Liquidity risk analysis in scheduled commercial banks

Abstract

Liquidity risk is the bank’s incompetence to meet the financial obligations on due date at rational cost and without experiencing undesirable losses. It is essential that banks should adhere to prudent liquidity risk management framework to avoid insolvency, bankruptcies and to ensure healthy and stable financial position. It also facilitates the banks to reduce the possibility of adverse situation developing. This study examines the liquidity risk management of scheduled commercial banks by applying stock approach i.e., liquidity ratios. This paper assesses the liquidity risk that the SCBs are exposed to spread over a period from 2005-2015 in order to identify effective measures to mitigate the risk. The findings from the study revealed that SCBs has better liquidity risk management framework in practice.