Asset-Liability Management (ALM) risk arises when banks fail to properly match the maturity and interest rates of assets and liabilities, leading to liquidity or profitability issues.

Regulatory guidelines by the Reserve Bank of India ensure that banks maintain proper risk management practices for ALM, credit, and FX risks.

Foreign Exchange (FX) risk arises from fluctuations in currency exchange rates, affecting banks involved in international transactions.

Poor credit assessment and weak risk management systems increase non-performing assets (NPAs), which weaken the banking sector.

Poor credit assessment and weak risk management systems increase non-performing assets (NPAs), weakening the banking sector.

Credit risk, the most common banking risk, occurs when borrowers fail to repay loans, impacting bank earnings and capital.

FX risk can lead to losses in cross-border lending, trade finance, and foreign investments if not properly hedged.

FX risk can lead to losses in cross-border lending, trade finance, and foreign investments if not properly hedged

Effective credit evaluation, diversification of loan portfolios, and strict monitoring help reduce credit risk

Tools like derivatives, forward contracts, and swaps are commonly used by banks to manage FX exposure.