This Paper discusses the tools and techniques of management of banks and other financial institutions.
At the end of the course, students should be able to:
Unit I (2 weeks)
Financial Intermediation; Kinds of Intermediation; Financial Institution and its kinds; An overview of the Indian financial system; Regulation of Banks, NBFCs & FIs; Products offered by Banks and FIs. CRR & SLR management; Capital Adequacy: Capital adequacy norms; Basel agreement-II&III; effect of capital requirements on bank operating policies.
References:
Saunders & Cornett – “Financial Institutions Management – A risk management approach” Tata McGraw Hill (Chapter 1 and 2)
Resti & Sironi – “Risk management and shareholders‟ value in banking” John Wiley (Chapter 20 and 21)
Unit II (3 weeks)
Statement of Financial Sector: Flow of Funds Accounts – Sector wise and Instrument wise. Statements of Financial Institution: Analyzing Bank’s Financial Statement: The balance sheet; income statement; Cash Flow Statement; profitability, liquidity and solvency analysis; Performance Analysis of banks: CAMELS Risk system; KPIs; Data Envelopment Analysis. Asset Liability Management: RBI guidelines on asset liability management
References:
Justine Paul & Padmalatha Suresh-“ Management of Banking and Financial Services” Perason (Chapter 6)
Saunders & Cornett – “Financial Institutions Management – A risk management approach” Tata McGraw Hill (Chapter 6 and 13)
Unit III (3 weeks)
Institutional Risk Management: Interest Rate Risk; Market Risk; Credit Risk; Liquidity Risk; Operational Risk. Determination of Interest Rate. Theories of Interest Rates: Classical Theory; Loanable Funds Theory; Liquidity Preference Theory; Term Structure of Interest Rates. Interest Rate Risk Management: Measurement of Interest Rate Risk; Duration and its kinds; Convexity. Managing Interest Rate Risk: Repricing Gap Model, Maturity Matching Model, Duration Gap Model, Cash Flow Matching Model; Convexity Adjustments.
References:
Saunders & Cornett – “Financial Institutions Management – A risk management approach” Tata McGraw Hill (Chapter 7, 8, 9, 10 and 11)
Resti & Sironi – “Risk management and shareholders‟ value in banking” John Wiley (Chapter 1, 2, 3, 4 and 5)
Unit IV (4 weeks)
Credit & Liquidity Risk Management: Types of Assets, NPA & its types, Management of NPA, Measurement of Credit Risk – Qualitative and Quantitative models. Modelling Credit Risk; Term Structure of Credit Risk; Managing Credit Risk: Credit Analysis and kinds of Loans; Pricing of Loans. Liquidity Risk Management: Measurement of Liquidity Risk; Measures of Liquidity Exposure; Causes of Liquidity risk: Asset-Side and Liability-Side; Managing Liquidity Risk: Purchased Liquidity management and Stored Liquidity management; Liquidity Planning; Deposit Insurance; Discount Window
References:
Saunders & Cornett – “Financial Institutions Management – A risk management approach” Tata McGraw Hill (Chapter 17, 18 and 19)
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