TREASURY OPERATIONS & MANAGEMENT- UNIT 2 Liquidity Management CRR/SLR/CCIL/RTGS, Objectives, Sources & Deployment, Internet Control, Netting, etc.(3 Lectures)

TO&RM- UNIT 2 OBJECTIVE, SOURCES & DEPLOYMENT: *LIQUIDITY can be defined as ability to meet the liabilities exactly when they fall due. This is at the heart of Banking operations. *A Bank’s liquidity stems from the following - Cash in excess of CRR - Investment in securities over & above SLR, (which can be used to borrow under CBLO/REPO from CCIL/RBI 19/11/2013 P K MITRA

TO&RM- UNIT 2 Contd. - Swapping Forex funds with INR - Return flow from investment in treasury bills, securities, interest & instalments on loans - Undrawn lines from RBI, SIDBI, NABARD, EXIM BANK, NHB, etc. - Normal accretion in deposits which may take time for deployment 19/11/2013 P K MITRA

TO&RM- UNIT 2 LIQUIDITY SHORT SITUATION - Tap various sources - Optimise cost - In extra ordinary situations, Bank may borrow from RBI against collateral SURPLUS SITUATION - Money Market Lending - Reverse REPO – Buying Treasury Bills, CPs, Securities - Repaying refinance 19/11/2013 P K MITRA

TO&RM- UNIT 2 CRR - RBI is empowered to increase CRR from 3% to 20% of NDTL - Exclusion of following liabilities is made in calculations: a) Paid up capital b) Loans taken from RBI, IDBI, NABARD c) Aggregate of liabilities towards other banks/ FIs as notified by Central Govt. 19/11/2013 P K MITRA

TO&RM- UNIT 2 DEMAND Liability: Current account, a portion of Saving Fund, overdue FD, cash certificate, outstanding TTs, DDs, credit balance in Cash credit, security deposits TIME LIABILITIES: FD, cash certificates, RDs, Time liability portion of Saving Deposit, Deposits held as security against advance OTHER LIABILITY: Bills Payable, Unpaid dividends, sundries account, Interest accrued on deposits 19/11/2013 P K MITRA

TO&RM- UNIT 2 STATUTORY LIQUIDITY RATIO - Reporting fortnight is from Saturday to Friday – Statement is submitted by Bank to RBI in a format - Ratio cant be lower than 25% on any day and RBI can hike it up to 40% - Investment in Govt. and other approved securities, includes Central/ State Govt. Securities & Treasury Bills (cash mismatches) 19/11/2013 P K MITRA

TO&RM- UNIT 2 REAL TIME GROSS SETTLEMENT *Electronic based settlement of inter-bank and customer based transactions with support from RBI *Transfer of funds is on immediate basis; as such more than 90% transactions are on this *This is fully integrated with the accounting system of RBI *Uses INFINET a secured and state of the art network 19/11/2013 P K MITRA

TO&RM- UNIT 2 ESSENTIAL COMPONENTS OF RTGS *Membership of Indian Financial Network *Establishment of Payment Gateway *Use of Structured Financial Messaging System (SFMS) as a common messaging format *Use of Electronic coding and decoding technology *Unique Identification of Bank’s branch for RTGS 19/11/2013 P K MITRA

TO&RM- UNIT 2 FUNCTIONING OF RTGS *Each Bank to open RTGS account with RBI *Dedicated account for RTGS settlement *Account funded in the morning and squared in the evening when it shows nil balance *Shortfall in the account if any, is adjusted under intra-day liquidity withdrawal facility against securities given by the bank *Surplusis transferred to the Current account of the bank TO&RM- UNIT 2 19/11/2013 P K MITRA

TO&RM- UNIT 2 CLEARING CORPORATION OF INDIA LTD: *Institution is a clearing house for settling trades on a guaranteed basis *Products handled by by CCIL are a)G-Secs/State Govt./T Bills i) Outrights ii) REPOs/CBLOs iii) RBI auctions 19/11/2013 P K MITRA

TO&RM- UNIT 2 b) FOREX *USD/INR * -Spot * -Cash * -Forward *CCIL has introduced a dealing and trading platform for Forex called FX Clear. * FX Clear enables trade to be done with order matching mode and negotiation mode 19/11/2013 P K MITRA

TO&RM- UNIT 2 Contd… *CCIL applies the concept of novation & multilateral netting in its operation *Novation introduces CCIL as the intermediary responsible for clearing and settlement of trades *CCIL takes responsibility for delivery, making & receiving payments to and fro from all the counter parties for all transactions. 19/11/2013 P K MITRA

END OF PRESENTATION ASSIGNMENT Explain following key words: *Arbitrage *Derivatives *Emerging Market Countries *Leveraging *Speculation *Short-sale *Tradable assets AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAaaaaaaaaaaaaaaaaaaaa 19/11/2013 P K MITRA