CASH

CASH
MANAGEME
MANAGEME
NT
NT

Presenter:
Presenter:

Dr.
Dr. Vighneswar
Vighneswar

In this
In this
session
session
we shall
we shall
focus
focus
our
our
discussi
discussi
on on:
on on:

Cash
Cash
management
management

Currency
Currency
management
management
Role of RBI
Role of RBI
Flow of Notes &
Flow of Notes &
Coins
Coins
Currency Chest
Currency Chest
Cash management at

Cash management
at
branch
branch

Liquidity
Liquidity

Inferences from cash

Inferences from cash
ratios
ratios

Cash vault
Cash vault
services
services
Summary
Summary

Presenter: VIGHNESWAR

CASH
CASH MANAGEMENT
MANAGEMEN
FORECASTING
FORECASTING
DEMAND
DEMAND
SUPPLY
SUPPLYCHAIN
CHAIN
MANAGEMENT
MANAGEMENT

(STORAGE, TRANSPORTATION
(STORAGE, TRANSPORTATION
and
and
DISPENSATION)
DISPENSATION)

SECURITY
SECURITY
INTEGRITY
INTEGRITY
CUSTOMER SERVICE
Presenter: VIGHNESWAR

STRATEGIC
CASH
MANAGEMENT
STRATEGIC CASH MANAGEMENT
Collectively
these
Collectively these
activities
activitiesconstitute
constitute
strategic
strategic
management
managementof
ofcash.
cash.
Strategic
plans,
Strategic plans,
strategic
strategicthinking,
thinking,
strategic
strategicactions,
actions,
etc.,
etc.,Are
Areparts
partsof
ofan
an
overall
overallcreative
creative
Presenter: VIGHNESWAR

CASH
MANAGEMENT

INDIAN
CASH MANAGEMENT INDIAN
SCENARIO
SCENARIO
Currency chest mechanism

Currency chest mechanism

consisting of 18 issue offices of
consisting of 18 issue offices of
the Reserve Bank of India (RBI),
the Reserve Bank of India (RBI),
1 sub-office of the RBI, 4301
1 sub-office of the RBI, 4301
currency chests with banks,
currency chests with banks,
and 4027 small coin depots
and 4027 small coin depots
More than 60000 bank
More than 60000 bank
branches and atms
branches and atms
39.83 billion pieces of
39.83 billion pieces of
banknotes (rupees 4961.38
banknotes (rupees 4961.38
billion)
billion)
Presenter: VIGHNESWAR

90.36 billion pieces of coins

India
India AA Huge
Huge
Country
Country

Chandigarh

Noida
New Delhi
Jaipur

Lucknow

Guw ahati
Kanpur
Bhopal
Aham adabad

Patna
Salboni

Dew as

Calcutta
Calcutta
Nagpur
Mum bai

Nasik

Bhuaneshw ar

Mum bai
Byculla

Hyderabad

Hyderabad

Press
Mysore

Banglore

Chennai

Population: 1 billion
Population:
1 billion
North
to South:
3,200 km
North
to
South:
3,200
West to East: 3,000
km km
West3,288,000
to East: 3,000
km
Area:
sq. km
Area: 3,288,000
Per-capita
Incomesq. km
Per-capita Income

Mint
Issue Offices

Trivandrum

Presenter: VIGHNESWAR

Distribution
Distributionof
ofCurrency
Currency
-Dimension
-Dimension(value)
(value)

Rs.2,448 billion, i.e.,

US $ 49 billion currently
Presenter: VIGHNESWAR

Distribution
Distributionof
ofCurrency
Currency-Dimensions
Dimensions(volume)
(volume)

41 billion pieces in 2002

Presenter:
VIGHNESWAR

Dimensions
Dimensions

Enormous
volume
of
lower
Enormous volume of lower
denominations
denominations

Presenter: VIGHNESWAR

Dimensions
Dimensions

Too
little
value
of
the
lower
Too little value of the lower
denominations
denominations

Presenter: VIGHNESWAR

Agencies
Involved
in
Agencies Involved in
CASH
CASHMANAGEMENT
MANAGEMENT
MOF
Railways

Police

RBI

RBI's
Presses

Govt
Presses

Mints

Presenter: VIGHNESWAR

Banks
(chests)

