Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
To analyze in detail, the way Banks currently manage their finances and make
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Scope of the Project
receivables and manage liquidity. This study done, taking consideration of Thane
Janta Sahakari Bank. 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 co-operative sector. The mounting pressure from competitors forces the
Banks to look for an Information Technology vendor who can offer better solutions
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
them.
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Hypothesis-
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RESEARCH METHODOLOGY
Proble m Formulation
returns will be important factors for the banking sector. This project analyzed
Research Design
The research design for this study is basically analytical because it utilizes the
Data Type
Primary data takes much time and are also expensive whereas the secondary
Mainly secondary data utilised for this project study. The annual reports of the
TJSB bank and master circulars of RBI were used for getting information.
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Executive Summary
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
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
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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
development.
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
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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
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
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
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.
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WHAT IS CASH MANAGEMENT OF BANKS?
Cash management is a broad term that refers to the collection, concentration, and
cash balance, and its short-term investment strategies. In some ways, managing cash
flow is the most important job in today’s scenario. Efficient cash management
involves proper outflow and inflow of cash to improve liquidity and returns while
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CASH MANAGEMENT IN BANKS
The Reserve Bank of India (RBI) has placed an emphasis on upgrading technological
enterprise resource planning (ERP), real time gross settlements (RTGS) are just few
There are a number of regulatory and policy changes that have facilitated an efficient
Technology Act gives legal recognition to electronic records and digital signatures.
institutional structure for the clearing and settlement of trades in foreign exchange
(FX), money and debt markets has indeed helped the development of financial
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EVOLUTION OF SERVICES
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,
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
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CASH MANAGEMENT SOLUTION CURRENTLY OFFERED IN
INDIA
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
information from its accounts. With this service the banks can offer almost all types
wire transfers etc. It also helps in an effective and efficient management of regular
cash flow.
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Lockbox
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.
CBLO
CCIL (Clearing Corporation of India) launched a new money market instrument with
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
future date.
• It is an authority to the lender to receive money lent, at a specified future date with
• 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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Brief History of Urban Cooperative Banks in India
The term Urban Co-operative Banks (UCBs), though not formally defined, refers to
primary cooperative banks located in urban and semi- urban areas. These banks, till
1996, were allowed to lend money only for non-agricultural purposes. This distinction
does not hold today. These banks were traditionally centered around communities,
localities work place groups. They essentially lent to small borrowers and businesses.
There was the general realization that urban banks have an important role to play in
economic construction. This was asserted by a host of committees. The Indian Central
Banking Enquiry Committee (1931) felt that urban banks have a duty to help the
small business and middle class people. The Co-operative Planning Committee (1946)
went on record to say that urban banks have been the best agencies for small people in
whom Joint stock banks are not generally interested. The Rural Banking Enquiry
recommended the establishment of such banks even in places smaller than Taluka
towns.
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The first study of Urban Co-operative Banks was taken up by RBI in the year 1958-
59. The Report published in 1961 acknowledged the widespread and financially sound
urban cooperative banks in new centers and suggested that State Governments lend
such banks should be organized at all Urban Centers with a population of 1 lakh or
more. The committee introduced the concept of minimum capital requirement and the
criteria of population for defining the urban centre where UCBs were incorporated.
Duality of Control
rise to the view that they should be better regulated. Large cooperative banks with
paid-up share capital and reserves of Rs.1 lakh were brought under the perview of the
Banking Regulation Act 1949 with effect from 1st March, 1966 and within the ambit
of the Reserve Bank’s supervision. This marked the beginning of an era of duality of
control over these banks. Banking related functions (viz. licensing, area of operations,
interest rates etc.) were to be governed by RBI and registration, management, audit
respective State Acts. In 1968, UCBS were extended the benefits of Deposit
Insurance.
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Towards the late 1960s there was much debate regarding the promotion of the small
scale industries. UCBs came to be seen as important players in this context. The
Madhavdas Committee (1979) evaluated the role played by urban co-operative banks
in greater details and drew a roadmap for their future role recommending support
from RBI and Government in the establishment of such banks in backward areas and
The Hate Working Group (1981) desired better utilization of banks' surplus funds and
that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio
(SLR) of these banks should be brought at par with commercial banks, in a phased
sickness, better professional standards in urban co-operative banks and sought to align
Recent Developments
Over the years, primary (urban) cooperative banks have registered a significant
growth in number, size and volume of business handled. As on 31st March, 2003
there were 2,104 UCBs of which 56 were scheduled banks. About 79 percent of these
are located in five states, - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and
Tamil Nadu.
