Managing the Interest Rate Risk of Indian Banks' Government Securities Holdings

Author/Editor: Sy, Amadou N. R.
Publication Date: April 01, 2005
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.
Subject(s): Interest rates | India | Banks | Risk premium | Bonds | Basel Core Principles

Author's Keyword(s): Interest rate | risk management | government securities | duration | value-at-risk | Basel Core Principles
Publication Date: April 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005078 Pages: 17
US$15.00 (Academic Rate:
US$15.00 )
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