Managing the Interest Rate Risk of Indian Banksâ€™ Government Securities Holdings
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.
|Date of creation:||01 Apr 2005|
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- International Monetary Fund, 2004. "Interest Rate Volatility and Risk in Indian Banking," IMF Working Papers 04/17, International Monetary Fund.
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