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A PROJECT REPORT ON Assets and liabilities management In Comparison between two textile companies CHENNAI Submitted to



In partial fulfillment of the requirements for the award of the degree of Master of Business Administration

Submitted by


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This is to certify that the project report of Assets and liablities management in, CHENNAI is a bonafide project work done by ****** a full-time student of the Department Of Management Studies, *******, in partial fulfillment of the requirements for the award of the degree of Master of Business Administration during the year **********

Faculty, Guide Dept. of Management Studies

HOD, Dept. of Management Studies



I hereby declare that the Project entitled Assets and liablities management in comparision between two textile companies submitted to the Anna University for the award of the degree of Master of Business Administration is a record of work done by me. I also declare that this project has not been previously submitted for the award of any certificate, diploma, and associate ship or any other similar title.




This project report deals with asset and liability management followed or handled by Textile companies. It has been found Textile companies as a major nationalized textile companies needs to tone up their assets and liability management to such an extent that their assets always exceeds their liability on hand.


Asset-Liability Management matching an individual's level of debt and amount of assets. Someone who is planning to buy a new car, for instance, would have to decide whether to pay cash, thus lowering assets, or to take out a loan, thereby increasing debts (or liabilities). Such decisions should be based on interest rates, on earning power, and on the comfort level with debt. Financial institutions carry out assetliability management when they match the maturity of their deposits with the length of their loan commitments to keep from being adversely affected by rapid changes in interest rates.

Asset-Liability Management active management of a textile companies's balance sheet to maintain a mix of loans and deposits consistent with its goals for longterm growth and risk management. Textile companiess, in the normal course of business, assume financial risk by making loans at interest rates that differ from rates paid on deposits. Deposits often have shorter maturities than loans and adjust to current market rates faster than loans. The result is a balance sheet mismatch between assets (loans) and liabilities (deposits).

The function of asset-liability management is to measure and control three levels of financial risk: interest rate risk (the pricing difference between loans and deposits), credit risk (the probability of default), and liquidity risk (occurring when loans and deposits have different maturities).

A primary objective in asset-liability management is managing Net Interest Margin (NIM) , that is, the net difference between interest earning assets (loans) and interest paying liabilities (deposits) to produce consistent growth in the loan portfolio and shareholder earnings, regardless of short-term movement in interest rates. The dollar difference between assets (loans) maturing or repricing and liabilities (deposits) is known as the rate sensitivity gap (or maturity gap). Textile companiess attempt to manage this asset-liability gap by pricing some of their loans at variable interest rates.

Amore precise measure of interest rate risk is duration , which measures the impact of changes in interest rates on the expected maturities of both assets and liabilities. In essence, duration takes the gap report data and converts that information into present-value worth of deposits and loans, which is more meaningful in estimating maturities and the probability that either assets or liabilities will reprice during the period under review. Besides financial institutions, nonfinancial companies also employ asset-liability management, mainly through

the use of derivative contracts to minimize their exposures on the liability side of the balance sheet.

Asset-liability management (ALM) is a term whose meaning has evolved. It is used in slightly different ways in different contexts. ALM was pioneered by financial institutions, but corporations now also apply ALM techniques. This article describes ALM as a general concept, starting with more traditional usage. Traditionally, textile companiess and insurance companies used accrual accounting for essentially all their assets and liabilities. They would take on liabilities, such as deposits, life insurance policies or annuities. They would invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured. Consider a textile companies that borrows USD 100MM at 3.00% for a year and lends the same money at 3.20% to a highly-rated borrower for 5 years. For simplicity, assume interest rates are annually compounded and all interest accumulates to the maturity of the respective obligations. The net transaction appears profitablethe textile companies is earning a 20 basis point spread but it entails considerable risk. At the end of a year, the textile companies will

have to find new financing for the loan, which will have 4 more years before it matures. If interest rates have risen, the textile companies may have to pay a higher rate of interest on the new financing than the fixed 3.20 it is earning on its loan.


Industry profile helps to gain an insight into the evolution of the industry and competitive dynamics prevalent in the market. It discusses the significant developments in the industry and analyzes the key trends and issues. The profile provides inputs in strategic business planning of industry professionals.

This profile is of immense help to management consultants, analysts, market research organizations and corporate advisors.

The objective and scope of various sections of our industry profile has been discussed below.

Industry Snapshot

This section gives a holistic overview of the industry. It starts with defining the market and goes on to give historical and current market size figures. It also clearly illustrates the major segments of the market which would be discussed later on in the report.

Industry Analysis It involves a comprehensive analysis of the industry and its market segments. This section discusses the key developments that have taken place in the industry. It also identifies and analyzes the driving factors and challenges of the industry. A description of the regulatory structure tells us about the major regulatory bodies, laws and government policies.

Country Analysis This section presents the key facts & figures of the country. It also discusses the political environment and the macroeconomic indicators. It analyzes government stability and economic growth of the country.

Competitor Assessment This section compares the major competitors in the industry. The Competitors Ata-Glance is aimed at giving an overview of the competitive landscape in the industry.

We worked on Ashraf textile mills ltd. & Saiham textilemills ltd for our report. Source of Data:

For our report we collect data for finding &analysis. At first we collected the annual report & take financial statements of two companies. We also collected some data from the internet.

Methodology: As a rule, we had to follow a particular method for collecting data to complete the report accurately. At first we make Income Statement, Balance Sheet & Cash Flow on a excel sheet. Than we analysis the Income Statement & the Balance Sheet using the common sizing & indexing method.


In our country textile companies are doing very well business. So many competitors are in this sector. Lots of new companies entered this market. From all of them we choose two cement companies for our report. We collect their financial statement & analyze them within three methods & we identify their comparative advantage.

Saiham Textile Ltd.

Late Syed Sayeed Uddin Ahmed & Begum Hamida Banu, in remembranceof whom, Saiham Textile Mills Limited has deriv ed the name of thecompanies; would have been proud to know how well their offspring have managed and extended the organization. Saiham Textile Mills was set up in Noyapara, Hobiganj district in the year 1982 with an annual capacity of 7.5 m yards of finished cloth. It was equipped with modern and sophisticated machineries from Japan. Initially it was a weaving, dyeing printing and finishing plant. Saiham Textile claims to be the pioneer in introducing the concept of modern fabrics in Bangladesh.They were one of the first textile mills to start inte rnational standard polyester fabric, TC fabric, synthetic and Georgette sarees with cross border. The mother companies of

the present conglomerate is now comprised of different industrial concerns. The entrepreneurship of Saiham consists of five directors, all from the same family. Although a compani es run andmanaged by relatives, the standard and efficiency of the management does not compromise on its quality.

