Treasury Management

Indian and International Perspective

Introduction
Traditionally Treasury Management in India was confined to compliance with RBI regulations regarding various reserve ratios to maintain the proper balance between assets and liabilities. In the era of globalization, Indian banking came across to various International practices and exposed to various risk Presently, treasury management is an advanced science & and occupies pivotal position in advanced and modern banking

Definition
Treasury management involves management cash flows by a firm (here banks) to mitigate the financial, operational & reputation risk and maximize liquidity with a view to maximize profit Treasury management involves to balance assets & liabilities to avoid adverse liquidity position. It also seek to maximize profits by taking proper investment decision

Objectives
To maintain current account with RBI for CRR. To invest surplus funds in different instrument. To invest requisite funds in eligible securities to meet the SLR. Funding different bank accounts as per the demand. Continuously monitor the environment and risk to the portfolio. To improve the portfolio return to ensure steady and optimization of returns for the future also.

Structure
FRONT OFFICE OPERATIONS. BACK OFFICE OPERATIONS. MID OFFICE OPERATIONS.

Functions
Reserve Management & Investment Cash Management Liquidity & Funds Management Risk Management Asset liability management Transfer Pricing Derivative products Arbitrage

Components
Cash Reserve Ratio. Statutory Liquidity Ratio. Dated Government Securities. Money Market Operations. Assets-Liability Management. Risk Management.

Reserve Management & Investment Meeting CRR/SLR obligations a) CRR 6% b) SLR 24% Appropriate mix of investment portfolio

Cash Management Control & care of the cash assets and liabilities of the organization. Selection of investment products, investment brokers, methods of borrowing, cash management information systems.

Liquidity & Funds Management Analysis of cash flow arising out of asset liability transaction Fund various asset of balance sheet Policy inputs to strategic planning and yield expected in credit and investment. Risk Management Changes in Interest rates Increasing NPAs Increasing level of disintermediation

Transfer Pricing Transfer of funds to related party. Assist in enhancing profits Performance evaluation Derivative Products Develop Interest Rate Swap and other cross currency derivative products Hedge banks own exposure and also sell to customers

Arbitrage Risk less profits

Asset Management
An attempt to match : Assets & liabilities In Terms of : Maturities & interest rate sensitivities To Minimize: Interest rate risk & Liquidity Risk

Asset Liability Management

Asset Management

Liability Management

How Liquid are assets of banks

How easily banks can generate loans from market

ALM
ALM is an integral part of the financial management process of a bank. ALM is concerned with strategic balance sheet management involving risks caused by changes in interest rate, exchange rates and liquidity position of the bank. ALM can be termed as risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities.

Treasury Management Services

Improve your receivable collection processes Increase control and management of your disbursements Enhance your level of timely and comprehensive information controls Maximize your liquidity management Reduce the potential for fraud and possible monetary losses to your company Provide the most advanced information technology tools available

Marketwise Functions
Money market Capital market Foreign Exchange

Money Market
Make Investment in their own account CRR, SLR Treasury Bills Commercial Papers Certificates of deposits Government Bonds Call Money Market

Capital Market
Investment in Equity & its derivatives Market Equity analysis Investment in debentures Risk analysis & risk management

Currency Market
Operations in behalf of clients Exchange facility of currencies Operations in spot market Forward and futures market Currency swap Minimize risk due to volatility in currency market

Global Practices
Asset Liability Management Trading Risk Derivatives Credit Risk Liquidity Risk Funding Trading Contingency Funding Plan Operational Risk

Global Practices
Corporate Treasury Management

Risk Management Governance

Organization Disclosures

Policy Statements Analytics

Performance Measurement
Various functions / Business Lines

Treasury Management- International

Trends
Advanced technology & Information Technology Electronic Commerce Working Capital Management Management of balance sheet Collaboration between different departments Broader horizon for treasury Management Centralized Treasury Management like Euro Derivatives Trading Corporate governance & Ethics outsou

Conclusion

Thank You