Managing the Interest Rate Risk of Indian Banks’ Government Securities Holdings
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Summary:
The large holdings of government securities by banks in India draw attention to their risk as interest rates are at historical low levels. This paper measures such a risk using duration and value-at-risk methods and assesses its current management by banks. The main finding is that some public sector and old private banks are vulnerable to a reversal of the interest rate cycle, while foreign and new private banks have built adequate defenses. In this regard, the paper makes a number of recommendations regarding government policies and individual bank practices to manage interest rate risk.
Series:
Working Paper No. 2005/078
Subject:
Banking Capital adequacy requirements Commercial banks Government securities Market risk
English
Publication Date:
April 1, 2005
ISBN/ISSN:
9781451860979/1018-5941
Stock No:
WPIEA2005078
Pages:
17
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