Source- www.rbi.org.in/scripts/fun_urban.aspx
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Introduction of Thane Janata Sahakari Bank
With the modest beginning in 1972 in the co-operative field, the dynamism infused by
the Board of Directors, unflinching loyalties of clientele and devotion of staff has
propelled the sound foundation of The Thane Janata Sahakari Bank Ltd (TJSB) and
has emerged as one of the leading multi state scheduled co-operative Bank in the
country.
Branches and 2 Extension Counters spread all over the city of Thane, Mumbai, Navi
Mumbai, Nasik, Pune & Satara. All these Branches have made remarkable progress
TJSB believes that "customer delight" is the ultimate goal and has a strong belief that
Customers & all Stakeholders wholehearted support, absolute faith and their
patronage has largely been responsible for its enviable growth. TJSB is committed to
industrialists, traders and professionals who have grown leaps & bound due to timely
TJSB has set before a Visionary Growth Plan focusing all business strategies solely
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Technological Initiatives
TJSB, a Techno-savvy Bank has implemented successfully the Core Banking Solution
(CBS). This has helped the Bank to migrate the Branches from being the processing
centers to marketing customer centric outfits. It will also extend the Bank’s reach to
its customers by multiple delivery channels such as ATM, Internet, Mobile etc. This
has brought the Bank on par with the leading Banks. Bank has network of 49 ATM’s
TJSB is the first Bank in Co-operative sector to install Cheque Depository Machines
TJSB has put in place Real Time Gross Settlement System (RTGS) transactions. With
Core Banking Solution in place the Bank is Providing RTGS facility to all its
customers.
TJSB has initiated process for strategic alliance with other Banks for the usage of
their delivery channels by which nearly 5000 ATMs will be available to Bank’s
TJSB is first Bank In the country to introduce Automated Cheque Issuance Machine
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Bancassurance :
TJSB is having arrangement with Max New York Life Insurance Co. Ltd. for Life
Insurance products and with The Oriental Insurance Co. Ltd. for General
TJSB has recognized the opportunity for its expansion through the Merger and
Takeover of the other Banks. To step forward it has recently acquired two Pune based
Co-operative Banks namely The Navjeevan Nagrik Sahakari Bank Ltd and The
Special Mention :
TJSB has been awarded 1st Prize for the Best Co-Operative Bank in Maharashtra
TJSB has been awarded 1st Prize as “Padmabhushan Vasantdada Patil Utkarsha
Nagri Sahakari Bank” for the F.Y.2003-2004 from Kokan Region for the second time
consecutively.
TJSB was recognized amongst top 5 Co-Operative banks in the country, during
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Cash management of TJSB
i. In TJSB every branch has maximum retention limit i.e. amount of cash every
branch can hold with them, this limit can decided by estimated transaction
takes place in particular branch i.e. as per inflow and outflow of cash in that
branch.
ii. In any branch of TJSB, retention limits decided as per business mix by board
authority, maximum retention limit for any branch should not exceed 1% total
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iii. it is necessary to run the software/programme installed at cash pool regarding
daily cash balance of all branches. After running the said software programme
will show the daily current balance at the time of running the software
programme along with the receipt & payment and cash retention limit of the
iv. It is necessary to take into account each branch’s cash position & cash limit
while managing the daily cash requirement. Many of the branches are not in
need of cash viz-a-viz they are having surplus cash which they need to deposit
with the cash pool where as some of the branches have to fulfill their cash
requirement daily or on alternate days. The cash pool has to fulfill all the cash
v. The corporate office has decided the limit of branches which also includes the
ATM cash. Also, likewise cash pool, the branches have also to run the
whether the cash limit of their respective branch do not exceed. However at
present while running the said programme, the ATM cash is not shown
separately in the said programme. The official have to keep record in the
register maintained at the cash pool by telephonic enquiry with the branches
volume of average daily cash they require for ATM transactions which
enables the cash pool to take into account the daily cash requirement of the
branches. The total daily cash required for the ATM transaction and across the
counter is to be considered while managing cash and the branch heads should
be communicated asked to deposit the excess cash if any, with the cash pool.
