Asset Liability Management in Banks : A Study of Performance and Profitability of Banks

Deregulation and integration have led banks and financial institutions into competition both on Assets side as well as Liabilities side of the Balance-sheet, forcing them to assume greater and newer risks in their quest for higher returns.Asset Liability Management (ALM) has grown up as a response to the problem of managing modern day business which is exposed to a wide variety of risks in an environment where interest rates, exchange rates and economic conditions are highly volatile.The maturity mismatches and changes in the levels of assets and liabilities cause both liquidity risk and interest-rate risk.The ALM process is the only solution for banks to survive in this rapidly changing environment where the composition and risk profile of their assets and liabilities have a direct impact on their performance and profitability.