ALM is a risk management tool that helps a bank's management take investment / disinvestment decisions, maintain the required statutory liquidity ratio (SLR), credit reserve ratio (CRR) and other ratios as per Reserve Bank of India (RBI) guidelines. It generates the SLP / IRS / MAP / SIR reports and supports risk management modules like graphical analysis, data analysis and interest rate simulation.

Basically, the ALM system consists of seven modules:

Administration
The administration module lets the administrator conduct various user activities as well as some distinct functions. The administrator can add a new user, modify or delete an existing user or lock / unlock a user. Various categories linked with a group of users can be set. This module sets up user-level permissions to access different options from the ALM system, depending on the category of the user.

Registration
This module handles registration of the bank and its branches into the ALM system. Before extracting data from any branch, it is necessary to register the branch. The bank / branch ID and address are also updated in the database during registration.

Rule guide
The rule guide is one of the most important modules in the system. Only the administrator has privileges to access this module for setting the various parameters of the ALM system. Data processing can be carried out only after all the required parameters have been set.

The various functions performed by the module are:

	Enable / disable account heads: The user can enable or disable asset or liability account heads in the system.
	Account head maintenance: The user can add, modify or delete account heads with the help of this function.
	Percentage settings: Percentages can be defined to identify the 'bucket' for all those account heads that are of a percentage type (for example, 30 per cent in the first bucket, 50 per cent in the second bucket and 20 per cent in the third bucket).
	Bucket codes maintenance: The user can set various buckets for various reports. In case the buckets defined by the RBI for SLP, IRS, MAP or SIR change, this function can be used. For example, bucket codes defined by RBI for SLP are: 1 to 14 days 15 to 28 days 29 days and up to 3 months Over 3 months and up to 6 months Over 6 months and up to 12 months Over 1 year and up to 2 years Over 2 years and up to 5 years Over 5 years
	Settings of account heads to appear in a report: The user can select the account heads which should appear in a report, with the help of this function.
	RBI code mapping: This function lets the user map ALM account codes with the RBI account codes.
	Client code mapping: This function lets the user map ALM account codes with the client account codes.
	Data process: This module allows the user to upload the data into the system manually or through a flat file for: Trial balance Residual accounts Parameterised accounts Bucket-wise accounts

The user can set the 'as on date' and copy the data for one particular branch from the previous 'as on date' to the next 'as on date' with the help of this module.

Consolidation: This has two sub-modules; pre-consolidation and consolidation. The pre-consolidation sub-module consolidates the balances of all the account heads branch-wise and puts them into appropriate time buckets, whereas the consolidation sub-module consolidates the data from all the branches and computes the figures at bank level into various time buckets. Reports: Generates various reports: Structural liquidity profile (SLP) Interest rate sensitivity (IRS) Maturity and position (MAP) Statement of interest rate sensitivity (SIR)

Data analysis: Data analysis projects the balance of any account head for any future date by three different methods — linear, polynomial and exponential — provided the historical data for two, three or more previous 'as on dates' is available with the system. The projected balances could be of any account head or any time bucket of an account head for the structural liquidity profile report. This is also known as forecasting. Data analysis also does simulations, with which an amount pertaining to any time bucket for any account can be altered and placed in a different time bucket, to see the overall impact on the structural liquidity and interest rate reports. This makes it much easier for the management to take decisions.

Technical architecture, hardware and software platforms

Hardware installed –- make/model

Pentium III / IV processor

Operating system –- server side	Windows NT / 2000 / UnixWare / Linux
RDBMS used –- server side	Oracle 8i or higher server

Operating system –- client side	Windows 98 / 2000 / XP
RDBMS used –- client side	Oracle 8i or higher client

Application software	ALM
Programming languages	Visual Basic 6.0
Security features	User level, application level

Strengths

	The ALM system works on most easily available software and hardware platforms
	User-defined account heads
	Generation of statutory returns
	System is capable of handling modules such as: Data analysis Data forecasting Interest rate simulation

Indicative client list

	United Western Bank
	Societe Generale Bank Ltd

SLP: Statutory liquidity profile
IRS: Interest rate sensitivity
MAP: Maturity and position
SIR: Statement of interest rate