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vi. On 7th & 10th of every month on which generally the salaries of the customer
are being credited at the branches and so also, the huge withdrawals from the
customers takes place on the said dates which results into increase in daily
cash requirement up to Rs 50 lacs to 70 lacs. The cash pool has to provide this
cash requirement to the branches. This cash requirement gets reduced after
vii. It is the duty & responsibility of the cash pool to bring down the cash
requirement by Rs 1.50 crores to Rs.2 crores than the total prescr ibed cash
viii. On Saturday, many of the branches in thane city function during 9 a.m. to
12.15 afternoon. As such cash pool should provide the cash on Sunday only to
local branches and cash should be provided to the branches such as, Airoli and
ix. The cash pool should ask telephonically to the branches at western suburbs
about their cash requirement or deposit of excess cash if any and accordingly
cash should be provided or to be carried out for depositing the same with the
cash pool. This will enable the cash pool to manage the carrying of cash on the
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x. Cash pool can easily find out the exact daily cash requirement of the branches
by running the above software. While managing daily cash requirement, the
about the exact cash requirement of their respective branches and note the said
into their diaries. To keep the balance between the required / excess cash the
cash pool should inform daily to the accounts department of the corporate
office to enable them to issue the cheque for withdrawal from the state bank of
India. The cash pool should maintain their total cash limit prescribed by
xi. As per existing practice, the cash pool withdrew the required cash from the
state bank of India as & when necessary. It is the duty & responsibility of the
manager and all the official of the cash pool to maintain relationship with the
official of the state bank of India, their cash department in charge, subordinate
staff etc. this will enable the cash pool to obtain new notes in required
It is mandatory for every bank to affix the round seal of the respective branch
on each soiled note while depositing the soiled cash with SBI on and after 10 th
every month the cash pool should collect the soiled cash along with the letter
addressed to bank where the soiled cash is to be deposited as per the norms
prescribed in the clean note policy of the RBI. A copy of the said letter should
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The cash pool should ensure that the said cash is deposited with the SBI, TCC
acknowledgement of the same & the counter foil number should be sent to the
accounts department on same day and the zerox copy of the same should be
during 11th to 20th of every month. The cash pool scrupulously adhere the
same and the soiled cash should not be kept in the custody of the cash pool for
xii. Cash pool officials should submit the letter of intimation one & half month in
festivals seasons, especially at the time of Ganpati and Diwali to the manager
currency cash ,HDFC bank , kamal mill compound, Parel, Mumbai so also
submitted to the SBI, TTC one month before the festival season start.
The cash pool should ensure that confirmation for collection of the cash the
cash pool in charges of respective banks three days before Ganpati & Diwali
to enable the cash pool official to distribute the same to the branches.
xiii. For example maximum retention limit for Noupada branch of TJSB is 75 lakh
as this is a industrial area where need for cash is maximum due to business
transaction, whereas for thane east branch maximum limit is 30 lakh as there
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Rules and Regulation Of Primary Co-Operative Banks In India
The banking regulation act 1949 which had come into force from 1 st march 1966, has
vested the Reserve Bank with various statutory powers of control and supervision
Sec.5 (CCV): in terms of this section a primary co-operative bank means a co-
2. The paid-up share capital and reserves of which are not less than one lakh
rupees
3. The bye- laws of which do not permit admission of any other co-operative
society as a member.
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Legal And Regulatory Regime Regarding Cash Management
Of Co-Operative Banks
All primary (urban) co-operative banks (PCBs) are required to maintain stipulated
The scheduled PCBs were required to maintain with the RBI during the
liabilities (DTL) in India obtaining on the last Friday of the second preceding
fortnight
strategy for cash management depending upon their intra period cash flow
Demand and Time Liabilities) as on the last Friday of the second preceding
fortnight.
stipulated CRR by the scheduled banks. Thus with effect from the fortnight
maintained by every bank based on its NDTL as on the last Friday of the
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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
ii) Fortnight- It shall mean the period from Saturday to second following
Money at call and short notice up to 14 day lent to banks and notified
financial institution
Any other amounts due from the banking system, like amount held by
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2. Statutory liquidity reserves-
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
Current prescription for SLR: presently the PCBs are required to maintain a
In cash or
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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 Demand
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GENERAL CONDITION FOR CALCULATION OF CRR AND SLR
REQUIREMENT OF 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
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.
only in SGL accounts with reserve bank of India, primary dealers, state co-
operative banks.
Time liabilities are whose which are payable otherwise than on demand.
