NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Treasury Management in Banking
Internal Assignment Applicable for December 2019 Examination
Assignment Marks: 30
1. Explain the process (in terms of Risk/ Returns/ Ratings etc.) to select bonds in both Rising
and declining interest rates scenarios. Select one bond each from the below bonds with long
term and short term maturities (eg 10 years as long term bond and 1-3 years as short term
bond) and evaluate their risk/ return parameters such as Maturity, YTM etc.
School for Continuing Education (NGA-SCE)
Course: Treasury Management in Banking
Internal Assignment Applicable for December 2019 Examination
Assignment Marks: 30
1. Explain the process (in terms of Risk/ Returns/ Ratings etc.) to select bonds in both Rising
and declining interest rates scenarios. Select one bond each from the below bonds with long
term and short term maturities (eg 10 years as long term bond and 1-3 years as short term
bond) and evaluate their risk/ return parameters such as Maturity, YTM etc.
Suggest which of these will outperform/ underperform in current interest rate scenarios.
(Assume interest are being paid annually)
|
Symbol
|
Coupon
Rate |
YTM
|
Face
Value |
Last Traded
Price |
Maturity
Date |
|
NHAI
|
8.3
|
5.6384
|
1,000
|
1,235.00
|
25-Jan-27
|
|
NHAI
|
8.2
|
5.6276
|
1,000
|
1,133.00
|
25-Jan-22
|
|
SBIN
|
9.95
|
7.886
|
10,000
|
11,445.00
|
16-Mar-26
|
|
IRFC
|
8
|
5.1262
|
1,000
|
1,137.00
|
23-Feb-22
|
|
IIHFL
|
12
|
14.6823
|
1,000
|
992.5
|
2-Apr-20
|
|
IIFCL
|
8.66
|
6.034
|
1,000
|
1,152.11
|
22-Jan-24
|
|
HUDCO
|
7.64
|
5.9595
|
1,000
|
1,180.00
|
8-Feb-31
|
|
IIFCL
|
8.91
|
5.8239
|
1,000
|
1,350.00
|
22-Jan-34
|
|
M&MFIN
|
9
|
9.0053
|
1,000
|
1,022.01
|
6-Jun-26
|
(10
Marks)
2. Explain ALM process in banks. Discuss the impacts of Positive and Negative Gaps on the
profitability of a bank in different interest rates scenarios. You are required to analyze the
above impact with the help of following balance sheet excerpts of a bank:
TABLE GIVEN BELOW
2. Explain ALM process in banks. Discuss the impacts of Positive and Negative Gaps on the
profitability of a bank in different interest rates scenarios. You are required to analyze the
above impact with the help of following balance sheet excerpts of a bank:
TABLE GIVEN BELOW
|
Balance Sheet for Hypothetical Bank
|
||||
|
Particulars
|
Assets
|
Yield
|
Liabilities
|
Cost
|
|
Rate sensitive
|
500
|
8.00%
|
600
|
4.00%
|
|
Fixed rate
|
350
|
11.00%
|
220
|
6.00%
|
|
Non-earning
|
150
|
100
|
||
|
Equity
|
80
|
|||
|
1000
|
1000
|
|||
Scenarios
for Impact analysis:
1.Interest rates increased by 1%
2.Interest rates decreased by 1%
(10 Marks)
3. Case Study:
While current accounts and savings accounts have different objectives, the banks stand to
benefit from the low cost of servicing these deposits. In the current scenarios it has been
observed that private banks such as HDFC bank, Kotak bank etc. are able to raise higher
saving account / current account deposits compared to their PSU counterparts. Also the other
income is now becoming more significant as a % share of total income of private sector
banks compared to PSUs.
In relation to above scenarios, analyze the following (With examples):
a. Why PSU banks are not able to raise money from low cost saving and current account
deposits ratios? What impact would it have on their profitability? (5 Marks)
b. What are the reasons behind increase in share of other income in total income for private
sector banks as compared to PSU banks. (5 Marks)
**********
1.Interest rates increased by 1%
2.Interest rates decreased by 1%
(10 Marks)
3. Case Study:
While current accounts and savings accounts have different objectives, the banks stand to
benefit from the low cost of servicing these deposits. In the current scenarios it has been
observed that private banks such as HDFC bank, Kotak bank etc. are able to raise higher
saving account / current account deposits compared to their PSU counterparts. Also the other
income is now becoming more significant as a % share of total income of private sector
banks compared to PSUs.
In relation to above scenarios, analyze the following (With examples):
a. Why PSU banks are not able to raise money from low cost saving and current account
deposits ratios? What impact would it have on their profitability? (5 Marks)
b. What are the reasons behind increase in share of other income in total income for private
sector banks as compared to PSU banks. (5 Marks)
**********
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