural areas, promoting rapid development of these areas. The fundamental change that was intended to be introduced was rapid transformation of purely profit -oriented private owned and urbanized banking sector into a development oriented, and social justice based public sector industry. This enhanced level of importance of Asset Liability Management has led to the change in the nature of its functions. It is no longer a standalone analytical function. Asset Liability Management (ALM) is an act of planning, acquiring and directing the flow of funds through a financial organization to generate adequate and stable earnings, maintain adequate liquidity and steadily build capital while taking reasonable and measured business risk.