SDMIMD Journal of Management

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A bank is said to have adequate liquidity when it can raise sufficient funds both by increasing liabilities (deposits) and by realizing assets promptly. Bank’s liquidity management, therefore, is the process of generating funds to meet contractual obligations like new loan demand, existing loan commitment and deposit withdrawals at reasonable prices at all times. The main forms of liquidity risks are ‘Funding Risk’, ‘Time Risk’ and ‘Call Risk’. Measuring and managing liquidity risk are one of the most vital activities of commercial banks. This case study brings out the procedure given by Reserve Bank in the lines of Basel III framework and the liquidity management practices of South Indian Bank. While analysing the liquidity in Flow approach and Stock approach it is observed that there is a better liquidity for the Bank to meet obligations in some time buckets and in some, the position needs improvement.

Keywords

Liquidity Risk, Basel III Framework, Funding Risk, Time Risk, Call Risk, Stock Approach, Flow Approach, Time Bucket.
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