Ashraf Textile mills Ltd


textile mills ltd is one of the another companies which is run and managed by relatives, the standard and efficiency of the management does not compromise on its quality

Findings & Analysis:

According to our report subject our main objective is identifyin g thedifference between two companies financial statement. Also we want to findout which companies is more stable & which is not stable. From the financial statement we can find out our requirements .In below we give our finding & analysis in basis of companiess financial statement.

Analyze of Income Statement, Balance Sheet between two companies:

In below we are going to discuss about the two companies balance sheet, Income Statement & Cash flow comparison in a briefly :

Balance Sheet Comparison:


From the balance sheet of the both companies we can identify that Ashraf textile had 504,741,251

tk total assets in 2005 but on the other hand Saiham textile had only 425,320,371 that total asset in 2003-2004. Next year Ashraf Textile Companiess total asset was decreased and Saiham textile companiess total assets increase and in 2007 Ashraf textile reached in 167,726,578 that whereas in 2005-2006 Saiham textiles total asset 436,650,516 tk. For the total asset volume we can say that Saiham textile has more powerful rather than Ashraf textile.
Liability: The total liability we saw that Ashraf textile had 623,823,012 liabilities in 2005 & Saiham textile had 152,581,718 only in 2003-2004.Bothcompanies liabilities were also increased in next year. But clearly we can comments that Ashraf textile had least liability than the Saiham textile. However Saiham textile had the more Net asset than the Ashraf textile. Share holders equity we can easily understand that Saiham textile had the more equity and it was 818,663,635 tk for 2004-06 & Ashraf textile had -1,123,244,182

. So we can say that Saiham textile had the more investment in the market

Income Statement Comparison:

From our income statement we can identify that Saiham textile has a profit 74, 932,529 in 2008& 52,001,246 tk in 2009 & 57,295,427 tk in 2010. From this we can say that the profit is decreasing by next two years. And this shows that sale for Saiham textile decreasing during the next two year. On the other hand Ashraf textile is in a loss of -62,609,854 that in 2005 & -122,738,787 tk in 20010 & -14,064,257 tk in 20011. They continue their business in loss where Saiham textile doing their business with profitability.

Analyzing Common Sizing & Indexing: In common size analysis we express the various components of a balance sheet as percentage of the total assets of the companies .In addition this can be done for the income statement, but here items are related to net sales .In Ashraf textile balance sheets over the three year span the percentage

of current assets increased.On the other hand S aiham textile current assetsfluctuated. We see that Ashraf textile account receivable showed a relative decreased from 2005 to 2007.Saiham textile account receivable fluctuated from 200304 to 2005-2006.On the liability & equity portion of the balance sheets, Ashraf textile total debt of the companies decline on a relative basis from 2005 to 2007.but Saiham textile total debt decreased in 2004-2005 &increased in 20052006.The common size income statement show the gross profit/loss margin from year to year. We see that Ashraf textile operating expenses increase year to year & in 2007 increases sharply .where as Saiham textile operating expensesdiccreased in 20042005 & increase again in 2005-2006.In 20052007Ashraf textiles net profit had negative percentage, whereas Saiham textiles net profit increased. In indexes analysis all financial statement items are 100%. In 2006 & 2007Ashraf textile current assets indexed is 91.53 & 9.95 whereas Saiham textile current assets s indexed is 116.26 & 100.93 in 20042005 & 2005-2006.The indexed income statements give much the same picture as the common size income statements namely, fluctuating be

havior. In Ashraf textileincome statement total gross loss i ndexed are 100, 196.037491 &22.46332822 in 2009 , 2010 & 2011.Whereas Saiham textiles gross profit are 100, 69.3974 & 76.4626 in 200708, 2008-09 & 2009-2010.

We examine the analysis of Ashraf textile & Saiham textile mills ltd. We see that the liquidity position is nit good both of the companies. Comparatively Saiham textile better than Ashraf textile mills ltd. Ashraf textile mills ltd should change the credit policy & proper use of its assets. The profitability ratio of Ashraf textile mills ltd. Good than the Saiham textile mills ltd. The companies should avoid the use of debt; otherwise companies would be fall into textile companies bankruptcy



o To analyze and understand the asset and liability management of two textile companies


o To identify the existing falls in the current system related to asset and liabilities management of Textile Companies. o To suggest the remedial measures that will help in greater assets and lesser liability in the system of Textile Companies.


1. The sample size is small. 2. The period of 4 months is limited to conduct the study.

Asset - Liability Management System in textile Guidelines

Over the last few years the Indian financial markets have witnessed wide ranging changes at fast pace. Intense competition for business involving both the assets and liabilities, together with increasing volatility in the domestic interest rates as well as foreign exchange rates, has brought pressure on the management of textile companiess to maintain a good balance among spreads, profitability and long-term viability. These pressures call for structured and comprehensive measures and not just ad hoc action. The Management of textile companies has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. Textile companiess are exposed to several major risks in the course of their business - credit risk, interest rate risk, foreign exchange risk, equity / commodity price risk, liquidity risk and operational risks.

2. This note lays down broad guidelines in respect of interest rate and liquidity risks management systems in textile companies which form part of the AssetLiability Management (ALM) function. The initial focus of the ALM function would

be to enforce the risk management discipline viz. managing business after assessing the risks involved. The objective of good risk management programmers should be that these programmers will evolve into a strategic tool for textile companies management. 3. The ALM process rests on three pillars: ALM information systems => Management Information System => Information availability, accuracy, adequacy and expediency ALM organization => Structure and responsibilities => Level of top management involvement ALM process => Risk parameters => Risk identification => Risk measurement => Risk management => Risk policies and tolerance levels.

The Statistical Cost Accounting (SCA) method is used to test whether assets and liabilities of a textile companies can in fact help forecast its profits. Gup and Brooks (1993) argued that "asset and liability management in textile companiess is defined as the simultaneous planning of all asset and liability positions on the textile companies's balance sheet under consideration of the different textile companies management objectives and legal, managerial and market constraints, for the purpose of mitigating interest rate risk, providing liquidity and enhancing the value of the textile companies."

Due to the competition in the financial markets, textile companies seek out greater efficiency in the management of their assets and liabilities. The core issue of Asset-Liability Management (ALM) is the textile companies's balance sheet and the main question is: Given a certain level of risk, government regulation, globalization, competitors, alternative choices of investment, liquidity and interest rate changes in the market, what should be the composition of a textile companies's assets and liabilities in order to maximize the textile companies's profit? What should be the optimal combination of ALM? These are the two questions raised by Kosmidou et al (2004) who argued that the optimal balance between these factors cannot be found without considering important

interactions that exist between the structure of a textile companies's liability and capital and the compositions of its assets.

