OBJECTIVE OF THE PROJECT

To know about Cash Management of Bank of India. To analyze the Cash Management Process of Bank of India. To analyze in detail, the way Banks currently manage their finances and make decisions to achieve trade off between profitability and liquidity

Scope of the Project

Efficient cash management processes are pre-requisites to execute payments, collect receivables and manage liquidity. This study done, taking consideration of Bank of India. With reference to experience availed at branch. The study of this topic will help to get the knowledge about cash management policy of banks as particularly in cooperative sector. The mounting pressure from competitors forces the Banks to look for an Information Technology vendor who can offer better solutions and services in Cash Management and Internet Banking. Hence the study will lead to analysis of policies and procedure of managing cash inflow and outflow, also this project focus on RBI norms and rules regarding PCBs (Primary Co-operative Banks) cash management policies. This will give brief view about entire structure of liquidity management of banks and solutions offered by them.

RESEARCH METHODOLOGY

Problem Formulation Efficient management of cash (outflows/inflows) to improve liquidity and returns will be important factors for the banking sector. This project analyzed cash management of banks on this basis.

Research Design The research design for this study is basically Descriptive Research because it utilizes the large number of data of the Bank of India.

Data Type Secondary data utilized for this project study.

Executive Summary

In a business anything done financially affects cash eventually. Cash Is To A Business Is What Blood Is To A Living Body. A business cannot operate without its life blood cash, & without cash management there may remain no cash to operate. Cash movement in a business is two way traffic. It keeps on moving in & out of business. The inflow & outflow of cash never coincides. Important aspect which is unique to cash management is time dimension associated with the movement of cash. Due to non-synchronicity of cash inflow outflow, the inflow may be more than outflow or outflow may be more than inflow at a particular point of time. Hence there is a direct need to control its movement through skilful cash management. The primary aim of cash management is to ensure that there should be enough cash availability when the needs arise not too much but never too little.

Banking History

Banks are the most significant players in the India n financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector the banking industry has so far acted as an efficient partner in the growth and the development of the country. Public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development. The Indian banking can be broadly categorized into: 1. Nationalized (Government owned) 2. Private Banks and 3. Specialized Banking Institution. The reserve bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financia l sector. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow- moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look a new at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulted partially from the Asian currency crisis.

Indian banks are now quoting at higher valuation when compared to banks in other Asian countries (viz. Hongkong, Singapore) that have major problems linked to huge Non Performing Assets & payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the high revenue nicknames of the new Indian market and is addressing the relevant issues to take on the multifarious challenges of the retail segment. The Indian banking finally worked up to the competitive dynamics of the new Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium. The internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The Indian banking has come from a long way from being a sleepy business institution to a highly proactive & dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional stream (borrowing and lending). The banking in Indias highly fragmented with 30 banking units contributing to almost 50 % deposits and 60% advances. Indian nationalized banks continue to be major lenders in the economy due to their sheer size and penetrative networks which assures them high deposits mobilization. The nationalized banks continue to dominate the Indian banking area. Industry estimates that out of 274 commercial banks operating in India 223 banks are in the public sector and 51 are in the private sector. The private sector bank also includes 24 foreign banks.

WHAT IS CASH MANAGEMENT OF BANKS?

Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. It encompasses a banks level of liquidity, its management of cash balance, and its short-term investment strategies. In some ways, managing cash flow is the most important job in todays scenario. Efficient cash management involves proper outflow and inflow of cash to improve liquidity and returns while implementing adequate controls to manage risks. Cash management is achieving tradeoff between liquidity and profitability.