Flow
Flow of
of Notes
Notes &
& Coins
Coins
NOTES

Public

COINS

Chest
branches

Chest branches & RBI

Offices
Public

4 mint-linked RBI
Offices

RBI Offices

Presses

4 Mints

Presenter: VIGHNESWAR

Network
Network of
of Currency
Currency
Chests
Chests
RBI is located only in 18 places for
RBI is located only in 18 places for
currency operations
currency operations
Distribution of notes and coins throughout
Distribution of notes and coins throughout
the country is done through designated
the country is done through designated
bank branches, called chests
bank branches, called chests
Chest is a receptacle in a commercial
Chest is a receptacle in a commercial
bank to store notes and coins on behalf of
bank to store notes and coins on behalf of
the Reserve Bank
the Reserve Bank
Deposit into chest leads to credit of the
Deposit into chest leads to credit of the
commercial banks account and
commercial banks account and
withdrawal, debit
withdrawal, debit
Presenter: VIGHNESWAR

More
More on
on Currency
Currency Chest
Chest
Meets currency
Meets currency
requirement of public
requirement of public
Withdraws unfit notes
Withdraws unfit notes
Exchange facility from
Exchange facility from
one denomination to
one denomination to
another
another
Payment requirement of
Payment requirement of
the Government
the Government
Exchange of mutilated
Exchange of mutilated
notes
notes
Avoids frequent
Avoids frequent
movement of cash
movement of cash
Chest branch operates
Chest branch operates
with minimum cash
with minimum cash
Presenter: balance
VIGHNESWAR
balance

Currency
Currency Chest
Chest
Mechanism
Mechanism

Net deposit /withdrawal of notes

Net deposit /withdrawal of notes
and coins at the chest is reported
and coins at the chest is reported
on daily basis to parent Issue Office
on daily basis to parent Issue Office
Overall deposit or withdrawal leads
Overall deposit or withdrawal leads
to credit or debit of banks account
to credit or debit of banks account
in RBI
in RBI
Net withdrawal from chests means
Net withdrawal from chests means
expansion of currency and deposits
expansion of currency and deposits
means contraction
means contraction
Notes in circulation being the
Notes in circulation being the
liability of RBI, it adjusts its assetliability of RBI, it adjusts its assetliability position centrally for such
liability position centrally for such
expansion or contraction
expansion or contraction

Presenter: VIGHNESWAR

Movement
Movement of
of
Treasure
Treasure

Specially
Speciallybuilt
builttrucks
trucksfor
for
short
shortdistance
distance(journey
(journey
completed
completedduring
duringthe
theday)
day)
Railways
for
long
distance
Railways for long distance
Guarded
Guardedby
bypolice
police
Remittance
Remittanceaccompanied
accompanied
by
byofficials
officialsof
ofRBI
RBIto
to
chests
chests
Further
movement
from
Further movement from
chest
chestto
toaabranch
branchdone
doneby
by
the bank concerned
Presenter: VIGHNESWAR

How
How much
much to
to
print
print &
& mint?
mint?
Incremental
Incrementalneeds
needs
Replacement
Replacementneeds
needs
Reserve
Needs
Reserve Needs
Statistical
Statisticalanalysis
analysisand
andlonglongterm
termforecast
forecast
Printing/minting
allocated
Printing/minting allocated
between
betweenthe
thepresses/mints
presses/mintsand
and
delivery schedule decided in
Presenter: VIGHNESWAR

Challenges
Challengesof
ofDistribution
Distribution
Security- police is
Security- police is
preoccupied with other
preoccupied with other
activities of priority
activities of priority
Private security is
Private security is
unavailable and not
unavailable and not
favoured
favoured
Transport through railways
Transport through railways
involves enormous
involves enormous
coordination of logistics
coordination of logistics
Privatization of transport
Privatization of transport
introduced recently in
introduced recently in
respect of coins only
respect of coins only
Presenter: VIGHNESWAR

Coin
CoinDistribution
Distribution Some
Some
new
newsteps
steps

Mobile van at city centres

Mobile van at city centres
Distribution through milk
Distribution through milk
cooperatives in the state of
cooperatives in the state of
Gujarat
Gujarat
Through Post Offices in rural
Through Post Offices in rural
areas a beginning made in
areas a beginning made in
Maharashtra
Maharashtra
Coin dispensing machines in
Coin dispensing machines in
public places and bank branches
public places and bank branches
Issue of notes of lower
Issue of notes of lower
denominations to bulk users by
denominations to bulk users by
RBI is compulsorily accompanied
RBI
is compulsorily
by
issue
of some partaccompanied
in coins
by issue of some part in coins
Presenter:
VIGHNESWAR

CASH
CASHMANAGEMENT
MANAGEMENTand
and
COMMERCIAL
BANKS
COMMERCIAL BANKS

HANDLING OF CASH IS
HANDLING OF CASH IS
REGARDED AS A COSTLY,
REGARDED AS A COSTLY,
HAZARDOUS AND RISKY
HAZARDOUS AND RISKY
AREA OF WORK.
AREA OF WORK.
CASH MANAGERS ARE
CASH MANAGERS ARE
NOT REWARDED FOR
NOT REWARDED FOR
EFFECTIVE
EFFECTIVE
MANAGEMENT OF CASH.
MANAGEMENT OF CASH.