Accurately evaluating and measuring the performance of commercial textile companies is not an easy task. Textile companies differ in their sizes and this will have an effect on responsibilities of management, liquidity, debt level and profitability. A textile companies assets and liabilities will affect its valuation in the market, its ability to acquire other textile companies or to be acquired at a good price. Therefore, a complete picture of the textile companies, in the form of its financial position, i.e. its balance sheet, should be studied and evaluated to be able to acceptably predict its future performance. Profits generated by listed textile companies always give positive signals to the stock market, and hence help to achieve the main goal of textile companies, which is maximizing its wealth for shareholders. The main source of profits generated by a textile companies is the balance sheet portfolio: the assets, liabilities, and capital which are considered important components in determining profits.

The aim of this study is to develop models for assets-liability management as a risk-return management of the textile companiesing industry in Kuwait. In another words, the operating profit will be examined to see how it is determined together

with determining what factors from the balance sheet create the profits of the textile companies and what factors deteriorate it. Since the balance sheet is composed of assets and liabilities, this means that we are talking about rate of return on assets and cost of borrowing on liabilities. Therefore, the risk and return concept is also significant at this stage because textile companies are tested to see whether they are a "risk machine" or not. This means that a textile companies is expected to take risk and transform it to services, products and then profits.

The study investigates risk factors such as liquidity, credit and capital risk that mostly derive profits (these are explained in the next section). The risk-return relationship in the textile companiesing industry will affect its valuation in the market. Fraser and Fraser (1991) argued that decisions, which increase the profitability of the textile companies without increasing its risk, would obviously make the textile companies more valuable to its shareholders. Similarly, decisions which reduce the risk of the textile companies without reducing its profitability will also increase the value of the shareholder wealth. Therefore, all decisions made by management have an effect on risk and returns.

Fraser and Fraser (1991) argued that the financial performance of commercial textile companies is better if its profit is high and its risk is low. But since, generally, investors are assumed to be risk averse, high profit to them means accepting high risk. Therefore, management should have a good trade-off

between risk and return. Management should always ask questions about the level of returns generated compared to the level of risk taken. The most common ratios that measure the level of risk in the textile companies industry ate categorized into: Credit risk, Capital risk and Liquidity risk. A brief explanation for each level of risk is given below.

The total international assets and liabilities of textile companies in India increased by Rs 11,191 crore ($4.664 billion) and Rs 20,237 crore ($8.662 billion) respectively in 2003-04.

The increase in assets was mainly due to an increase in foreign currency loans to residents. The international liabilities rose sharply due an increase in foreign currency borrowings from abroad, Foreign Currency Non-Resident (B) (FCNR(B)) deposits and American/Global Depository Receipts (ADRs/ GDRs).

As of March-end 2004, the outstanding international assets and liabilities of textile companies in India stood at Rs 1,15,765 crore (Rs 1,04,574 crore as of March 31, 2003) and Rs 2,20,730 crore (Rs 2,00,493 crore) respectively, according to the Reserve Textile companies of Indias latest monthly bulletin.

A break-up of the international liabilities shows that as of March-end 2004, the outstanding FCNR (B) deposits amounted to $10.46 billion ($9.261 billion); NonResident External Rupee accounts : $17.501 billion ($11.184 billion); foreign currency borrowings : $7.743 billion ($3.876 billion); and bonds (including Resurgent India Bonds and India Millennium Bonds) : $6.389 billion ($9.281 billion).

Among others, non-repairable deposits deposits were down to $2.680 billion ($4.013 billion), non-debt credits, including ADRs/GDRs and equities of textile companies held by NRIs were at $3.230 billion ($2.205 billion) and foreign currency liabilities to residents stood at $1.985 billion ($1.668 billion).

The NRE rupee deposits had the maximum share of 34.4% in total international liabilities as on March 31, 2004 as compared with 26.5% a year ago. The RBI said the continuous increase in outstanding amount for NRE deposits could be attributable to the crediting of maturity proceeds under NR(NR)RD accounts to the account holders NRE rupee deposit accounts. The currency composition of international assets as of March 31, 2004 showed that the assets held in dollar continued to account for the maximum share at 79.4% (77.2%) in the total international assets of textile companies. Next comes the pound sterling at 5.6% (7.5%).

As regards currency liabilities, the dollar held the maximum share at 47.4% (51.3%), followed by rupee liabilities at 44% (40.6%).

The consolidated international claims of textile companies, in rupee terms, declined continuously from Rs 91,061 crore as at March-end 2003 to Rs 78,124 crore as of March-end 2004. However, in dollar terms, these claims amounted to $18.005 billion as at March-end 2004 as compared to $19.171 billion as at March-end 2003.

The Textile companies international liabilities and assets have increased. And the international liabilities of textile companies have almost doubled than that of their international assets. The latest data published by the Reserve Textile companies of India (RBI) which compiles figures of all authorized dealers (AD) branches of 87 commercial and co-operative textile companies has shown that while the international liabilities of textile companies increased by 10.6%, international assets went up by 5% as of September-end 2005, as against the position in the previous quarter.

A plausible explanation for the mismatch of international assets and liabilities for textile companies in India could be deployment of the funds mobilized abroad in the domestic market in the domestic currency, the RBI said. The international

liabilities of textile companies rose by Rs 27,745 crore due to an increase in foreign currency borrowings, NRE deposits, ADRs/GDRs and equities of textile companies held by non-residents. The rise in international liabilities over the year was Rs 60,841 crore (26.7 %). The liabilities denominated in foreign currencies accounted for 57.5 % of the total international liabilities by September-end 2005, registering an increase over the share of 56.1% in the previous year.

The international assets jumped by Rs 6,426 crore during the reporting period. The increase was mainly because of considerable increase in outstanding export bills drawn on non-residents and foreign currency loans to the residents. The assets denominated in foreign currencies accounted for 96.8% of total international assets as of September-end 2005, increasing marginally from 96.4% as against the previous quarter. The currency composition of international liabilities as of September 2005 showed that the liabilities in US dollar chipped in with the maximum share(47.3%), followed by liabilities in Indian rupee (42.5 %) and Pound sterling (5.2%).

Major component-wise international liabilities of textile companies in India shows Deposits and loans accounted for the highest share at 78.5% of total international liabilities of textile companies which declined by 1.2 and 3.3 percentage points over the share in the previous quarter and a year ago, respectively. The share of own issues of debt securities, including IMDs, showed a decline over the position in the previous quarter as well as a year ago.

The share of other liabilities in total international liabilities of textile companies in India at September-end 2005 increased by 2.2 percentage points as compared to its share in the previous quarter and 5 percentage points as against its share a year ago.

