ASSET-LIABILITY MANAGEMENT IN INDIAN PRIVATE SECTOR BANKS-A CANONICAL CORRELATION ANALYSIS

ABSTRACT Banks generally mobilize resources in the form of deposits and lend them as loans and advances. The resources mobilized by the banks are generally short-term in nature and the deployments of funds are medium and long-term, hence there is always a mismatch between the maturity and repayment of funds in banks. The mismatch risk the banks due to the incurrent risks involved in the business mechanisms and leads to liquidity crunch and loss of margins at times. There are many risks involving the banking business -such as credit risk, liquidity risk, interest rate risk, operational risk, exchange risk, and regulatory risk. However, the major risks faced by the banks are liquidity risk and interest rate risk. A systematic management of assets and liability of the banks help the banks to address these risks effectively and leads the banks towards a sustainable growth. For this purpose, the sample of three Old & New generation Private sector Banks was taken and the Canonical correlation technique has been applied to capture the predictor variables, liability and predictive variables assets in these banks. The finding of the paper reveals that except ICICI banks, all other banks are in safer zone and mostly the predictor variables are long-term and the predictive variables are also long-term, and short-term in nature