CASH MANAGEMENT IN BANKS The Reserve Bank of India (RBI) has placed an emphasis on upgrading technological infrastructure to manage cash efficiently. Electronic banking, cheque imaging, enterprise resource planning (ERP), real time gross settlements (RTGS) are just few of the new initiatives for efficient cash management. There are a number of regulatory and policy changes that have facilitated an efficient cash management system (CMS). Fox example, the Enactment of Information Technology Act gives legal recognition to electronic records and digital signatures. The establishment of the Clearing Corporation of India in order to establish a safe institutional structure for the clearing and settlement of trades in foreign exchange (FX), money and debt markets has indeed helped the development of financial infrastructure in terms of clearing and settlement. Other innovations that have supported in streamlining the process are: Introduction of the Centralized Funds Management Service to facilitate better management of fund flows. Structured Financial Messaging Solution, a communication protocol for intra-bank and interbank messages.

EVOLUTION OF SERVICES

One of the emerging cash management services in India is payment outsourcing. Though cheques and drafts are a popular mode of payment in India, it is obviously a time consuming procedure because of the manual processing required. This is an area where payment outsourcing can help. It allows corporate to reduce their overheads and focus on their core competencies and, as a result, benefit from speed and accuracy. The enhanced security it offers also allows for tighter fraud control. For the Indian payment system to become completely seamless there are many variables that need to be tackled, such as regulatory and legal issues, customer behavior and infrastructure. As more corporate and banks have added technology to their processes, the issues surrounding connectivity security have become much important. Today, treasurers need to ensure that they are equipped to make the best decisions. For this, it is imperative that the information they require to monitor risk and exposure is accurate, reliable and fast. A strong cash management solution can give corporate a business advantage and it is very important in executing the financial strategy of a company. The requirement of an efficient cash management solution in India is to execute payments, collect receivables and managing liquidity. Traditional or ebusiness objectives, in India there are different cash management solutions.

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CASH MANAGEMENT SOLUTION CURRENTLY OFFERED IN INDIA

Account Reconciliation Services

Balancing a chequebook for a very large business can be quite a difficult process. Banks have developed a system to overcome this issue. They allow companies to upload a list of all the cheques whereby at the end of the month, the bank statement will show not only the cleared cheques but also unclear ones.

Positive Pay

An effective anti- fraud measure for cheque disbursements. Using the cheque issuance data, updated regularly with cheque issuance and payment, the bank balances all cheques offered for payment. In the case of any discrepancies, the cheque is reported as an exception and is returned.

Balance Reporting Services

Balance reporting provides help in procuring a company's current banking information from its accounts. With this service the banks can offer almost all types of transaction-specific details on activities related to payment like deposits, cheques, wire transfers etc. It also helps in an effective and efficient management of regular cash flow.

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Lockbox Facilitates the cash improvement where, instead of being delivered to business address, customer payments are delivered to a special post office (PO) box. It is only the customers' payments that are delivered in the PO box and the company's own bank collects the amount and delivers them to the banks of the customers. The bank of the customers opens and processes the payments for direct deposit to the bank account. Lockbox contents regularly removed and processed.

CBLO CCIL (Clearing Corporation of India) launched a new money market instrument with RBI, the Collateralized Borrowing and Lending Obligation (CBLO). It is a variant of liquidity adjustment facility, permitted by RBI. It is a mechanism to borrow and lend funds against securities for maturities of 1 day to 1 year. CBLO is expected to meet the needs of banks, FIs, PDs, MFs, NBFCs and companies for deploying their surplus funds. Borrowing limits for members will be fixed by CCIL at the beginning of the day taking into account the securities deposited by borrowers in their CSGL account with CCIL. It is an obligation by the borrower to return the money borrowed, at a specified future date.
It is an authority to the lender to receive money lent, at a specified future date with an option/privilege to transfer the authority to another person for value received;

It is an underlying charge on securities held in custody (with CCIL) for the amount borrowed/lent.

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RTGS System

The acronym RTGS stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a real time and on gross basis. This is the fastest possible money transfer system through the banking channel. Settlement in real time means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. Gross settlement means the transaction is settled on one to one basis without bunching with any other transaction.

