MEANING OF CASH

There are two ways of viewing the term ‘cash’. In a narrow sense it includes actual cash
in the form of notes and coins and bank drafts held by a firm and the deposit withdraw
able on demand. In broader sense, it includes even marketable securities which can be
immediately sold or converted into cash.

THE NEED TO HOLD CASH

➢ TRANSACTION MOTIVE

A company for its business purpose always enters into transaction with other entities.
While some of these transactions may not result in immediate cash inflow/outflow, other
may result so. So firms always keep a certain amount as cash to deal with routine
transactions.

➢ PRECAUTIONARY MOTIVE

Contingencies have a tendency of coming when they are least expected for ex: - a
sudden accident etc. The firm has to be prepared for all such contingencies so that
losses can be minimized. For this the company maintains some amount of ready cash.

➢ SPECULATIVE MOTIVE

Companies also maintain cash balances in order to reap the benefit of the opportunities
that do not take place in the regular business activities. These transactions are of
absolute speculative nature for which firms need cash.

OBJECTIVES OF CASH MANAGEMENT

Cash is the most liquid of all the assets and can be put to alternative uses. Thus idle
cash has an opportunity cost as it could be invested to fetch a positive return. Thus, the
objective of cash management can be regarded as one of making short-term forecasts
of cash position, finding avenues for financing during periods when cash deficits are
anticipated and arranging for repayment/investment during periods when cash
surpluses are anticipated with a view to minimizing idle cash as far as possible.

MODELS FOR DETERMINING OPTIMAL CASH

Optimal level of cash and marketable securities reduces and minimizes the cost such as
transaction cost – costs incurred for transferring marketable securities to cash or vice
versa. Inconvenience cost and opportunity cost – the interest earnings foregone on
marketable securities for holding cash.
  INVENTORY MODEL

In this model the opportunity cost, i.e., the carrying cost of holding cost is balanced
against the fixed cost associated with securities transactions to arrive at an optimal
balance. By using EOQ formula, the firm attempts to determine the funds transfer size
that will minimize the total cash cost which include total transaction cost and total
carrying cost.

 STOCHASTIC MODEL

According to this model cash flows are stochastic and random. Basically in this model
there are two limits defined one is the lower limit and the second is the upper limit.
Within these two limits lie one point which is called the return point. Upper limit is the
limit which restricts the cash from exceeding after that point. Miller says that reaching
this point signifies that there is excess cash and thus the company has idle cash which
incurs opportunity cost and hence it is advisable to invest it in marketable securities as it
will fetch something in return. The investment should be done till it reaches the return
point because return point is that point which indicates the average requirement of cash
by the company at any point of time. Another point is the lower limit which signifies that
if cash reaches that point it is time for the company to sell its marketable securities and
increase its cash in order to reach the return point because the minimum point has been
reached and if it does not sell its securities it may be possible that it cant be able to
meet its short term obligations at time which can hamper its goodwill.

 A PROBABILITY APPROACH

For those firms, whose cash flows are neither reasonably predictable, nor reasonably
unpredictable, a probabilistic approach can be applied. In this approach end-of-period
cash balances are estimated for different cash flow outcomes. For more precision,
length of the period is usually short one week or less. This probabilistic information,
together with information about the fixed transaction cost and interest earnings on
investments in marketable securities is required to estimate the initial balance between
cash and marketable securities. Then we compute the expected net earnings [interest
earned – (fixed transaction cost + opportunity cost)] associated with initial levels of
marketable securities for different possible cash flow outcomes. The level at which
expected net earnings are maximized is the optimal level of marketable .securities

ACCOUNTING STANDARDS (AS 3) –CASH FLOW STATEMENT

OBJECTIVE:-
Information about the cash flows of an enterprise is useful in providing users of financial
statements with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize those cash flows. The economic
decisions that are taken by users require an evaluation of the ability of an enterprise to
generate cash and cash equivalents and the timing and certainty of their generation.