ATTITUDINAL APATHY
ATTITUDINAL APATHY
HAS RESULTED INTO
HAS RESULTED INTO
OUTSOURCING WITHOUT
OUTSOURCING WITHOUT
ASSESSMENT OF RISK
ASSESSMENT OF RISK
COST.
Presenter:AND
VIGHNESWAR
AND COST.

CASH
CASHMANAGEMENT
MANAGEMENTand
and
COMMERCIAL
BANKS
..
COMMERCIAL BANKS ..

INDISCRIMINATE
INDISCRIMINATE
OUTSOURCING
OUTSOURCINGHAS
HAS
RESULTED
IN
POOR
RESULTED IN POOR
CUSTOMER
CUSTOMERSERVICE.
SERVICE.
COMMERCIAL
COMMERCIALBANKS
BANKS
HAVE
HAVENEVER
NEVER
ASSESSED
RISKS
ASSESSED RISKS
ASSOCIATED
ASSOCIATEDWITH
WITH
OPERATIONAL
OPERATIONALRISK
RISK
Presenter: VIGHNESWAR

Liquidity
Liquidity in
in CC A
AM
M EE LL SS
Liquidity
Liquidity
Liquidity implies the cash position of the bank,
Liquidity implies the cash position of the bank,
and the ability of the banks to meet its
and the ability of the banks to meet its
customers day-to-day cash needs and to
customers day-to-day cash needs and to
respond to sudden cash withdrawals. Liquidity
respond to sudden cash withdrawals. Liquidity
has been measured by Cash/Deposit ratio.
has been measured by Cash/Deposit ratio.
Cash to Deposit Ratio: This ratio is calculated
Cash to Deposit Ratio: This ratio is calculated
by dividing the total amount of cash held by
by dividing the total
amount of cash held by
Presenter: VIGHNESWAR

CASH
CASHMANAGEMENT
MANAGEMENTand
and
COMMERCIAL
BANKS
..
COMMERCIAL BANKS ..

CASH PER BRANCH

Cash to Deposits

Cash to Adv. & Investmen

Return on assets
Presenter: VIGHNESWAR

Inferences
Inferences from
from Cash
Cash
ratios
ratios
Higher percentage of cash to
Higher percentage of cash to
assets means loss of earning
assets means loss of earning
opportunities.
opportunities.
Higher percentage of cash to
Higher percentage of cash to
deposits increases cost for
deposits increases cost for
storage and security.
storage and security.
Increase in operational
Increase in operational
expenses lead to lower return.
expenses lead to lower return.
Increasing risks reduce
Increasing risks reduce
return
to capital after
Presenter: VIGHNESWAR
return
to capital after

Cash
Cash Vault
Vault Services
Services
Organizations with large cash
Organizations with large cash
requirements want to place coin and
requirements want to place coin and
currency orders when it's convenient
currency orders when it's convenient
and have quick access to deposited
and have quick access to deposited
funds.
funds.
One way of achieving both goals
One way of achieving both goals
particularly for organizations that
particularly for organizations that
make daily deposits in the $10,000
make daily deposits in the $10,000
range or that have security concerns
range or that have security concerns
about employees traveling to a
about employees traveling to a
banking center is to use a cash
banking center is to use a cash
vault and an armored car carrier. This
vault and an armored car carrier. This
combination of services streamlines
combination of services streamlines
currency and coin ordering processes,
currency and coin ordering processes,
and protects your cash deposits and
and
protects
your cash deposits and
Presenter:
VIGHNESWAR
your
most
important asset your
your most important asset your

Summary
Summary
The
failure
to
The
failure
to
reliably
manage
reliably
manage
cash
inventories
cash
inventories
leaves
bank
leaves
bank
branches
branches
overstocked
overstocked with
with
cash
cash that
that could
could
otherwise
be
an
otherwise be an
invested
invested asset
asset and
and
increases
the
increases
the
Presenter: VIGHNESWAR
possibility of costly

Save Environment
Save Earth
Presenter: VIGHNESWAR