Source-CashManagementTrendsInIndia_GT_NVedwa.pdf

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Introduction of Bank of India

Bank Profile History of Bank Of India Bank of India was founded on 7th September 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalized along with 13 other banks. Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalized banks. The Bank has 2644 branches in India spread over all states/ union territories including 93 specialized branches. These branches are controlled through 48 Zonal Offices . There are 24 branches/ offices (including three representative offices) abroad. The Bank came out with its maiden public issue in 1997. Total number of shareholders as on 30/09/2006 is 2,25,704. While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalized banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974.The Bank has sizable presence abroad, with a network of 23 branches (including three representative office)at key banking and financial centers viz. London, Newyork,Paris,Tokyo,Hong-Kong,and Singapore. The international business accounts for around 20.10% of Bank's total business. The Bank has a strong position in financing foreign trade. Over 270 branches provide export credit. The expertise in this area has enabled the Bank to achieve a leading position in providing export credit in certain areas like diamond export. The Bank has identified specialized target groups

to develop core advantage for future growth. The Bank, has specialized branches comprising of Corporate Banking Branches to undertake very large credit business, Overseas Branches specializing in Foreign Exchange Business, NRI Branches which specially cater to the requirements of Non-Resident Indians, Capital Market Branches which undertake all activities relating to capital market such as collection of applications, processing of refund orders, Merchant Banking etc. Commercial & Personal Banking Branches cater to the requirements of high net worth customers. Apart from this, the Bank also has specialized Branches for Asset Recovery, Small Scale Industries, Hi-tech Agriculture Finance, Lease Finance and Treasury. To effectively meet the ever-growing challenges and competition, the Bank has made a good headway in bringing about technological up gradation. MIS and critical functions of controlling offices have been computerized. At present, the operations at about 2618 branches are totally computerized. 26 branches operate in partially computerized mode besides these 1019 branches and 31 extension counters are migrated to Core Banking Solution. New facilities such as, Telebanking, ATM & Signature Retrieval Systems have been introduced in a progressing manner to add value to services. Telebanking facilities with Fax on Demand facility, Remote Access Terminals for Corporate Customers are now available at many branches. The Bank has installed ATMs in Mumbai and other centres in the country. The Bank is a member of the RBI's VSAT Network and has installed 39 VSATs linking strategic branches/offices. The Bank is making a paradigm shift from branch automation to bank automation and is in the process of implementing a Multi-Branch Banking Project, that facilitates City-wise Connectivity of Computerized Branches. The Bank is in the process of installing BOINET, a Wide Area Network for providing a interand intra-city connectivity, as a part of enhancing its decision support system. The Bank's corporate personality and philosophy are fully reflected in the emblem, which is a five-pronged Star -- a harmonious blend of traditional and the functional. The elongated prong pointing upwards, conveys the Bank's drive to achieve ascending goals. The Star is a beacon and guide to those in need of direction MISSION & VISION Our Mission "To provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders".

Our Vision "To become the bank of choice for corporate, medium businesses and upmarket retail customers and to provide cost effective developmental banking for small business,mass market and rural markets"

Introduction of Cash Management

Manage your cash flow and liquidity-Effectively and Efficiently For any organization, cash is the lifeblood that keeps the business going. That is why, increasingly, Cash Management has been gaining importance with organizations that view the services as a crucial part of their corporate strategies. Cash Management is Efficient Management of cash (Outflows/Inflows) to improve liquidity and returns while implementing adequate control and managing risks. Cash Management can generally be defined as the efficient utilization of cash through coordinated management of payments, collections and cash balances. The objectives are to reduce costs, enhance control and optimize returns as well as reduce the inventory holdings. Traditionally, cash management involved personalized services offered by the bank's staff to the company's treasurer via mails, telephone, calls, faxes etc or visits to the bank initiated transactions. But with the advent of computer technology, cash management services have been automated to a large extent. Many banks now allow their corporate customers to perform online inquiries and transaction services (payment, collection and liquidity management) through PC or Internet via a web interface. With such a system in place, a company can perform most of the cash management functions themselves without relying on a bank staff to act as the executor of their requests.