The Statement deals with the provision of information about the historical changes in
cash and cash equivalents of an enterprise by means of a cash flow statement which
classifies cash flows during the period from operating, investing and financing activities.

SCOPE

1. An enterprise should prepare a cash flow statement and should present it for
each period for which financial statements are presented.
2. Users of an enterprise’s financial statements are interested in how the enterprise
generates and uses cash and cash equivalents.
3. A cash flow statement, when used in conjunction with the other financial
statements, provides information that enables users to evaluate the changes in
net assets of an enterprise, its financial structure and its ability to affect the
amounts and timings of cash flows in order to adapt to changing circumstances
and opportunities.
4. Historical cash flow information is often used as an indicator of the amount,
timing and certainty of future cash flows.

The following terms are used in this statement:-

 Cash comprises cash on hand and demand deposits with banks.

 Cash equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
 Cash flows are inflows and outflows of cash and cash equivalents.
 Operating activities are the principal revenue-producing activities of the
enterprise and other activities that are not investing or financing activities.
 Investing activities are the acquisition and disposal of long-term assets and
other investments not included in cash equivalents.
 Financing activities are activities that result in changes in the size and
composition of the owners’ capital and borrowings of the enterprise.

An enterprise should report cash flow from operating activities using :-

a) The direct method , whereby major classes of gross cash receipts and
gross cash payments are disclosed; or
b) The indirect method, whereby net profit or loss is adjusted for the effects
of the transactions of a non-cash nature, any deferrals or accruals of past
or future operating cash receipts or payments, and
DIRECT METHOD:-

This method shows the items that affect the cash flow of the entity. Adopting this
method involves reflecting the gross amounts of the principal components of cash
receipts and payments from operating activities such as cash received from customers
and paid to suppliers, etc. Under this method, the amount of net cash provided by or
used in the operating activities during the period are equal to the difference between the
total amount of gross cash receipts and payments from the operating activities. In this
method the cash received and cash paid are presented as opposed to converting the
accrual basis income to the cash flow information. The following are the principal
components of operating cash receipts and payments which need to be disclosed under
this method:

1. Cash received from customers including leases, licenses and other receipts.
2. Interest and dividends received.
3. Cash paid from employees and suppliers of goods and services including
suppliers of insurance, advertisement and similar payments.
4. Interest, income tax and other similar cash payments.
5. Other operating cash receipts and payments.
This method permits the user to clarify the relationship between the net income
and the cash flows.

INDIRECT METHOD:-

This method also known as the reconciliation method is more popular as it is

easier to prepare and it focuses on the differences between the net incomes and
the cash flows. It is generally suitable for those organizations which do not want
to disclose more information regarding the major classes of cash receipts and
payments which would otherwise be reflected if the direct method is adopted. It
begins with the net income obtained from the income statement from the income
statement from which revenue and expense items not affecting the cash provided
by operating activities. The statement lays emphasis on the changes in the most
current asset and liability items. Under this method, the interest and income tax
paid shall be disclosed in the related disclosures.

REPORTING CASH FLOW

➢ An enterprise should report separately major classes of gross cash
receipts and payments arising from investing and financing activities,
except that cash flows described are reported on a net basis.
 ➢ Cash flows arising from the following operating, investing or financing
activities may be reported on a net basis:
a. Cash receipts and payments on behalf of customers when the cash
flows reflect the activities of the customer rather than those of the
enterprise; and
b. Cash receipts and payments for items in which the turnover is quick,
the amounts are large, and the maturities are short.
➢ Cash flows arising from each of the following activities of a financial
enterprise may be reported on a net basis :
a. Cash receipts and payments for the acceptance and repayment of
deposits with a fixed maturity date;
b. The placement of deposits with and withdrawal of deposits from
other financial enterprises; and
c. Cash advances and loans made to customers and the repayment
of those advances and loans.
➢ Cash flows arising from transactions in a foreign currency should be
recorded in an enterprise’s reporting currency by applying to the foreign
currency amount the exchange rate between the reporting currency and
the foreign currency at the date of the cash flow.
➢ The cash flows associated with extraordinary items should be classified as
arising from operating, investing or financing activities as appropriate and
separately disclosed.
➢ Cash flows from interest and dividends received and paid should each be
disclosed separately. Cash flows arising from interest paid and interest
and dividends received in the case of a financial enterprise should be
classified as cash flows arising from operating activities. In the case of
other enterprises, cash flow arising from interest paid should be classified
as cash flows from financing activities while interest and dividends
received should be classified as cash flow from investing activities.
Dividend paid should be classified as cash flows from financing activities.

