Liquidity Management in Banks | ALM System | Banking diploma exam l TMFI | BL Academy |EP -7
Channel: Banker Learning Academy
Date: 2024-01-13

This video is part of my series on Asset Liability Management at banks. It gives a short overview over Liquidity Management in Bank which is an important part of market risk management.
Related Link Video :
https://www.youtube.com/watch?v=6e238pBeTl8&t=1384s
https://www.youtube.com/watch?v=jfK_1yA37Mc&t=1208s
https://www.youtube.com/watch?v=hRnybW7gOkI

Concept of Liquidity :
Liquidity means nearness to cash or easily convertibility to cash. Liquidity is the availability of funds, or assurance of funds for available to  honor cash outflow commitments (both Balance Sheet and off balance sheet) as they fall due. The degree to which the asset or security can be bought or sold in the  market without affecting the asset’s price or Assets that can be easily  bought or sold, are known as liquid assets

Needs for Bank Liquidity : 
Deposit Liquidity : it means the ability of a banker to meet the demand of depositors for cash as & when the arise
Loan Ability : it refers to the banker capacity to meet all the credit requirements of his customer

Factors influencing Liquidity 
- Cash Reserve Ratio –(fixed by central bank varying from time to time)
- Banking systems (if increase investment or decrease deposit collection or vice versa)
- Uses of cheque (reduce liquid cash in transaction)
- Nature of business condition (inflation & depletion reflect on liquidity)
- Seasonal Condition (festival session – requirement of cash high)
- Bankers Policy ( banks maintain high cash reserve to win customer confidence)