Cash Management helps the organization in: Properly timing the disbursements. Some payments must be made on a specified or legal date, such as Social Security payments. For such payments, there is no cash management decision. For other payments, such as vendor payments, discretion in timing is possible. Government vendors face the same cash management needs as the Government. They want to accelerate collections. One way vendors can do this is to offer discount terms for timely payment for goods sold. Eliminating idle cash balances. Every Rupee held as cash rather than used to augment revenues or decrease expenditures represents a lost opportunity. Funds that are not needed to cover expected transactions can be used to

buy back outstanding debt (and cease a flow of funds out of the Treasury for interest payments) or can be invested to generate a flow of funds into the Treasurys account. Minimizing idle cash balances requires accurate information about expected receipts and likely disbursements. Ensuring timely deposit of collections. Having funds inhand is better than having accounts receivable. The cash is easier to convert immediately into value or goods. A receivable, an item to be converted in the future, often is subject to a transaction delay or a depreciation of value. Once funds are due to the Government, they should be converted to cash-in-hand immediately and deposited in the Treasury's account as soon as possible. Monitoring exposure and reducing risks. The Banks have the responsibility to use timely, reliable, and comprehensive financial information and systems. To that end, banks encourage to improve their cash management practices by using electronic funds transfer (EFT) whenever cost effective, practicable, and consistent with statutory authority. So there is a need to monitor the exposure and reduce the risk.

Cash Management Services - Indian Scenario The need for cash management aroused two decades ago in the mid eighties when the Indian corporate were facing various problems like the uncertainty as to when funds would be made available to them, the problem of long transit period between banking cheques and receiving funds, long period of administrative work in banking cheques and tracking progress and reconciliation problems regarding uncertainty of inflows and lack of details on each credit to the account. It is important to review the Indian scenario in this regard. As we are all aware, that the banks desire for funds has lost because of the slowdown. Despite the offer of very soft terms corporates are refusing to borrow, while bank deposits have been ballooning. Compelled to service the burgeoning liabilities, but unable to lend hastily and allow their non-performing assets (NPAs) to grow, bankers are forced to compete for the handful of safe bets among their borrowers. Banks chose to use the opportunity to refocus their activities, seeking clearly defined identities in terms of services and customer segments. Most of them concentrated on cleaning up their books by peeling down their NPAs. All of them are attempting for freezing of costs, improving operational efficiencies, and boosting productivity. The strategy of the banks, which are performing well, is to use fee-based services to maintain their earnings growth. With interest rates falling, non-interest income is, unsurprisingly, the fastest-growing component of the banks total income.

Fee-based activities will complement though not substitute the core business of lending. With rising interest rates too, Corporate and others are not willing to borrow, fee-based services play again an active role in boosting a Banks total income. It is gratifying to note that a number of banks in India are offering wide-ranging cash management services to their corporate clients. All the three categories of banks viz., nationalized banks, private banks, and foreign banks operating in India are active in the cash management segment. SBI, PNB, Corporation, ICICI Bank, HDFC Bank, Centurion Bank of Punjab and ING Vysya Bank, are some of the active Indian banks in this segment. Citi Bank, Standard Chartered Bank, ABN Amro Bank, BNP Paribus, and HSBC are the foreign banks operating in India, which are prominent among the cash management services providers. Indian banks are offering services like electronic funds transfer services, provision of cash related MIS reports, cash pooling services, collection services, debit transfer services, guaranteed credit arrangements, sweep products, tax payment services, receivables and payables management. Foreign banks operating in India are offering regional and global treasury management services, liquidity management services, card services, electronic banking services, ecommerce solutions, account management services, collection management services, cash delivery management services and investment solutions. Banks realized that if they do not offer the services required by corporate customers it would result in a net loss of clientele, returns and goodwill. Banks in India need to continuously monitor international trends in innovations taking place in providing cash management services and swiftly offer similar services to their corporate clients. The Reserve Bank of India is taking a number of initiatives, which has facilitated the active involvement of commercial banks in the sophisticated cash management segment. One of the pre- requisites is to ensure faster and reliable mobility of funds in a country and to have an efficient payment system. Considering the importance of a robust payment system to the economy, the RBI has been taking numerous measures since mid Eighties to strengthen the payments mechanism in the country. Introduction of computerized settlement of clearing transactions, use of Magnetic Ink Character Recognition technology, provision of inter-city clearing facilities and high value clearing facilities, Electronic Clearing Service Scheme , Electronic Funds Transfer scheme, Delivery vs. Payment for Government securities transactions, setting up of Indian Financial Network are some of the significant initiatives which highlight the seriousness with which the Reserve Bank has taken up the reforms in Payment systems. Introduction of a Centralized Funds Management System , Securities