Cash flows arising from taxes on income should be separately disclosed and should be
classified as cash flows from operating activities unless they can be specifically
identified with financing and investing activities.

CASH MANAGEMENT IN CCL:

EXPLANATION OF THE CASH FLOW STATEMENT
1. On close scrutiny of the cash flow statement we find that there is decrease in
loans and advances compared to last year. In the year 2008-09 there was an
increase in loans and advances of rs 50064.28 lakhs whereas in the year 2009-
10 there was a decrease in loans and advances of rs. 141372.16 lakhs. This
shows a positive aspect of
2. Further if we look into the change in the amount of sundry debtor from the cash
flow statement than we find that there is a decrease in the amount of sundry
debtors which further states that collection from debtors has increased compared
to last year. On studying the content it was found that the payment period of the
debtors has reduced and most of power houses and steel plants clear their dues
unless it falls in the category of dispute. It is a good sign from the company’s
perspective as because of the payment done by these organizations the
company’s profit is increasing every year.
3. There is decrease in inventory compared to last year. In the year 2008-09 there
was an increase in inventory of rs. 2311.62 lakhs whereas in the year 2009-10
there was a decrease in inventory of rs.20911.21 lakhs which is further good sign
as it signifies that there is not much money blocked in working capital and hence
the opportunity cost in this context is not much. Further the production as well as
the sales has also increased compared to last year and thus we cannot say this
that inventory has decreased because of the decrease in production and sales.
4. There is an increase in the amount of other current assets and decrease in the
amount of other current liabilities compared to last year which further is a good
sign for the company.
5. If we consider the investing activities than we find that the company has
purchased more fixed assets compared to last year and further there is an
increase in the amount of interest on short term deposit which is further a positive
sign in context of the company as the former will help show a better position in
the balance sheet and the latter is good as the company is getting more interest
and hence will be shown on the credit side of the P&L account.
6. There is no change in the amount of redemption of tax free power bonds which
signifies that the opportunity cost in this context is high because there is no
increase in amount compared to last year and hence here time value of money
comes in picture and thus it is not a good sign from company’s perspective but
because of the stringent norms it cant do anything.
7. There is further a decrease in the amount of interest on the surplus fund parked
with CIL and further there is a decrease in the amount of interest on investment
compared to last year
8. Moving to the financing activities we find that there is an increase in the
repayment of world bank loan and CIL loan which is a good thing for the
company.
WHAT IS CASH BUDGET

Cash budget is a detailed plan showing how cash resources will be acquired and used
over some specific time period. A Cash Budget is arrived at through a projection of
future cash receipts and cash disbursements of the firm over various intervals of time. It
reveals the timing and amount of expected cash inflows and outflows over the period
studied.

A cash budget is important for a variety of reasons. For one, it allows to make
management decisions regarding cash position (or cash reserve). Without the type of
monitoring imposed by the budgeting process, one may be unaware of the cash flow
through the business. At the end of a year or a business cycle, a series of monthly cash
budgets will show how much cash is coming into the company and the way it is being
used. Seasonal fluctuations will be made clear.

