Working Capital Management Practices in Banks: A Review of Financial and Operational Perspectives

Parminder Kaur

doi:10.69968/ijisem.2026v5i1266-273

Authors

Parminder Kaur Assistant Professor, Department of Commerce, DAV College Pundri

DOI:

https://doi.org/10.69968/ijisem.2026v5i1266-273

Keywords:

Working Capital Management, Bank Liquidity, Bank Profitability, Credit Management, Financial Stability

Abstract

The significance of working capital management (WCM) to banks lies in its impact on financial resources management, which can affect the financial stability, financial efficiency, profitability, and liquidity of banks. This review addresses the financial and operational aspects of working capital management practices in the banks, namely its cash and liquidity management, loans and advances, deposits, credit recovery, capital adequacy and financial risk. The review draws on published research literature on banks in various countries and institutional contexts. The findings showed that the effective management of liquidity, lending capacity, cash deposits, and credit management can positively impact bank performance, especially profitability and ROA. But too much liquidity can restrict the ability to profitably deploy funds and too little can raise financial risk. Loan recovery and management of non-performing assets are also essential in achieving good financial performance. The review concludes that banks need a balanced WCM strategy, which is the adequate liquidity and productive fund usage, combined with proper credit management and financial controls.

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