Services System , Real Time Gross Settlement System and Structured Financial Messaging System are on the top priority items of the agenda to transform the existing systems into a state-of-the-art payment infrastructure in India by the Reserve Bank. The current vision envisaged for the payment systems reforms is one, which contemplates linking up of at least all important bank branches with the domestic payment systems network thereby facilitating cross border connectivity. With the help of the systems already put in place in India and which are coming into being, both banks and corporates can exercise effective control over the cash management.

Framework for effective Cash Management Services Companies seek to achieve synergies by implementing a simplified account structure and through rationalizing the number of banks used. In advising companies on the optimal account structure, it is important to bear in mind the nature of companys funds flows. The aim is to maximize control, efficiency and returns. Banks need to work with its clients to ensure that arrangements are in place to assist them in maximizing returns from an otherwise idle fund. Experience of local banking regulations and market practices can ensure clients preferred structure. Greater challenges lie in tying together multiple accounts into a cohesive structure to manage liquidity efficiently, often across numerous time zones and currencies. To meet the needs of international corporate and institutional clients, banks should have a wide range of customized products and services. Often companies should maintain multiple banking relationships for their cash management. Movement of funds between accounts across banks is generally inefficient, costly and time-consuming. Cash status is not readily available, often causing unnecessary usage of overdrafts or return of issued checks. Untimely payments can also result in penalty and other charges. With multiple accounts, account reconciliation is usually difficult to be kept current, making control virtually impossible. So for effective cash management there is a need for multiple banking relationships which is often due to the lack of comprehensive service offered by a bank, the difficulty in accessing particular services of a bank, or the varying degree of efficiency across services of a bank. Many companies, including medium-sized enterprises, are now implementing Enterprise Resource Planning (ERP) systems to help manage the accounting process and gain better control of their cash management. However, what several have found is that while internal processes are more automated, the number of staff required to support their cash management operations

has not reduced. Without a comprehensive cash management solution from a bank, business finds it difficult to reach the optimal operational and working capital efficiency level. Corporate treasurers cannot afford to spend time worrying about routine payments and collections. So banks have to help clients to successfully handle the large volumes of corporate client payments. So in today's competitive market place, effectively managing cash flow can make the difference between success and failure. And so the Banks offer a full range of receivables and payment services to meet the complex cash management needs. Payments received from their buyers and made to their suppliers are efficiently processed to optimize their cash flow position and to ensure the effective management of their business' operating funds. The flow of receivables and payables can also be seen through the web solution.

Legal And Regulatory Regime Regarding Cash Management Of Co-Operative Banks

Maintains of statutory reserves- cash reserve ratio (CRR) & statutory Liquidity ratio (SLR)