ALM information systems

Information is the key to the ALM process. Considering the large network of branches and the lack of an adequate system to collect information required for ALM which analyses information on the basis of residual maturity and behavioral pattern it will take time for textile companies in the present state to get the requisite information. The problem of ALM needs to be addressed by following an

ABC approach i.e. analyzing the behavior of asset and liability products in the top branches accounting for significant business and then making rational assumptions about the way in which assets and liabilities would behave in other branches. In respect of foreign exchange, investment portfolio and money market operations, in view of the centralized nature of the functions, it would be much easier to collect reliable information. The data and assumptions can then be refined over time as the textile companys management gain experience of conducting business within an ALM framework.

The spread of computerization will also help textile companies in accessing data.

ALM organization

a) The Board should have overall responsibility for management of risks and should decide the risk management policy of the textile companies and set limits for liquidity, interest rate, foreign exchange and equity price risks.

b) The Asset - Liability Committee (ALCO) consisting of the textile companie's senior management including CEO should be responsible for ensuring

adherence to the limits set by the Board as well as for deciding the business strategy of the textile companies (on the assets and liabilities sides) in line with the textile companie's budget and decided risk management objectives. c) The ALM desk consisting of operating staff should be responsible for analyzing, monitoring and reporting the risk profiles to the ALCO. The staff should also prepare forecasts (simulations) showing the effects of various possible changes in market conditions related to the balance sheet and recommend the action needed to adhere to textile companies internal limits.

The ALCO is a decision making unit responsible for balance sheet planning from risk - return perspective including the strategic management of interest rate and liquidity risks. Each textile companies will have to decide on the role of its ALCO, its responsibility as also the decisions to be taken by it. The business and risk management strategy of the textile companies should ensure that the textile companies operate within the limits / parameters set by the Board. The business

issues that an ALCO would consider, inter alia, will include product pricing for both deposits and advances, desired maturity profile of the incremental assets and liabilities, etc. In addition to monitoring the risk levels of the textile companies, the ALCO should review the results of and progress in implementation of the decisions made in the previous meetings. The ALCO would also articulate the current interest rate view of the textile companies and base its decisions for future business strategy on this view. In respect of the funding policy, for instance, its responsibility would be to decide on source and mix of liabilities or sale of assets. Towards this end, it will have to develop a view on future direction of interest rate movements and decide on a funding mix between fixed vs. floating rate funds, wholesale vs. retail deposits, money market vs. capital market funding, domestic vs foreign currency funding, etc. Individual textile companies will have to decide the frequency for holding their ALCO meetings.

Composition of ALCO

The size (number of members) of ALCO would depend on the size of each institution, business mix and organizational complexity. To ensure commitment of the Top Management, the CEO/CMD or ED should head the Committee. The Chiefs of Investment, Credit, Funds Management / Treasury (forex and domestic), International Textile companies and Economic Research can be members of the Committee. In addition the Head of the Information Technology

Division should also be an invitee for building up of MIS and related computerization. Some textile companies may even have sub-committees.

Committee of Directors

Textile companies should also constitute a professional Managerial and Supervisory Committee consisting of three to four directors which will oversee the implementation of the system and review its functioning periodically.

ALM process:

The scope of ALM function can be described as follows: Liquidity risk management Management of market risks Funding and capital planning (including Interest Rate Risk)

Profit planning and growth projection Trading risk management The guidelines given in this note mainly address Liquidity and Interest Rate risks.

Liquidity Risk Management 6.1 Measuring and managing liquidity needs are vital activities of commercial textile companies. By assuring a textile companys ability to meet its liabilities as they become due, liquidity management can reduce the probability of an adverse situation developing. The importance of liquidity transcends individual institutions, as liquidity shortfall in one institution can have repercussions on the entire system. Textile companies management should measure not only the liquidity positions of textile companies on an ongoing basis but also examine how liquidity requirements are likely to evolve under crisis scenarios.

Experience shows that assets Commonly considered as liquid like Government securities and other money market instruments could also become illiquid when the market and players are unidirectional. Therefore liquidity has to be tracked through maturity or cash flow mismatches. For measuring and managing net funding requirements, the use of a maturity ladder and calculation of cumulative surplus or deficit of funds at selected maturity dates is adopted as a standard tool. The Maturity Profile as given in Appendix I could be used for measuring the future cash flows of textile companies in different time buckets. The time

buckets given the Statutory Reserve cycle of 14 days may be distributed as under: i) 1 to 14 days ii) 15 to 28 days iii) 29 days and upto 3 months iv) Over 3 months and upto 6 months v) Over 6 months and upto 12 months vi) Over 1 year and upto 2 years vii) Over 2 years and upto 5 years viii) Over 5 years

Within each time bucket there could be mismatches depending on cash inflows and outflows. While the mismatches upto one year would be relevant since these provide early warning signals of impending liquidity problems, the main focus should be on the short-term mismatches viz., 1-14 days and 15-28 days. Textile companiess, however, are expected to monitor their cumulative mismatches (running total) across all time buckets by establishing internal prudential limits with the approval of the Board / Management Committee. The mismatch during 1-14 days and 15-28 days should not in any case exceed 20% of the cash

outflows in each time bucket. If a textile companies in view of its asset -liability profile needs higher tolerance level, it could operate with higher limit sanctioned by its Board / Management Committee giving reasons on the need for such higher limit. A copy of the note approved by Board / Management Committee may be forwarded to the Department of Textile companiesing Supervision, RBI. The discretion to allow a higher tolerance level is intended for a temporary period, till the system stabilises and the textile companies is able to restructure its asset -liability pattern.

The Statement of Structural Liquidity ( Annexure I ) may be prepared by placing all cash inflows and outflows in the maturity ladder according to the expected timing of cash flows. A maturing liability will be a cash outflow while a maturing asset will be a cash inflow. It would be necessary to take into account the rupee inflows and outflows on account of forex operations including the readily available forex resources ( FCNR (B) funds, etc) which can be deployed for augmenting rupee resources. While determining the likely cash inflows / outflows, textile companiess have to make a number of assumptions according to their asset - liability profiles. For instance, Textile companiess with large branch network can (on the stability of their deposit base as most deposits are renewed) afford to have larger tolerance levels in mismatches if their term deposit base is quite high. While determining the tolerance levels the textile companiess may take into account all relevant

factors based on their asset-liability base, nature of business, future strategy etc. The RBI is interested in ensuring that the tolerance levels are determined keeping all necessary factors in view and further refined with experience gained in Liquidity Management.

