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

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Author Info

  • Amadou N. R. Sy

Abstract

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/78.

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Length: 17
Date of creation: 01 Apr 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/78

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Related research

Keywords: Risk management; Basel Core Principles; Interest rates; Banks; Risk premium; Bonds; government securities; capital adequacy; holdings of government securities; government securities holdings; capital adequacy ratio; government securities yields; securities yields; government bonds; stock exchange; capital market; interest rate swaps; monetary fund; securities portfolios; capital adequacy ratios; open market sales; dated government securities; reserve requirements; investment in government securities; securities markets; capital injection; bond portfolios; open market operations; long-term interest rates; capital control; government securities markets; liquidity ratio; bond prices; securities contracts; hedging; securities market; market for government securities; capital gains; investments in government securities; fixed income securities;

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References

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  1. International Monetary Fund, 2004. "Interest Rate Volatility and Risk in Indian Banking," IMF Working Papers 04/17, International Monetary Fund.
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Cited by:
  1. Halil Ibrahim Aydin & Cafer Kaplan & Mehtap Kesriyeli & Erdal Ozmen & Cihan Yalcin & Serkan Yigit, 2006. "Corporate Sector Financial Structure in Turkey : A Descriptive Analysis," Working Papers 0607, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Udaibir S. Das & Jay Surti & Faisal Ahmed & Michael G Papaioannou & Guilherme Pedras, 2010. "Managing Public Debt and its Financial Stability Implications," IMF Working Papers 10/280, International Monetary Fund.

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