All primary (urban) co-operative banks (PCBs) are required to maintain stipulated level of cash reserve ratio and statutory liquidity ratio. 1. CRR reserves for scheduled PCBsThe scheduled PCBs were required to maintain with the RBI during the fortnight, a minimum average daily balance of 5% of their demand and time liabilities (DTL) in India obtaining on the last Friday of the second preceding fortnight In order to provide flexibility to banks and enable to choose an optimum strategy for cash management depending upon their intra period cash flow scheduled PCBs are presently required to maintain on average daily balance a

minimum of 70 percent of the prescribed CRR balance on their NDTL(Net Demand and Time Liabilities) as on the last Friday of the second preceding fortnight. In order to improve the cash management by banks, as a measure of simplification a lag of two weeks has been introduced in the maintenance of stipulated CRR by the scheduled banks. Thus with effect from the fortnight beginning from 1999 the prescribed CRR during a fortnight has to be maintained by every bank based on its NDTL as on the last Friday of the second preceding fortnight i.e. based on the NDTL. 26

For the purpose of maintain CRR every scheduled bank is required to maintain a principal account with the deposit accounts department (DAD) of the reserve bank of India. i) Average daily balance- It shall mean the average of the balances held at the close of business on each day of a fortnight. ii) Fortnight- It shall mean the period from Saturday to second following Friday, both days inclusive.
Generally ASSETS and LIABILITIES of banks include: Liabilities to the banking system include:

Deposit of the banks Borrowing from banks (call money/notice deposits) Other miscellaneous items of liabilities to the banks Assets with the banking system: Balances with banking system in current account Balances with the banks and notified financial institution Money at call and short notice up to 14 day lent to banks and notified financial institution Loans other than money at call and short notice Any other amounts due from the banking system, like amount held by the bank with inter-bank remittance facility etc.

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2. Statutory liquidity reservesIn terms of provisions of section 24 of the Banking Regulation Act 1949, (As applicable to co-operative societies), every primary (urban) co-operative bank is required to maintain liquid assets which at the close of business on any day should not be less than 25 percent of its demand and time liabilities in India (in addition to the minimum cash reserve requirement).

Current prescription for SLR: presently the PCBs are required to maintain a uniform SLR of 25 percent on their total DTL in India.

Manner of maintaining Statutory Liquidity reserves: The liquid assets may be maintainedIn cash or In gold valued at a price not exceeding the current market price, or In unencumbered approved securities Holding in Government/other approved Securities

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All primary (urban) co-operative banks are required to achieve certain minimum level of their SLR holdings in the form of government and other approved securities as percentage of their Net Demand and Time Liabilities (NDTL) as indicated below:

Sr. No.

Category of bank

Minimum SLR holding in government and other approved securities as percentage of Demand and Time Liabilities

1.

Scheduled banks

25%

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GENERAL CONDITION FOR CALCULATION OF CRR AND SLR REQUIREMENT OF BANKS-

In order to improve the cash management by banks, as a measure of simplification, a lag of two weeks has been introduced in the maintains of stipulated CRR by the scheduled banks.

Thus for example fortnight beginning from November 6 2009 the prescribed CRR during a fortnight has to be maintained by every bank based on its NDTL as on the last Friday of the second preceding fortnight i.e. based on the NDTL as on reporting Friday i.e. October 22, 2009 and so on.

CRR doesnt include interbank deposit- for the purpose of computation of liabilities the aggregate of the liabilities of a co-operative bank to the state bank of India, a subsidiary bank, a corresponding new bank, a regional rural bank, a banking company or any other financial institution notified b y the central government in this behalf shall be reduced by the aggregate of the liabilities of all such banks and institution to the co-operative bank.

SLR requirement of banks- every PCB is required to maintain on a daily basis liquid assets the amount of which shall not be less than 25 percent of its demand and time liabilities in India as on last Friday of the second preceding fortnight.

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For SLR purpose- banks are required to maintain SLR on borrowing through CBLO.

All the PCBs are required to maintain investments in government securities only in SGL accounts with reserve bank of India, primary dealers, state cooperative banks.

Computation of net demand & time liabilities (NDTL) Liabilities of a bank may be in the form of demand or time deposits or borrowings or other miscellaneous items of liabilities. Demand liabilities include all liabilities which are payable on demand. Time liabilities are whose which are payable otherwise than on demand.

