New scheme for banking

Let me start with a clear definition of Asset – Liability mismatch.

Any bank’s working can be easily understood by this asset –liability match. Banks take deposits from customers which will be considered till its maturity period. Within that maturity period this amount will be given as loan to another customer at a higher rate. So, by the maturity time banks would have got back the amount given as advance along with the profit that came from the higher interest rate. But, what will be the bank’s situation if the customer deposited wanted the money before maturity. This leads to asset – liability mismatch the deposit was given as advance. So, what is the new scheme? The new scheme is an introduction to manage this asset-liability mismatch.

Non – callable deposits and fixed tenure deposits are the new concepts entering into the banking field. Till today, any deposit less than 1 crore can be called pre maturely. Non – callable and fixed tenure deposits are those that cannot be called off before maturity period at any cause.RBI has announced a higher deposit rate or differential rate on non-callable deposits and fixed tenure deposits. This prevents the deposit holder to call of the deposit amount so that banks can manage the asset – liability match taking into consideration the maturity period and since higher deposit rates are given customers can prefer choosing non-callable deposits or fixed tenure deposits as their money would grow quick over years.

Click here for government certification in Accounting, Banking & Finance