When is an asset or liability termed as rate sensitive?

(a) Within the time interval under consideration, there is a cash flow,

 (b) The interest rate resets/reprices contractually during the interval

(c) RBI changes interest rates if rates are administered and,

 (d) It is contractually pre-payable or withdrawal before the stated maturities.

If a portfolio has assets repricing earlier than liabilities, it is said to be asset sensitive. This is because near term changes in earnings are going to be driven by interest rate resets on those assets.

Similarly, if liabilities reprice earlier, earnings are more exposed to interest rate resets on those liability, and the portfolio is called liability sensitive.by interest rate resets on those assets. 

Great answer

Sir

Agree with Vinod.............

The difference between the aggregate amount of assets and liabilities that are repricing at various time frames is called the interest rate sensitivity “gap.

Perfect answer, Mr. Jetley.

Any type of short-term deposit held by a bank that pays a variable rate of interest to the customer. Interest sensitive liabilities make up a significant amount of the assets of most banks. These liabilities include money market certificates, savings accounts and the Super NOW account.

Thank you for the invitation, agree (off course) with your answer.

Endorse your answer, Mr. Jetley.

agree with u sir