Time liabilities include Fixed deposits Cash certificates Cumulative and recurring deposits Staff security deposits Time liabilities portion of savings bank

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Demand liabilities include Current deposits Margins held against letter of credit Outstanding telegraphic and mail transfer Demand drafts unclaimed deposits

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MANAGEMENT OF LOANS AND ADVANCES :

In the context of rapid growth of primary co-operative banks (PCBs), qualitative aspects of lending, such as adequacy of lending to meet credit requirements of their borrowers and effective supervision and monitoring of advances have assumed considerable importance. Consistent with the policy of liberalisation and financial sector reforms, several indirect measure to regulate bank credit such as exposure norms for lending to individual/group borrowers, prudential norms for income reorganisation, asset classification and provisioning for advances, capital adequacy ratios,etc. were introduce by RBI. UCBs are permitted to determine their lending rates taking into account their cost of funds, transaction cost etc.with the approval of their board However it may be appreciated that though interest rates have been deregulated, rates of interest beyond a certain level may be seen usurious and can neither be sustainable nor be conforming to normal banking practice. Banks also required publishing the minimum and maximum interest rates charged on advances and displaying the information in every branch.

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MANAGEMENT OF INVESTMENT OF BANKS:

Keeping in view the various regulatory and the banks own internal requirements, primary (urban) co-operative banks should lay down with the approval of their board of directors, the broad investment policy which efficiently manage their cash. The investment policy of the bank should include guidelines on the quantity and quality of each type security to be held on its own investment account.

INVESTMENT POLICY OF BOI:

Objective of policy

To decide investment policy for financial year and to revise it from time to time. To decide investment strategies in respect of government securities, PSU bonds (Public sector bonds), CD, CP, T-bills, MF. To fix borrowing limits under Call/CBLO, government securities.

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BOI can invested in following securitiesCentral/state government securities Treasury bills Approved security Call money deposit CBLO, bonds/NCDs(Non-Convertible Debenture) issue PSU Debt/money market Certificate deposit Deposit with nationalised Shares of cooperative banks Repo in government security Commercial papers

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Delegation of Powers: The powers for investment decision are proposed to be delegated as under :

Government approved PSU security/T-bills bonds

Non trustee security

Call CBLO

Bank fixed deposit

CEO General manager Deputy general manager

50 crore 25

40 15

10 -

100 100

50 25

100

10

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Various Measures UCB Can Take For Efficient Cash Management :

The bank shall borrow funds in CBLO as per its requirements within limit and as per the basis of collateral security pledged by the bank The bank shall lend money in CBLO depending upon surplus funds in hand The bank shall borrow money in CBLO depending upon deficit funds in hand. The bank may borrow in call money market for maintaining liquidity or fulfilment of CRR requirement. The bank may lend in call money market for same purpose. As per RBI borrowing in call money market shall not exceed amount equivalent to 2% of aggregate deposit as at end of year last financial year. The PSU bonds may be sold according to the liquidity position opportunity for improving the yield. Investment in bonds which are considered for non-SLR investment will be for higher yields. The total transaction in case of government securities (sale/purchase both) In a day can done upto Rs.100 crore. The bank shall sell/purchase government securities & T-bills should be minimum 25% of NDTL (SLR) as per RBI. Purchase of government securities will be made according to the availability of funds prevailing market condition and SLR requirement as per RBI. Sale of government security will be made according to the liquidity position and requirement of funds for credit deployment and prevailing market condition.

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Measures Taken By BOI For Efficient Cash Management:

BOI target investment margin for FY 2009-2010 is 8.53%. For risk management BOI- total exposure in government securities should not exceed 45% of the NDTL and the excess portion over and above SLR requirement i.e. 20% kept for trading purpose. For SLR requirement it maintains daily register. Sale of government security will be made according to the liquidity position and requirement of funds for credit deployment and prevailing market condition. In CBLO rates are low but it involves securitization with CCI, it offer instrument for management of cash. BOI use this instrument very efficiently to fulfil its CRR requirement. BOI use this instrument for trading purpose also i.e. if they have excess cash they can lend at higher interest rates For maintain SLR, BOI invest in government securities as they offer higher interest rates with security, compare to invest in gold as well as cash, Because if SLR maintained in cash it would remain ideal cash result in generating no margin. Only 0.15 basis points they aim from trading in market, rest they planned to invest in secure securities.

