ARIMA modelling of weighted average lending rates of Indian scheduled commercial banks and estimation of VaR: implications on asset-liability management

Upendra Nath Shukla, Rohit Kushwaha, Himanshu Mohan and Sanjay Medhavi

International Journal of Business Innovation and Research, 2025, vol. 36, issue 1, 19-41

Abstract: Weighted average lending rates (WALRs) as introduced by Reserve Bank of India (RBI) to compute effective lending rates on outstanding rupee loans, play a significant role on value at risk (VaR) and asset-liability management of Indian banks. This study aims to predict WALR of scheduled commercial banks on outstanding Rupee loans in India by taking monthly data from February 2012 to November 2020 from 'rbi.org.in'. Using Box-Jenkins methodology, AR(16)MA(11) model is modified to have adjusted ARIMA (16,19,11) or AR(16) AR(19) AR(11) model, thereby optimising the model for efficient forecasting of WALR. Forecasted values are further used to estimate value at risk (VaR) on outstanding loans. Data does not exhibit any significant volatility for GARCH adjustments. The proposed model has substantial implications on asset-liability management (ALM) and risk shifting strategies of banks to hedge themselves against VaR limits at 99% confidence, leading to an efficient risk management.

Keywords: lending rates; interest rates; commercial banks; ARIMA; forecasting; liquidity and asset-liability management; ALM; risk management; VaR; risk management. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=143941 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbire:v:36:y:2025:i:1:p:19-41

Access Statistics for this article

More articles in International Journal of Business Innovation and Research from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().