Purposes of Cash Budgeting

Preparing cash budget will show how cash flows in and out of business. it may be
used in planning short-term credit needs. In today's financial world, it is required by
most financial institutions to prepare cash budgets before making capital expenditures
for new assets as well as for expenditures associated with any planned expansion. The
cash budget determines future ability to pay debts as well as expenses. Businesses that
operate on a casual day-to-day basis are more likely to borrow funds at unfortunate
times and in excessive amounts. Without planning, there is no certainty that there will
be repayment of loans on schedule. However, once carefully mapped out a cash
budget, will be able to compare it to the actual cash inflows and outflows of the
business. One will find that this comparison will go a long way in assisting future cash
budget preparation. Also, a monthly cash budget helps pinpoint estimated cash
balances at the end of each month which may foresee short-term cash shortfalls. Cash
budgeting is a continuous process that can be checked for consistency and accuracy by
comparing budgeted amounts with amounts that can be expected from using typical
ratios or financial statement relationships.
Cash collections from customers can also be estimated and scheduled by dates along
with other expected cash receipts. With careful cash planning, one should be able to
maintain a sufficient cash balance for his needs and not put himself in the position of
holding excessive balances of nonproductive cash. In the normal course of operations
in a merchandising business, for example, merchandise is purchased and sold to
customers who eventually pay for the merchandise sold to them. Usually there is a time
lag in business operations. It may be necessary to pay the suppliers for merchandise
before the merchandise is sold to the customers. Before and during a busy selling
season the demand for cash may be higher than the inflow of cash from operations. In
this case it may be necessary to arrange short-term loans. When the selling season is
over, cash collections from customers will be relatively large and the loans can be paid
off.

Methods of Preparing Cash Budget

 The method to be used for preparing cash forecast depends upon the circumstances
and needs of the business. There are generally three methods used for preparing cash
budget:
(1) Receipts and Payments Method
(2) Adjusted Earnings Method (or Adjusted Profit and Loss Method)
(3) Balance Sheet Method (or Balance Sheet Projection Method)
Receipts and Payments Method: This is the most widely-used and popular method of
preparing cash budget. The estimates under this method may be divided into weekly,
fortnightly or monthly basis. The method is of particular importance in business where
sale is unstable or seasonal or which suffers from shortage of liquid resources. Due to
its flexibility, this method is used in planning cash at various time periods and thus helps
in controlling cash disbursement
POINTS TO BE CONSIDERED WHILE PREPARING CASH BUDGET

Time Period
The first decision to make when preparing a cash budget is to decide the period of time
for which the budget will apply.

Cash Position
The amount of cash you wish to keep on hand will depend on the nature of your
business, the predictability of accounts receivable, and the probability of fast-happening
opportunities (or unfortunate occurrences) that may require you to have a significant
reserve of cash.

Estimated Sales and Expenses

The fundamental concept of a cash budget is estimating all future cash receipts and
cash expenditures that will take place during the time period. The most important
estimate you will make, however, is an estimate of sales. Once this is decided, the rest
of the cash budget.

Expected Cash Receipts:

• Cash balance
• Cash sales
• Collections of accounts receivable
• Other income

Expected Cash Expenses:

• Raw material (inventory)
• Payroll

Other Direct Expenses:

• Advertising
• Selling expenses
• Administrative expense
• Plant and equipment expenditures
• Other payments

ANNUAL CASH BUDGET

Central Coalfields Limited (CCL),

Ranchi

CASH BUDGET

For Two Years ending 31st March 2011

PARTICULARS 2009 2010 2011

Beginning Cash
Balance 48616 20659 43897
Cash Inflows
(Income)
Cash Sales 580429 643044 712414
Collection of
Receivables 119640 154246 198860
Misc. Receipt 1132 1523 2049

Total Cash
Available 749817 819472 957220

Cash
Disbursments

Revenue
Expenditure:
Salary & Wages 127474 189579 246453
Arrear 13118 4514 2438
VRS 2288 1734 1315
Power & Electric 23488 28871 35488
Contractor 34884 35135 35388
Revenue Stores 51194 51060 50927
Purchase Repair & Misc
& Welfare 34869 36653 38528
Corporate Tax 50887 63409 79012
Total 338202 410955 489549

