homeviews NewsAsset Liability Mismatch: NPA is fairly well understood but the bankers’ other nightmare isn’t

Asset-Liability Mismatch: NPA is fairly well understood but the bankers’ other nightmare isn’t

Asset-Liability Mismatch: NPA is fairly well understood but the bankers’ other nightmare isn’t
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By S Murlidharan  Mar 20, 2023 9:16:03 AM IST (Published)

Unfortunately, the public has currently no data to rely on when it comes to banks' asset-liability mismatch (ALM). It is time the RBI tweaked its oversight on banks to require them to share the minutiae and granular details of how their deposits are tied with loans.

The RBI governor Shaktikanta Das has done well to bring centerstage Asset-Liability Mismatch (ALM) in the context of the Silicon Valley Bank (SVB) going belly up last week. He said ALM could well have contributed to SVB’s distress. He hastened to add however that the Indian banking system was in a much better shape. But then it is true that while the festering problem of Non- performing Assets (NPA) that has been plaguing the Indian banks for decades is talked about in policy circles and in the media, ALM isn’t with the same fervour and concern.

NPA is American euphemism for bad debts. It is believed that about 13 percent of the loan portfolios of Indian banks are locked up in NPA with solutions ranging from seizure of mortgaged assets to selling the bad debts to Asset Reconstruction Companies (ARC) being tried with very limited success. The helpless handwringing in this regard has spawned quite a few banking black humour---you come to borrow on your bicycle but arrive in style in your limousine to regret your inability to pay and you borrow in thousands you are in trouble with the bank and you borrow in crores, the bank is in trouble with you.
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