In order to enable the textile companiess to monitor their shortterm liquidity on a dynamic basis over a time horizon spanning from 1-90 days, textile companiess may estimate their short-term liquidity profiles on the basis of business projections and other commitments.

Currency Risk

Floating exchange rate arrangement has brought in its wake pronounced volatility adding a new dimension to the risk profile of textile

companiess' balance sheets. The increased capital flows across free economies following deregulation have contributed to increase in the volume of transactions. Large cross border flows together with the volatility has rendered the textile companiess' balance sheets vulnerable to exchange rate movements. Dealing in different currencies brings opportunities as also risks. If the liabilities in one currency exceed the level of assets in the same currency, then the currency mismatch can add value or erode value depending upon the currency movements. The simplest way to avoid currency risk is to ensure that mismatches, if any, are reduced to zero or near zero. Textile companiess undertake operations in foreign exchange like accepting deposits, making loans and advances and quoting prices for foreign exchange transactions. Irrespective of the strategies adopted, it may not be possible to eliminate currency mismatches altogether. Besides, some of the institutions may take proprietary trading positions as a conscious business strategy.

Managing Currency Risk is one more dimension of Asset- Liability Management. Mismatched currency position besides exposing the balance sheet to movements in exchange rate also exposes it to country risk and settlement risk. Ever since the RBI (Exchange Control Department) introduced the concept of end of the day near square position in 1978, textile companiess have been setting up overnight limits and selectively undertaking active day time trading. Following the

introduction of "Guidelines for Internal Control over Foreign Exchange Business" in 1981, maturity mismatches (gaps) are also subject to control. Following the recommendations of Expert Group on Foreign Exchange Markets in India (Sodhani Committee) the calculation of exchange position has been redefined and textile companiess have been given the discretion to set up overnight limits linked to maintenance of additional Tier I capital to the extent of 5 per cent of open position limit. Presently, the textile companiess are also free to set gap limits with RBI's approval but are required to adopt Value at Risk (VaR) approach to measure the risk associated with forward exposures. Thus the open position limits together with the gap limits form the risk management approach to forex operations. For monitoring such risks textile companiess should follow the instructions contained in Circular A.D (M. A. Series) No.52 dated December 27, 1997 issued by the Exchange Control Department.

Interest Rate Risk (IRR) 8.1 The phased deregulation of interest rates and the operational flexibility given to textile companiess in pricing most of the assets and liabilities have exposed the textile companiesing system to Interest Rate Risk. Interest rate risk is the risk where changes in market interest rates might adversely affect a textile

companies's financial condition. Changes in interest rates affect both the current earnings (earnings perspective) as also the net worth of the textile companies (economic value perspective). The risk from the earnings' perspective can be measured as changes in the Net Interest Income (Nil) or Net Interest Margin (NIM). In the context of poor MIS, slow pace of computerisation in textile companiess and the absence of total deregulation, the traditional Gap analysis is considered as a suitable method to measure the Interest Rate Risk. It is the intention of RBI to move over to modern techniques of Interest Rate Risk measurement like Duration Gap Analysis, Simulation and Value at Risk at a later date when textile companiess acquire sufficient expertise and sophistication in MIS. The Gap or Mismatch risk can be measured by calculating Gaps over different time intervals as at a given date. Gap analysis measures mismatches between rate sensitive liabilities and rate sensitive assets (including off-balance sheet positions). An asset or liability is normally classified as rate sensitive if:

i) within the time interval under consideration, there is a cash flow; ii) the interest rate resets/reprices contractually during the interval; iii) RBI changes the interest rates (i.e. interest rates on Savings Textile companies Deposits, advances upto Rs.2 lakhs, DRI advances, Export credit,

Refinance, CRR balance, etc.) in cases where interest rates are administered ; and iv) it is contractually pre-payable or withdrawable before the stated maturities.

The Gap Report should be generated by grouping rate sensitive liabilities, assets and offbalance sheet positions into time buckets according to residual maturity or next repricing period, whichever is earlier. The difficult task in Gap analysis is determining rate sensitivity. All investments, advances, deposits, borrowings, purchased funds etc. that mature/reprice within a specified timeframe are interest rate sensitive. Similarly, any principal repayment of loan is also rate sensitive if the textile companies expects to receive it within the time horizon. This includes final principal payment and interim instalments. Certain assets and liabilities receive/pay rates that vary with a reference rate. These assets and liabilities are repriced at pre-determined intervals and are rate sensitive at the time of repricing. While the interest rates on term deposits are fixed during their currency, the advances portfolio of the textile companiesing system is basically floating. The interest rates on advances could be repriced any number of occasions, corresponding to the changes in PLR.

The Gaps may be identified in the following time buckets: i) upto 1 month ii) Over one month and upto 3 months iii) Over 3 months and upto 6 months

iv) Over 6 months and upto 12 months v) Over 1 year and upto 3 years vi) Over 3 years and upto 5 years vii) Over 5 years viii) Non-sensitive

The various items of rate sensitive assets and liabilities in the Balance Sheet may be classified as explained in Appendix - II and the Reporting Format for interest rate sensitive assets and liabilities is given in Annexure II.

The Gap is the difference between Rate Sensitive Assets (RSA) and Rate Sensitive Liabilities (RSL) for each time bucket. The positive Gap indicates that it has more RSAs than RSLs whereas the negative Gap indicates that it has more RSLs. The Gap reports indicate whether the institution is in a position to benefit from rising interest rates by having a positive Gap (RSA > RSL) or whether it is in a position to benefit from declining interest rates by a negative Gap (RSL > RSA). The Gap can, therefore, be used as a measure of interest rate sensitivity.

Each textile companies should set prudential limits on individual Gaps with the approval of the Board/Management Committee. The prudential limits should have a bearing on the total assets, earning assets or equity. The textile companiess

may work out earnings at risk, based on their views on interest rate movements and fix a prudent level with the approval of the Board/Management Committee. RBI will also introduce capital adequacy for market risks in due course.

The classification of various components of assets and liabilities into different time buckets for preparation of Gap reports (Liquidity and Interest Rate Sensitivity) as indicated in Appendices I & II is the benchmark. Textile companiess which are better equipped to reasonably estimate the behavioural pattern, embedded options, rolls-in and rolls-out, etc of various components of assets and liabilities on the basis of past data / empirical studies could classify them in the appropriate time buckets, subject to approval from the ALCO / Board. A copy of the note approved by the ALCO / Board may be sent to the Department of Textile companiesing Supervision.

Basis of Asset-Liability Management

Traditionally, textile companiess and insurance companies used accrual system of accounting for all their assets and liabilities. They would take on liabilities such as deposits, life insurance policies or annuities. They would then invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All these assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured.