Capital
Expenditure: 19913 26992 36588

Statutory
Payments
Royalty 55651 58473 61438
Sales Tax 17653 19927 22077
Professional Tax 467 1103 1346
SED 4462 4087 3744
PF & Pension 35960 37924 39995
Total 114193 121514 128600

Other Payments:

Loans & Advances 496 452 412

Dividend 25023 0 0
Remittances to CIL 28800 48397 68723
Refund of DGCC/LSS
(M)/C 23417 9321 4758
Refund of Deposits 3824 2068 1530
Payment Against PMRF 290 0 0
Bank FD 175000 155876 158841
Total 256850 216114 234264

Total Expenditure 729158 775575 889001

Closing Balance 20659 43897 68219

INVESTMENT OF SURPLUS CASH

Investing surplus cash involves two basic problems:

1. Determining the amount of surplus cash
2. Determining the channels of investment.

Determining the amount of surplus cash:

The cash in excess of the firm’s normal cash requirements is termed as surplus
cash. Excess cash is generally what is above the minimum level of cash required
by the company and that level is also called safety level of cash. The basic
factors which should be considered are:
a) Desired days of cash: This is the number of days for which cash balance
should be sufficient to cover payments.
b) Average daily cash outflows: This is the average amount of disbursement
to be made daily.
These are to be determined separately for normal and peak period.

Determination of channels of investment:

Surplus cash may be either of a temporary or a permanent nature. Temporary cash
surplus consists of funds which are available for investment on a short term basis
(maximum 6 months) since they are required to meet regular obligations such as taxes
etc. Permanent cash surplus consists of funds which are kept by firms to use in some
unforeseen profitable opportunity of expansion or acquisition of some asset.

CRITERIA FOR INVESTMENT:

Most of the companies usually have no formal written instructions for investing the
surplus cash. It is left to the discretion and judgment of the Finance Manager. But CCL
does have some restriction which it has to follow but then too it also takes into
consideration the following factors:
 a) Security: - This can be ensured by investing money in securities whose price
remains more or less stable and where a minimum return is guaranteed.
b) Liquidity: - This can be ensured by investing money in short-term securities
including short-term fixed deposits with the bank.
c) Yeild: - Most corporate managers give less emphasis to yield as compared to
security and liquidity of investment. They, therefore, prefer short-term
Government securities for investing surplus cash. However, some corporate
managers follow aggressive investment policies which maximize the yield on
their investments.
d) Maturity: - Surplus cash is not available for an indefinite period. Hence, it will be
advisable to select securities according to their maturities keeping in view the
period for which surplus cash is available.

Road sale was 6.04 million last year and Net worth last year was 2661 million and
dividend was 386.32 million.

As far as the cash management of CCL is concerned CIL is a cash surplus

organization. It does not have cash deficit and even if CCL gets deficit then it gets cash
from the headquarter situated in Kolkata. Hence it does not have to do much labor and
accounting for deficit in cash balance.

CCL follows both direct method as well as indirect method of cash management. As
being a company it has to make cash flow statement using indirect method at the end of
the year. While doing so it follows AS 3. It prepared its cash flow statement using direct
method also but it prepares that frequently and further it does not publish that in its
annual report.
RAJRAPPA AREA
BILL REPORT FOR WEEK ENDING 20.03.2010
C O - 6 C O - 6 Rs.
CODE no. dt. Name of the party Lakhs
LTC/LLTC 2.15
17.03.1
133 0 0.04
17.03.1
2031 0 0.16
17.03.1
2030 0 0.07
17.03.1
2032 0 0.15
17.03.1
2108 0 0.22
17.03.1
2109 0 0.19
17.03.1
2107 0 0.14
17.03.1
2105 0 0.05
17.03.1
2106 0 0.07
TOTAL 1.09
Exgratia 2.18 TOTAL 0
SPARES FOR HEMM BILL - 3.19 (A)
05.06.0
150 9 Cummins India Ltd 0.07
11.11.0 S T I Marketing Pvt
705 9 Ltd 0.07
31.12.0 Bharat Power Corp P
918 9 Ltd 0.28
25.02.1 S T I Marketing Pvt
937 0 Ltd 0.05
TOTAL 0.47
SPARES FOR HEMM BILL
- 3.19 (B)
15.03.1
1198 0 Narayan Engg 0.83
TOTAL 0.83
SPARES FOR E & M 3.20
B
17.03.1
1207 0 Laxmi Ind Gases 0.03
19.03.1
1244 0 Shanti Entp 0.06
 19.03.1
1251 0 Moving Spares 0.06
19.03.1
1247 0 Raj Traders 0.04
19.03.1
1249 0 Raj Traders 0.06
19.03.1
1248 0 Raj Traders 0.04
19.03.1
408 0 BEML 9.07

