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

Author/Editor: Sy, Amadou N. R.
Authorized for Distribution: April 1, 2005
Electronic Access: Free Full Text (PDF file size is 343KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

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. 05/78
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
 
English  
    Published:   April 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005078   Pages:   17
    Price:   US$15.00
       
     
Please address any questions about this title to publications@imf.org.