MITIGATING NPA RISKS THROUGH EFFECTIVE ASSET LIABILITY MANAGEMENT IN INDIAN PUBLIC SECTOR BANKS

This study holds significant importance for the banking sector and the broader economy. The research focuses on analyzing Non-Performing Assets (NPAs) in two prominent public sector banks in India, namely Bank of India and Punjab National Bank, over a five-year period from 2018-19 to 2022-23, using their annual reports as data sources. The primary objective of this study is to understand the dynamics of NPAs in these banks and how effective Asset Liability Management (ALM) practices play a crucial role in mitigating NPA risks. The significance of ALM in the banking sector is multi-faceted. First and foremost, ALM is a powerful tool for risk mitigation. It allows banks to identify, assess, and mitigate various financial risks, including interest rate risk, liquidity risk, and credit risk. This is crucial for maintaining the stability and sustainability of banks, especially in times of economic uncertainty. Moreover, ALM is often subject to regulatory guidelines and requirements, ensuring that banks adhere to minimum levels of capital, liquidity, and risk management practices. This compliance ensures financial stability and adherence to legal obligations. Furthermore, effective ALM practices contribute to the overall financial stability of banks. Banks with successful ALM implementation are better equipped to withstand economic downturns and remain competitive, even in changing market conditions. By promoting economic growth, ALM enables banks to provide more loans to businesses and entrepreneurs, thereby stimulating investments, job creation, and economic development. Additionally, the reduction of risks associated with ALM, including NPA management, enhances investor confidence in banks, making it easier for these financial institutions to attract capital both domestically and internationally, which is critical for their growth and sustainability. In conclusion, the study's objective of analyzing NPA risks in selected public sector banks underscores the critical role of Asset Liability Management in the banking sector. Effective ALM practices are vital for managing and mitigating financial risks, ensuring regulatory compliance, promoting economic growth, building investor confidence, and securing the long-term viability of banks.