Treasury Management

Treasury
Treasury management includes management of an enterprise's holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial and reputation risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities.

Most banks have whole departments devoted to treasury management and supporting their clients' needs in this area. Until recently, large banks had the stronghold on the provision of treasury management products and services. However, smaller banks are increasingly launching and expanding their treasury management functions and offerings

Bank Treasuries
Bank Treasuries may have the following departments A Fixed Income or Money Market desk that is devoted to buying and selling interest bearing securities A Foreign exchange or "FX" desk that buys and sells currencies A Capital Markets or Equities desk that deals in shares listed on the stock market.

For non-banking entities, the terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger. In general, a company's treasury operations comes under the control of the CFO, Vice-President Director of Finance or Treasurer, and is handled on a day to day basis by the organization's treasury staff, controller, or comptroller.

What is Treasury Management

Collects funds and disburses money. Managing Funds Responsibilities fall under the scope of CFO The CFOs responsibilities include capital Management, risk management, strategic planning, Investor relations and financial reporting

Objectives of the Treasury

To take advantage of the attractive trading and arbitrage opportunities in the bond and Forex markets To deploy and invest the deposit liabilities, internal generation and cash flow from maturing assets for maximum return on a current and forward basis consistent with the banks risk policies appetite To fund the balance sheet on current and forward basis as cheaply as possible taking in to account the marginal impact of these actions To maintain statutory reserves- CRR and SLR- as mandated by the RBI on current and forward planning basis To identify and borrow on the best terms from the market to meet the clearing deficit of the bank

Function of Treasury Management

The function of treasury mgt is concerned with both macro and micro facets of the economy At the macro level, the pumping in and out of cash, credit and other financial instruments are the functions of the government and business sectors, which borrow from the public These two sectors spend more than their means and have to borrow in finance their ever-growing operations. They accordingly issue securities in the form of equity or debt instruments.

 The latter are securities including promissory notes and treasury bills which are redeemable after a stipulated time period. Such borrowings for financing the needs of the government and the business sector are met by surplus funds and savings of the household sector and the external sector. these two sectors have a surplus of incomes over expenditure. The micro units utilize these surpluses and build up their capacities for production of output and this leads to the productive system and distribution and consumption systems.

Responsibility of a Treasurer
Balance Sheet Management: Liquidity management Projection for a twelve month on a monthly basis If projection fails bank will have to finance long term liability with short term borrowing i.e. call money market Asset Liability Management Not just volume but the quality also matters Capital is needed to maintain Capital Adequacy Ratio Transfer Pricing Balance between asset and liability Reserve Management and Investments

SCOPE
Unit level- The performance of production, marketing and HRD functions is dependent upon the performance of the treasury department. the lubricant for day-to-day functioning of a unit is money or funds and these funds are arranged by the treasury manager. Domestic level- The scope is to channelise the savings of the community into profitable investment avenues. This job is performed by the commercial banks. TM is a crucial activity in banks and financial institutions as they deal with the funds, borrowings and lending and investments. International level- Is concerned with management of funds in the foreign currencies.

ROLES OF THE TREASURY MANAGER

Originating roles Supportive roles Leadership roles Watchdog roles Learning roles Informative roles

RESPONSIBILITES OF THE TREASURY MANAGER

Compliance with statutory guidelines Equal treatment to all departments Ability to network Integrity and impartial dealings Willingness to learn and to teach.

TOOLS OF TREASURY MANAGER

Analytic and planning tools Zero based budgeting Financial statement analysis

ENVIRONMENT FOR TREASURY MANAGEMENT

Legal environment: refers to the legislations, which govern corporate functioning. Regulatory environment: regarding employment, wages, land laws, promotion of units and closure of units etc. Financial environment: pertains to policies regarding monetary and fiscal control, financial supervision, exchange control etc.

Present status of Treasury Management in India

Treasury management is still in its infancy in India. It is still considered as a sub function of the financial management. In most of the companies, it is the finance manager which is also taking care of the treasury function. Treasury operations are carried out professionally and systematically by some banks and financial institutions. The first stage of evolution in treasury management is the establishment of a treasury function. The second stage is running it as a profit center. In India, treasury operations at the micro level are expected to grow at a fast pace with increasing integration of the Indian economy with the world economy