This term came in news as infrastructure funding by banks faced this problem. And it is haunting infrastructure funding
What is asset-liability mismatch?
Banks’ primary source of funds is deposits, which typically have short- to medium-term maturities. They need to be paid back to the investor in 3-5 years. In contrast banks usually provide loans for a longer period to borrowers. Home loans, for instance, can have a tenure of up to 20 years. Providing such loans from much shorter maturity funds is called asset-liability mismatch. It creates risks for banks that need to be managed.
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