ASSET LIABILITY MANAGEMENT PRACTICES AND NPA TRENDS IN INDIAN PUBLIC AND PRIVATE SECTOR BANKS

Abstract

This study delves into the critical financial strategy of Asset Liability Management (ALM) within the context of Non-Performing Asset (NPA) trends in select Indian public and private sector banks. ALM holds profound importance in the banking sector, serving as a multifaceted approach to risk management. It enables banks to effectively manage risks associated with interest rate fluctuations, liquidity challenges, and credit defaults, thereby contributing to the stability of financial institutions and the broader economy. Proper ALM practices are vital for minimizing vulnerabilities and ensuring that banks have the liquidity required to meet their obligations, safeguard against losses, and comply with regulatory guidelines. As a result, this study aims to shed light on the significance of ALM in the Indian banking sector by focusing on its direct impact on NPA trends and, by extension, the health of the financial system. The research objectives of the study include two primary goals. Firstly, to analyze the NPA levels in selected public and private sector banks in India. This analysis provides insights into the levels and trends of NPAs within these banks, offering a comprehensive understanding of their asset quality and credit risk management. Secondly, the study seeks to compare NPA levels between public and private sector banks, aiming to identify differences and similarities in NPA trends between these two sectors. By examining these objectives, the study will provide valuable insights into the effectiveness of ALM practices in managing NPAs, the relative asset quality of different banks, and the resilience of the Indian banking sector in the face of economic challenges.