Management of Financial Institutions

Course ID
61017910
Level
Undergraduate
Program
BBA (FIA)
Semester
Sixth
Credits
6.0
Paper Type
Discipline Specific Elective
Method
Lecture & Tutorial

61017910

This Paper discusses the tools and techniques of management of banks and other financial institutions.

Learning Outcomes:

At the end of the course, students should be able to:

  • Understand the functioning of a financial institution.
  • Understand the entire process of operating a bank and other financial institutions with respects to the rules and regulations prescribed by the regulators.
  • Understand the problems faced by the banks like that of NPA or of liquidity challenge etc. and tools and techniques to manage them.

Course Contents

Unit I
Unit II
Unit III
Unit IV

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)

Additional Information

Text Books


Saunders & Cornett – “Financial Institutions Management – A risk management approach” Tata McGraw Hill
Resti & Sironi – “Risk management and shareholders‟ value in banking” John Wiley

Teaching Learning Process

Class room lecture, Case study discussion, Numerical Problem solving, Class presentation on the assigned topic by students individually or in group, Workshop, Tutorials, Role play

Assessment Methods

1. Internal evaluation of 25% marks
a. Attendance 5% marks
b. Two internal evaluations by the teacher with 10% marks each out of which one must be a class test and other may be another test or home assignment or presentation. Faculty may take more than two assignments and (or) tests but total will be only 20% marks.
2. End term University Exam of 75% marks

Keywords

Financial Intermediation, Capital Adequacy, Asset Liability Management, NPA, Data Envelopment Analysis, Duration Gap Model

Disclaimer: Details on this page are subject to change as per University of Delhi guidelines. For latest update in this regard please refer to the University of Delhi website here.

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