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

Amadou Sy

No 2005/078, IMF Working Papers from International Monetary Fund

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.

Keywords: WP; bank; securities; interest rate; banking system; a number of bank; bank regulator (search for similar items in EconPapers)
Pages: 17
Date: 2005-04-01
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Citations: View citations in EconPapers (7)

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