Empirical Study on Behavioural Pattern of Bank Demand Deposits and Advances

Abstract

“Liquidity Risk” is emerging as a potential threat to banking institutions across the world and Basel III guidelines suggest measures to capture and evaluate the potential vulnerability through a variety of measures in the movements in such financial variables. ALM Guidelines of the RBI over the years also stressed on the advancement required in the measures and management of Liquidity for better Asset – Liability Management.
The paper examines and explains the importance and relevance of empirical studies for evaluating behavioral pattern of demand deposits and advances and there-by take banks to a path of refined and progressive ALM methodologies. An evaluation of a bank’s portfolio by subjecting its demand liabilities and assets to an empirical scrutiny was attempted by going back in time. The relevance of the methodology and its indispensability for progressive Asset Liability Management was appreciated by the bank whose data was used for the analysis. With regulators and supervisors underscoring the importance of progressive and advanced methods in managing liquidity, the theme and codified methodologies / results of the Paper have high practical relevance for the practitioners.