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They restricted their investment in unlisted securities up to 10% of total nonSLR portfolio. Investment other than in those held against term deposits with

banks/institutions/mutual fund/certificate of deposits and shares of co-op institutions are classified into held for trading (HFT), available for sale (AFS) and held to maturity (HTM) categories in accordance with the reserve bank of India guidelines. BOIs fixed deposits with other banks include deposits which are lodged as margin to secure overdraft limits/issuance guarantees.

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FINDINGS:
These are some key points which analyzed while studying this project which reflects some major factors about cash management of BANK OF INDIA as follows:

BOI bank manages its daily requirement of CRR as per guidelines of RBI every day. Every day it calculate its CRR requirement and try to maintain this requirement as per norms of RBI , if there is shortfall of cash it borrow through CBLO and vice versa. It doesnt maintain more cash as CRR, it try to avoid cash remain ideal. BOI purchase government securities according to the availability of funds, prevailing market condition and SLR requirement By using CBLO, BOI can take arbitrage opportunity as all security on CBLO are pledged with CCIL For NON-SLR option BOI invest mainly in Government securities Inter bank exposure- not more than 5% of deposits of previous FY PSU bonds
IDBI, IFCI bonds Commercial Papers

BOI invest more in government securities as compare to call money market or CBLO instrument because of risk purpose. BOI doesnt invest much in money market mutual fund instrument as it not offers higher return as compared to government securities.

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Recommendations of The Study

After analyzing BOI banks cash management policy, I would like to place following recommendation -

BOI bank should try to make more use of current money market instrument such as CBLO, as risk involve in CBLO is less, Since CBLO is fully collateralized by government securities, the risk weight as applicable to government securities for market risk would be applicable to CBLO.

BOI should go for more techno savvy products for payment and collection services.

BOI already introduce core banking solution, it should implement it for all its branches as soon as possible so it can make use of tech-savvy instruments such as RTGS

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Conclusion of the Study

BOI manage its cash efficiently as per rules and regulation of RBI, as it manages its inter branch cash very efficiently among various branches.

BOI also manage to achieve balance between its liquidity and profitability through various instrument, maintained its requirement for CRR and SLR regularly and invest its surplus cash in secure instruments and try to maximise its profit.

In India RBI frame policies on cash management which helps to banks for proper management of their cash.

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LIMITATIONS
Every research is conducted under some constraints and this research is not an exception. Limitations of this study are as follows:1. There were several time constraints.

2. Difficulty in getting information due to internal policies and procedure.

3. The study is based on information given by concerned persons.

4. People were reluctant to go in to details because of their busy schedules.

5. Due to continuous change in environment, what is relevant today may be irrelevant tomorrow.

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LEARNING-

Understanding of various norms and procedure of RBI for cash management.

Understanding about how one bank manage its liquidity position.

Importance of time and investing funds in right instruments. It helps me to increase my confidence, also thought me how to communicate with personnel in esteemed organization.

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Websites:
www.banknetindia.com/banking/boverview.htm www.rbi.org.in http://www.rbi.org.in/SCRIPTS/PublicationsView.aspx?id=7250 www.thanejanata.co.in/24x7_banking.html http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=5146

Books
38 Annual Report 2008-09 Co-operative Diary of PCB Master Circular of RBI on Investment
th

Paper and Journal:

International Research Journal of Finance and Economics ISSN 1450-2887 Issue 19 (2008) Article on Cash Management and Payment Developments in India :Bank Offerings and New Corporate Best Practices by Niraj Vedwa

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