Consider a textile companies that borrows 1 Crore (100 Lakhs) at 6 % for a year and lends the same money at 7 % to a highly rated borrower for 5 years. The net transaction appears profitable-the textile companies is earning a 100 basis point spread - but it entails considerable risk. At the end of a year, the textile companies will have to find new financing for the loan, which will have 4 more years before it matures. If interest rates have risen, the textile companies may have to pay a higher rate of interest on the new financing than the fixed 7 % it is earning on its loan.

Suppose, at the end of a year, an applicable 4-year interest rate is 8 %. The textile companies is in serious trouble. It is going to earn 7 % on its loan but would have to pay 8 % on its financing. Accrual accounting does not recognize this problem. Based upon accrual accounting, the textile companies would earn Rs 100,000 in the first year although in the preceding years it is going to incur a loss.

The Asset Liability Management (ALM) team is responsible for allocating funding to various lending products, and for ensuring that the currency, interest rate and maturity sensitivity characteristics of the Textile companiess assets and liabilities are within prescribed risk parameters. To achieve this, ALM makes extensive use of derivative instruments including currency swaps, interest rate swaps and other interest rate management products.

The ALM team develops new products and innovative market solutions tailored to meet clients individual hedging needs. As part of this, they collaborate with other units to provide technical training to borrowers on pricing, market execution and credit aspects of hedging products and participates in negotiations on Master Derivatives Agreements (MDAs) with borrowers. The ALM team works closely with clients to develop hedging strategies and market tools to achieve their specific debt management objectives.

The actual concept of ALM is however much wider, and of greater importance to textile companiess' performance. Historically, ALM has evolved from the early practice of managing liquidity on the textile companies's asset side, to a later shift to the liability side, termed liability management, to a still later realisation of using both the assets as well as liabilities sides of the balance sheet to achieve optimum resources management. But that was till the 1970s. In the 1980s, volatility of interest rates in USA and Europe caused the focus to broaden to

include the issue of interest rate risk. ALM began to extend beyond the textile companies treasury to cover the loan and deposit functions. The induction of credit risk into the issue of determining adequacy of textile companies capital further enlarged the scope of ALM in later 1980s. In the current decade, earning a proper returnof textile companies equity and hence maximisation of its market value has meant that ALM covers the management of the entire balance sheet of a textile companies. This implies that the textile companies managements are now expected to target required profit levels and ensure minimisation of risks to acceptable levels to retain the interest of investors in their textile companiess. This also implies that costing and pricing policies have become of paramount importance in textile companiess.

In the regulated textile companiesing environment in India prior to the 1990s, the equation of ALM to liquidity management by textile companiesers could be understood. There was no interest rate risk as the interest rates were regulated and prescribed by the RBI. Spreads between the deposit and lending rates were very wide (these still are considerable); also, these spreads were more or less uniform among the commercial textile companiess and were changed only by RBI. If a textile companies suffered significant losses in managing its textile companiesing assets, the same were absorbed by the comfortably wide spreads. Clearly, the textile companies balance sheetwas not being managed by textile companiess themselves; it was being `managed' through prescriptions of the regulatory authority and the government. This situation has now changed.

The textile companiess have been given a large amount of freedom to manage their balance sheets. But the knowledge, new systems and organisational changes that are called for to manage it, particularly the new textile companiesing risks, are still lagging. The turmoil in domestic and international markets during the last few months and impending changes in the country's financial system are a grim warning to our textile companies managements to gear up their balance sheet management in a single heave. To begin with, as the RBI's monetary and credit policy of October 1997 recommends, an adequate system of ALM to incorporate comprehensive risk management should be introduced in the PSBs. It is suggested that the PSBs should introduce ALM which would focus on liquidity management , interest rate risk management and spread management. Broadly, there are 3 requirements to implement ALMin these textile companiess, in the stated order: (a) developing a better understanding of ALM concepts, (b) introducing an ALM information system, and, (c) setting up ALM decision-making processes (ALM Committee/ALCO). The above requirements are already met by the new private sector textile companiess, for example. These textile companiess have their balance sheets available at the close of every day. Repeated changes in interest rates by them during the last 3 months to manage interest rate risk and their maturity mismatches are based on data provided by their MIS. In contrast, loan and

deposit pricing by PSBs is based partly on hunches, partly on estimates of internal macro data, and partly on their competitors' rates.

Description of Textile companies Asset and Liability Management

Textile companiess are a vital part of the global economy, and the essence of textile companiesing is asset liability management (ALM). This book is a comprehensive treatment of an important financial market discipline. A reference text for all those involved in textile companiesing and the debt capital markets, it describes the techniques, products and art of ALM. Subjects covered include textile companies capital, money market trading, risk management, regulatory capital and yield curve analysis.Highlights of the book include detailed coverage of: liquidity, gap and funding risk management; hedging using interest rate derivatives and credit derivatives; impact of Basel II; securitisation and balance sheet management; structured finance products including asset backed commercial paper, mortgage backed securities, collateralised debt obligations and structured investment vehicles, and their role in ALM; and treasury operations and group transfer pricing. Concepts and techniques are illustrated with case studies and worked examples. Written in accessible style, this book is essential reading for market practitioners, textile companies regulators and graduate students in textile companiesing and finance.

It includes free CD-ROM that contains software on applications described in the book, including a yield curve model, cubic spline spreadsheet calculator and CDO waterfall model.

Assets and Liabilities in Textile companies

The money a textile companies receives as deposits from both individuals and large companies becomes a textile companiess liability. The textile companies receives assets in the form of the interest it charges on loans made to governments, businesses, and private individuals. The chart shown here depicts how this process works.

Assets and liabilities are both affected by interest rate changes, so measuring and managing interest rate risk is the key to making sure your asset and liability mix performs at its peak. Proper management of the total exposure, maturity schedules, and nominal rates on both side of the equation can dramatically reduce damages and increase net profits. To acquire and maintain these skills in the face of new instruments and volatile environments, A/L managers and staff need effective, affordable, ongoing training.

Sheshunoff provides just such training in the Asset/Liability Management Computer-Based Training program. This self-paced program covers all areas of A/L management so there are no gaps. The CD goes from the basics of measuring and managing interest rate risk to specific management tactics and more complex A/L management concepts and tools. The program adapts the level of training to fit the level of the student, so beginners can master the basics and more experienced A/L managers can advance their skills.

Self-paced format allows users to absorb information at their own pace and retain more. Program adapts to the user's level so it works for both beginners and more experienced A/L managers. Coverage includes all areas of A/L management, including measuring and managing interest rate risk, specific tactics, liquidity, portfolio management, derivatives, and more.