Fixed deposits
Cash certificates
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Demand liabilities include
Current deposits
Demand drafts
unclaimed deposits
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NON-SLR INVESTMENTS -
(ii) Investments will be limited to "A" or equivalent rated Commercial Papers (CPs),
(iii) Investments in unlisted securities should not exceed 10% of the total non-SLR
investment at any time. Where banks have already exceeded the said limit, no
(iv) Investments in units of Mutual Funds, except Debt Mutual Funds and Money
(vi) All fresh investments under Non-SLR category should be classified under Held
for Trading (HFT) / Available for Sale (AFS) categories only and marked to
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(vii) Balances held in deposit accounts with commercial banks and in permitted
Commercial Banks will be outside the limit of 10% of total deposits prescribed
(viii) The total amount of funds placed as inter-bank deposits (for all purposes
including clearing, remittance, etc) shall not exceed 10% of the DTL of a UCB
(ix) Exposure to any single bank should not exceed 2% of the depositing bank's DTL
as on March 31 of the previous year, inclusive of its total non- SLR investments
(xi) All investments, other than those in CPs (commercial papers) and CDs (certificate
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MANAGEMENT OF LOANS AND ADVANCES :
several indirect measure to regulate bank credit such as exposure norms for
UCBs are permitted to determine their lending rates taking into account their
deregulated, rates of interest beyond a certain level may be seen usurious and
Banks also required publishing the minimum and maximum interest rates
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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
Objective of policy
To decide investment policy for financial year and to revise it from time to
time.
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TJSB can invested in following securities-
Treasury bills
Approved security
Debt/money market
Certificate deposit
Commercial papers
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Delegation of Powers:
deposit
General 25 15 - 100 25
manager
Deputy - - - 100 10
general
manager
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Investment Strategies of TJSB-
In the monthly meeting the investment committee shall review the economic
The investment department shall take a view on interest rates as per the
duration of portfolio etc. If the yield curve is flat more risk is involved at the
longer maturity and therefore exposure in the same may be reduced, if the
yield curve is steep the exposure in the longer term may be increased as per
availability of the funds because chances of appreciation in the value are more.
If the interest rates are likely to go down and condition are conducive for
investment, a certain percentage of the excess g-securities over and above the
SLR requirement may be shifted for aggressive trading in the market to grab
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The investment department shall analysed average modified duration of the
The average modified duration at any point of time shall not be allowed to
If the interest rate scenario is conducive for the longer and maturity,
Trustee securities 50 50
Call deposit 0 0
Shares of co-operative 44 44
banks
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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
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
The bank may lend in call money market for same purpose.
As per RBI borrowing in call money market shall not exceed amount
The PSU bonds may be sold according to the liquidity positio n opportunity for
Investment in bonds which are considered for non-SLR investment will be for
higher yields.
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.
condition.
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Measures Taken By TJSB For Efficient Cash Management:
not exceed 45% of the NDTL and the excess portion over and above SLR
condition.
In CBLO rates are low but it involves securitization with CCI, it offer
TJSB use this instrument very efficiently to fulfil its CRR requirement.
TJSB use this instrument for trading purpose also i.e. if they have excess cash
For maintain SLR, TJSB invest in government securities as they offer higher
generating no margin.
Only 0.15 basis points they aim from trading in market, rest they planned to
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They restricted their investment in unlisted securities up to 10% of total non-
SLR portfolio.
institutions are classified into “held for trading” (HFT), “available for sale”
(AFS) and “held to maturity” (HTM) categories in accordance with the reserve
TJSB’s fixed deposits with other banks include deposits which are lodged as
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FINDINGS:
These are some key points which analyzed while studying this project which reflects
TJSB 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
It doesn’t maintain more cash as CRR, it try to avoid cash remain ideal.
Government securities
PSU bonds
Commercial Papers
TJSB doesn’t invest much in money market mutual fund instrument as it not
44
TJSB manage its cash efficiently and it shows by their investment policy and
(Rs.in crores)
Financial Performance
6000
5000
4000
3000
2000
1000
0
Paid up Investment Working
Reserves Deposits Advances
capital s Funds
% increse 50 12.4 15 17 24 16.5
31.03.2009 27 281 2347 1506 1098 2951
31.03.2008 18 250 2039 1285 883 2533
Source38th
Annual
Report
2008-09
45
Recommendations of The Study
After analyzing TJSB bank’s cash management policy, I would like to place
following recommendation -
TJSB bank should try to make more use of current money market instrument
TJSB should go for more techno savvy products for payment and collection
services.
TJSB already introduce core banking solution, it should implement it for all its
such as RTGS
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Conclusion of the Study
TJSB manage its cash efficiently as per rules and regulation of RBI, as it
manages it’s inter branch cash very efficiently among various branches.
TJSB 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
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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:-
irrelevant tomorrow.
48
Learning-
management
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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
38th Annual Report 2008-09
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51