A COMPREHENSIVE STUDY ON ASSET LIABILITY MANAGEMENT AND ITS ROLE IN FINANCIAL STABILITY WITH REFERENCE TO ICICI

Banks, other financial organisations, and corporations employ Asset Liability Management (ALM) as a financial strategy to mitigate risks caused by asset-liability mismatches. In order to guarantee financial stability and profitability over the long term, this research delves into the structure, significance, and methodology of ALM, with a particular emphasis on controlling interest rate risk, liquidity risk, and market risk. By coordinating the due dates and interest rates on assets and liabilities, ALM aids institutions in keeping their risk-return profiles in check, as shown in the study. Analysis of interest rate sensitivity and cash flow mismatches is done using simulation models, gap analysis, and duration analysis, among other important methods. The ALM committees (ALCO) and regulatory frameworks that oversee policy implementation and financial risk exposure reviews are also part of the scope of the research. The results imply that a bank's capacity to adapt to shifting market circumstances, new regulations, and liquidity issues is improved by efficient ALM. Optimisation of the balance sheet, capital planning, and risk management as a whole all rely on it. Findings indicate that ALM is a crucial financial discipline for long-term development and stability in uncertain economic times