Textile companiess are a vital part of the global economy, and the essence of textile companiesing is asset-liability management (ALM). This book is a comprehensive treatment of an important financial market discipline. A reference text for all those involved in textile companiesing and the debt capital markets, it describes the techniques, products and art of ALM. Subjects covered include textile companies capital, money market trading, risk management, regulatory capital and yield curve analysis. Highlights of the book include detailed coverage of:

liquidity, gap and funding risk management hedging using interest-rate derivatives and credit derivatives impact of Basel II securitisation and balance sheet management structured finance products including asset-backed commercial paper, mortgage-backed securities, collateralised debt obligations and structured investment vehicles, and their role in ALM

treasury operations and group transfer pricing.

What are these words, and what do they share in common? Well, as we begin to understand the financial terms used each day, and how they interrelate to each other, these three words are going to be key players. Almost every possession we ever acquire, personal or business, will consist of an asset value, a liability value, and the equity we have in the possession.

The term asset refers to something that is of value to use. Our education is an asset, albeit and intangible one, it is an asset. Our cars are assets, and this would be a tangible asset that we can actually see and touch. Do we owe for our car? If so, the loan associated with our car is a liability. The difference between the asset value and the liability value of the loan is our equity in the car. This is as brief a summation of these terms, however these terms do need some further explanation and exploration.

An asset. So many things that come into our lives will be classified as assets. Our homes, our cars, our education, our possessions, they will all constitute our assets. We dont often think of them in these terms. Quite honestly, assets and liabilities are generally used only by business people and accountants. In reality however, we should really have a grasp on what our assets are, and what they can mean to us, financially.

For instance, your education is an asset. It is known as an intangible asset, because you cant actually see your education. It is an asset nonetheless because it gives you increased knowledge of a specific subject. You are able to turn this education into a greater income than the individual without an education.

What is the term liability going to refer to? Liability is a debt we owe, we incur, or are otherwise responsible for repaying. Why do we have liabilities? If you borrow money to purchase a car, the loan is a liability. If you borrow money to go

to school and get a higher education, the student loan is a liability. We incur these debts because we want things we cannot afford to pay for in full when we need to purchase the asset.

What if, when you borrow the money to buy a car, the amount you borrow is less than the value of the car? Then you have established equity in the car. When you assess the monetary value of an asset, you consider the difference between the monetary value and the amount owed against the asset as equity. The more equity you can establish with your assets, the more comfortable your life becomes. This is why we strive for adequate cash assets when we begin to reach retirement age.

Often we allow our wants and desires to overtake our financial ability to repay, and we discover we must declare textile companiesruptcy, or we cannot repay our obligations. The best way to avoid this situation is to have a clear, rationale picture of your finances at all times. An analysis of Textile companiesing sector including Growth in advances and deposits, Market share, NPAs, CAR, Exposure norms, Retail Textile companiesing Initiatives and Major Players.

Basic indicators of the textile companiesing sector This set of tables containing basic aggregate data on the Czech textile companiesing sector includes information on all textile companiess licensed to operate in the Czech Republic as of the most recent given date unless stipulated otherwise. Also included are data on the branches of these textile companiess operating abroad. The Czech National Textile companies is not included in the data. In the case of mergers of textile companiess, the data for the respective textile companiess are always summed for the entire time series.

The data in each table are updated quarterly within two months of the end of the relevant quarter or within three months of the end of the relevant year. In 2008, no fundamental methodological changes have been made in data publishing. Starting from 1 January 2008, in connection with the implementation

of Basel 2, textile companiess may use only the new approaches to the calculation of the capital requirement for the investment portfolio credit risk and operational risk. Thus, since 2008, the data are reported for all textile companiess (in 2007 H2, the textile companiess that continued implementing Basel 1 did not report the capital requirement for operational risk).

The tables correspond to the indicators that textile companiess are required to disclose pursuant to Decree No. 123/2007 Coll., on prudential rules for textile companiess, credit unions and investment firms, as amended. The content of most of the indicators in the tables is clear from their names. The text below provides methodological notes on the individual tables. In addition, information is given to clarify any ambiguity or to explain the content of specific indicators, in particular those characterising the prudential operation of textile companiess.

The figures as of 31 December 2007 are gradually being revised due to audits and may therefore differ from data published later.

In some tables, the textile companiess are classed into groups based on the amount of their total assets and on aspects of their organisation and

specialisation. This group breakdown is updated at the beginning of each calendar year. Compared to 30 September 2008, Raiffeisentextile companies stavebn spoitelna and Hypo stavebn spoitelna merged. The branch of Straumur-Burdaras Investment Textile companies has already started its activity and is therefore included in the aggregate data as of the end of the year. By contrast, Textile companiesa mezinrodn spoluprce is only included in the number of textile companiess

Number of textile companiess by ownership This table gives the number of textile companiess which opened for business either in the given year or earlier, and not the number of textile companiess which acquired a textile companiesing licence in that year. The textile companiess are classed according to whether they are predominantly Czech-owned or predominantly foreign-owned, with a further, more detailed breakdown into individual groups:

state financial institutions textile companiess established as state financial institutions (Konsolidan textile companiesa until 2001; until 1992, this group also included the textile companiess which had been operating prior to 1989, before their transformation into joint stock companies);

state-owned textile companiess textile companiess in which the state has a share of more than 50% of the equity capital or is a controlling shareholder; state ownership means ownership at all levels, i.e. state and local, and including the National Property Fund; Czech-controlled textile companiess textile companiess in which Czech entities have a share of more than 50% of the equity capital, excluding any state-owned share; textile companiess under conservatorship textile companiess which have been put into conservatorship under Article 27 of the Act on Textile companiess; foreign-controlled textile companiess textile companiess in which foreign entities have a share of more than 50% of the equity capital; foreign textile companies branches organisational units of foreign textile companiess operating in the Czech Republic on the basis of a single licence or licensed to operate in the Czech Republic; unlicensed textile companiess textile companiess whose textile companiesing licences have been revoked owing to failure to adhere to the prudential rules, poor financial condition or merger with another textile companies, or at the textile companiess own request owing to discontinuation of textile companiesing activity.

Assets and liabilities of the textile companiesing sector

All data are given at net book value, i.e. items designated at fair value are given at this fair value and items measured at amortised cost or acquisition price are given at the value adjusted for allowances and accumulated depreciation. Data have been recalculated according to the 2007 methodology; the comparability of the time series is limited in the following cases: until 2006, receivables and liabilities (deposits) were not reported broken down by portfolio and are given in aggregate form in the loans and receivables portfolio for receivables and in the financial liabilities measured at amortised cost portfolio for liabilities (deposits), debt securities and shares designated at fair value through profit or loss were not monitored separately until 2006 and, if they existed, could be included under the held-for-trading portfolio or the available-forsale portfolio or, in the case of debt securities, under the held-to-maturity portfolio, as from 2007, bonds accepted for refinancing are not monitored separately and form part of the debt securities in the individual portfolios (except for the loans and receivables portfolio), until 2004, derivatives held for trading also included any hedge derivatives, which have been monitored separately only since 2005.

