Asset Liability Management (ALM) ?
ALM is a comprehensive and dynamic framework for measuring, monitoring and managing the market risk of a bank. It is the management of structure of balance sheet (liabilities and assets) in such a way that the net earnings from interest is maximized within the overall risk-preference (present and future) of the institutions. The ALM functions extend to liquidly risk management, management of market risk, trading risk management, funding and capital planning and profit planning and growth projection.
Benefits of ALM – It is a tool that enables bank managements to take business decisions in a more informed framework with an eye on the risks that bank is exposed to. It is an integrated approach to financial management, requiring simultaneous decisions about the types of amounts of financial assets and liabilities – both mix and volume – with the complexities of the financial markets in which the institution operates.
Cheque Truncation System ?
RBI is considering replacement of the existing system of settlement of payment on the basis of physical cheques by a new procedure called “ Cheque Truncation System” (CTS). It is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically eliminating the actual cheque movement.
CTS is protected by a comprehensive PKI-based security architecture which incorporates basic security and authentication controls such as dual access control, user ID and passwords with crypto box and smart card interfaces.
Shorter clearing cycle.
Superior verification and reconciliation process
No geographical restrictions as to jurisdiction
Operational efficiency for banks and customers alike
Reduction in operational risk and risks associated with paper clearing
CTS is Initially to be taken up as a Pilot Project in NCR before extending to the rest of the country.
National informatics Centre (NIC) would develop software in consultation with RBI and CGA by September 2006.
NIC would study and suggest mode of transmission of data from banks and ensure security system for tamper free data transfer.
NIC would provide a uniform procedure for adoption by Government Departments for archiving the cheque images.