TOTAL 9.36
SPARES FOR WASHERY 3.21(A)
27.02.0
1126 9 L & T Ltd 0.14
30.05.0
141 9 L & T Ltd 0.93
04.07.0
241 9 L & T Ltd 0.77
04.07.0
242 9 L & T Ltd 0.01
TOTAL 1.85
SPARES FOR WASHERY - 3.21 B
16.03.1
1230 0 R K Sales 0.2
Vat - 13.14
REFUND OF E/M & S/M
14.11 TOTAL 0
17.03.1
3635 0 0.01
17.03.1
3634 0 0.08
17.03.1
3747 0 0.03
19.03.1
3856 0 0.17
19.03.1
3857 0 0.04
TOTAL 0.33
CAPITAL 15.11
TOTAL 0

GRAND TOTAL 27.37

Certified that all the bills appearing in the pending bills position are lying in cash
section awaiting for payment.
EXPLANATION OF THE CASH INDENT

The indent of Rajrappa area shows how much is the requirement of cash in that
particular area. This indent is prepared on a weekly basis. On close scrutiny of the
indent we find that most of the requirement is for the spare parts which the area itself
purchases. It is because these items are essential for the smooth functioning of the
machineries i.e. it ensures that production procedure is not hampered because of non-
availability of materials. These items are such which are very essential and if dispatched
from the head quarters will take time and will affect the continuity of production. The
purchase of such items is generally made from the manufacturers itself. These
manufacturers are located not only in Jharkhand but outside as well.

Besides the spare parts it also requires cash for LTC/LLTC i.e. leave travel
concession.LTC are given to government employees. The LTC amount is rs 1.09 lakh
which is given once in a block of two calendar years and hence it is for the year 2008-09
and 2009-10. LTC to hometown is admissible irrespective of the distance between the
headquarters of the government servant and his hometown.

Apart from LTC there is also Exgratia payments but the amount for the weekly
requirement for payment under this head is nil. Exgratia payments are those payments
which are made to an individual in respect of loss or damage to personal property in a
situation where the firm accepts no liability for the loss or damage but is willing to make
some reimbursement without accepting liability. Exgratia payments are not made in
situation where the loss is fully insured, either by the individual or by the firm.

FINDINGS

1. Since it is government organization it has to follow government norms which are

very stringent in nature. The surplus cash which the company has it cant invest
anywhere and there are certain specified places only where it can invest and
thus the opportunity cost in terms of CCL becomes very large.
2. The headquarter enjoys a good control over the regional areas and hence
regional areas are not given any extra surplus cash wherein to use it for any
creative purposes.
3. Cash Management will be successful only if cash collections are accelerated and
cash payments (disbursements), as far as possible, are delayed. But since most
of it sales are to government organizations so no strict rules can be implemented
in this regard.
4. First time in the history of CCL, all subsidiaries have earned profit in the year
2009-10.
POLICY GUIDELINES FOR INVESTMENT OF SURPLUS FUNDS