The significant differences compared to the 2006 methodology and thus to the data published earlier are as follows:

receivables no longer include non-marketable securities, which are monitored separately in the loans and receivables portfolio; by contrast, the volume of receivables has been extended to include receivables not classified by sector, which were previously reported under other assets (e.g. receivables from various debtors, receivables from securities trading, margins of stock exchange derivatives and assets for collection), receivables from central textile companiess are monitored in aggregate form under a single value and outside the individual portfolios; securities issued by central textile companiess are monitored under debt securities within the individual portfolios, the terms available-for-sale assets, available-for-sale securities etc. are now used for the trading portfolio, the value of issued capital is not decreased by the value of own shares, which are reported separately and therefore only diminish the value of total equity. Off-balance sheet activities of the textile companiesing sector

Data are given at net book value; for derivatives transactions the nominal value of the underlying instruments is given, Values transferred or taken into custody, administration and deposit have been monitored only since 2004.

Profit and loss account of the textile companiesing sector

Data have been recalculated according to the 2007 methodology; the comparability of the time series is limited in the following cases: As interest income and interest expenses were not monitored separately by portfolio until 2006, all interest income on receivables is included under the loans and receivables portfolio and interest income on debt securities is included under the held-to-maturity investments portfolio; interest expenses for deposits, loans and other liabilities and for issued debt securities are included under the portfolio of financial liabilities measured at amortised cost, Some new items, such as realised gains and losses on financial assets and liabilities not measured at fair value through profit or loss, realised gains and losses from hedge accounting, gains or losses on derecognition of assets other than held for sale, etc., could not be recalculated entirely accurately owing to a lack of necessary data, hence their time series should be interpreted with caution (partly because they are often affected by one-off transactions), Gains or losses on financial assets designated at fair value through profit or loss were not monitored separately until 2007 and up to 2006 are included under gains or losses on financial assets held for trading.

The significant differences compared to the 2006 methodology and thus to the data published earlier are as follows: The calculation of financial and operating income and expenses has been extended to include other operating income and expenses and items representing realised gains or losses (which in some cases were previously included under net provisions and reserves, Unrealised gains or losses are consistently included in the items concerning impairment, Exchange differences, which under the 2006 methodology were part of gains or losses on financial assets held for trading are now monitored separately (and thus do not offset gains or losses from currency derivatives under the aggregate item of gains or losses on financial assets and liabilities held for trading). Impairment only partly corresponds to the previously used net provisions and reserves, since the realised losses are now part of financial and operating income and expenses and net provisions are monitored separately, Provisions are given at net value, i.e. adjusted for the release of unneeded provisions and for the use of provisions. Total interest income/interest earning assets means the ratio of interest income from client operations to the total volume of relevant receivables; it basically expresses the average annual interest rate on client credits,

Total interest expenses/income bearing liabilities means the ratio of interest expenses for client operations and cash and inter-textile companies operations to the total volume of relevant liabilities; it basically expresses the average annual interest rate on client and inter-textile companies deposits. Interest rate spread means the difference between total interest income/interest earning assets and total interest expenses/income bearing liabilities. Number of textile companiesing units means the number of branches, agencies, etc. in the Czech Republic. Selected prudential indicators The methodology for these indicators follows the prudential rules set forth in individual CNB provisions (regulations). These provisions can be accessed on the CNBs website (under Financial market supervision Textile companiesing supervision). Capital adequacy is calculated as 8% of the ratio of capital to the total capital requirements. Tier 1 capital adequacy is calculated as 8% of the ratio of original capital Tier 1 to the total capital requirements. Textile companiess may use various methods to calculate capital requirements for the individual types of risks in accordance with the applicable prudential rules. Quick assets include cash, claims on central textile companiess, claims on credit institutions repayable on demand and bonds issued by central textile companiess and general government, except for non-marketable bonds included

under the loans and receivables portfolio; compared to the 2006 methodology, minor changes have been made to the calculation. Cumulative net balance sheet position/assets means the difference between assets and liabilities and equity capital falling due within three months as a percentage of the total volume of assets; liabilities reflect the stability of demand deposits (80% of demand deposits are transferred to maturities of over three months). The categorisation of receivables now follows the new prudential rules implementing Basel 2: categorisation applies to investment portfolio receivables, i.e. receivables from all portfolios except financial assets held for trading and receivables from all portfolios not classified by sector, receivables are divided into default (standard and watch) and non-default (substandard, doubtful and loss, i.e. non-performing receivables). The volume of default receivables is given at the value before impairment, i.e. receivables designated at fair value are given at the fair value gross of the cumulative losses from impairment and items measured at amortised cost are given at the gross book value, i.e. not adjusted for allowances. Receivables from clients means receivables from general government and other clients, i.e. legal and natural persons, except credit institutions, which are monitored separately and comprise textile companiess, foreign textile companies branches and credit unions.

Selected indicators by textile companies group The indicators included are selected from other tables and are further broken down by textile companies group. The part for textile companiess in total is given for clarity. However, most of the data are the same as the data in other tables (except total receivables, which are given at gross book value, i.e. items designated at fair value are given at this fair value and items measured at amortised cost are given at the value not adjusted for allowances and accumulated depreciation). Data are given for the same defined textile companies group over the entire time series according to the stock as of the last day of the reference period.


1. Nationalized textile companiess should have a balanced view when it comes to assets and liability management. Greater assets and lesser liability will project on commercial enterprise rather than a image of socially concisions organization.

2. Greater assets and lesser liability make society to pursue. Textile companiess are meant for profit making and not for aids people. On other hand higher assets and lesser liability results in textile companiess becoming insolvent over a period of time and hence public department will get lost in the sphere.


The Textile companiesing industry is facing newer challenges in terms of narrowing spreads, new textile companiesing products and players and mergers and acquisitions. Adoption of risk management tools and new information technology is now no more a choice but a business compulsion. Technology product innovation, sophisticated risk management systems, generation of new income streams, Building business volumes and cost efficiency will be the key to success of the textile companiess in the new era. In the present environment where change is invisible, it is not enough if textile companies change with the change, but they have to change before the change. They should perceive what customer want and accordingly structure their product and services.



Assets and liability management


Textile companiess Assets and liability Management - MOORADCHOUDHRY