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Explain ALM process in banks. Discuss the impacts of Positive and Negative Gaps on the profitability of a bank in different interest rates scenarios. You

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Explain ALM process in banks. Discuss the impacts of Positive and Negative Gaps on the profitability of a bank in different interest rates scenarios. You are required to analyze the above impact with the help of following balance sheet excerpts of a bank:

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Balance Sheet for Hypothetical Bank Particulars Assets Yield Liabilities Cost Rate sensitive 500 8.00% 600 4.00% Fixed rate 350 11.00% 220 6.00% Non-earning 150 100 Equity 80 1000 1000

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