This Bankers Tutorial article is independent educational material. Examples are illustrative, and changing rules or examination requirements should be checked at the official source.
01 / UNDERSTANDING
Understand the idea
Follow a loan campaign from its sales proposal to the committee discussion and later review. Show why treasury, lending and risk can each present accurate but incomplete views. Let the reader construct the decision record, then introduce weaker deposit retention so that the earlier assumptions become concrete management questions rather than decorative caveats.
02 / UNDERSTANDING
The concept in context
A balance sheet contains assets and funding with different cash-flow, repricing and behavioural characteristics. Evaluating each business separately can miss interactions: an attractive loan campaign may increase funding needs, while a deposit campaign changes cost and concentration. ALCO provides a forum for assessing these connected consequences.
A useful committee paper distinguishes the measured exposure, assumptions, available responses and implementation constraints. Management must consider customer behaviour and market access as well as contractual maturity. A decision record should explain why the selected response fits the risk appetite and when the underlying assumptions need to be challenged again.
03 / UNDERSTANDING
A worked learning case
A fictional bank proposes longer fixed-rate loans while relying heavily on deposits that can leave sooner. The lending team presents margin expectations; treasury presents funding alternatives; risk presents adverse scenarios. ALCO compares the whole position, chooses a funding and pricing response and assigns a review if deposit retention differs from the forecast.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Why should ALCO review a profitable loan campaign alongside its funding plan?
Show the answer and reasoning
Profitability alone does not establish manageable funding and repricing risk.
The lending proposal creates receipts over time, while its funding can create earlier payments and different rate-reset dates. Reviewing the two together exposes timing, concentration and earnings sensitivity. The committee can then judge whether the projected margin compensates for the combined position under plausible changes in behaviour and markets.
Two traps to watch for.
- Treating ALCO as a meeting that merely receives spreadsheets.
- Approving growth without identifying its funding consequences.
YOUR TOPIC-SPECIFIC LEARNING MAP
Turn understanding into practice
Connect the loan proposal to its funding cash flows.
Separate contractual dates from behavioural assumptions.
Write an owner and review trigger for the selected action.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/caiib-certified-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/60%20-%20CAIIB_24.07.25_Change_Final%20Website_23.02.2026.PDF
- www.rbi.org.in https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7680
For CAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