A. Investment/Deployment of Surplus Funds in Appropriate Financial Instruments

approved by CIL Board in its 197th meeting held on 20.7.2001

1. With revision in coal prices with effective from 31.1.2001, NCL and MCL
having share of 32% of total coal production with only 7% of total
manpower are generating substantial surpluses. These companies have
been parking their surplus resources with CIL. Under the corporatization
structure adopted by CIL, such surpluses are recognized as interest
bearing loans.
2. CIL Board in its 197th meeting held on 20.7.2001 approved the policy in
respect of Deployment of surplus fund in appropriate financial assets for
shor dett and long duration so as to enable the company generate
resources for payment of interest to the PMCs on surplus funds parked
with CIL. In absence of any investment policy, CIL has been parking
surplus funds by way of short-term deposits since May 2001. Further, in
the aforesaid Board Meeting, CIL Board approved the Policy and ratified
the interim action, the summary of which is as under:
3. Investment of surplus funds in PSUs are regulated by the guidelines
received from the Govt. Notification dt 14.12.94, 1.11.95, 11.3.96, 2.7.96,
14.2.97 and 25.11.99. The various notifications read collectively yield the
following set of guidelines for regulating investment of surplus funds by
PSUs:
a. The mode and manner of identifying surplus funds and duration
thereof should be decided in consultation with the administrative
Ministry.
b. According to para 3 of OM dt 14.12.94, it has also been stated that
decisions for investment of surplus funds shall have to be taken by
the Board except that decisions for investing short term surplus
funds upto 1 year maturity may be delegated to the designated
group of Directors which should invariably include CMD and D(F).
Wherever such delegation is made, the order should spell out the
levels of approval and the powers of each official. In all such cases
where delegation is being exercised a appropriate system should
be made functional to ensure automatic internal reporting to the
Board at its next meeting in all cases.
c. The instruments may be selected from the following ranges as
detailed below:
 1. Keeping the aforesaid position in view the following system has been
adopted for investment of surplus funds:
NDS. In short, the banks accepting the arrangement shall be grouped in
three categories based on their offered interest rate, namely those eligible
for NDS (Interest rate at or around the median offer), 50% of NDS (interest
rate lower than the median offer by 25 bps or more), 200% of NDS
(interest rate higher than the median offer by 25 bps or more). Further, in
order to ensure the better return on deposits, it has been decided that the
banks offering interest rate lower by 50 bps than median rate has not been
considered for placing deposits.

In compliance with Govt. guidelines it has been ensured that the banks in
receipt of such deposits have, as per their latest Balance Sheet, a net
worth in excess of Rs. 100 crores and are in fulfillment of the current
capital adequacy norms stipulated by RBI.
a. Furthermore, an incentive system has been built in for the banks
offering encashment without any penal charges. At the same time,
a disincentive system may be built in for the banks asking penal
charges higher than the normal. One or two banks have indicated
that premature encashment shall not be allowed by them and such
banks were not considered for placing the deposit.
b. The deployment of funds as short term deposits in scheduled banks
is an eligible instrument for investing short term surplus funds upto
1 year maturity may be taken by a designated group of Directors
that should include Chairman and Director (F). Placing surplus
funds in CIL is a day-to-day operation and that cannot be carried
out in the manner suggested in the guideline. However, keeping the
spirit of the guideline and in order to ensure complete transparency,
a committee of three members has been formed comprising of
CGM (F) – who shall chair the proceedings, CFM (B) and CFM
(WBP) alternate CFM(D).
A. Investment/Deployment of Surplus Funds in Appropriate Financial Instruments
approved by CIL Board in its 214th meeting held on 12.2.2004
CIL Board in its 214th meeting held on 12.2.2004 approved the deployment of
surplus funds with
The data and graph clearly reveals that cash and bank balance is on continuous
increase. This further proofs that the amount from cash sales is on increase which is a
good sign from the company’s point of view. The graph further shows that CCL is a
cash surlpus organization and it is able to pay all its short term obligations at time.
CASH & BANK
BALANCE
Ye amoun (Rs.in
ar lakh)
200
0 5341.97
200
1 7495.07
200
2 11906.16
200
3 16552.79
200
4 11155.59
200
5 18411.43
200
6 23482.02
200
7 33408.78
200
8 111546.67
200
9 181588.39
201
0 260700.75