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MF0016 solved assignment

MF0016 solved assignment

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Published by: Sandeep Hebbar on Dec 08, 2012
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Master of Business Administration -MBA Semester 4MF0016 – Treasury Management Assignment Set- 1Q.1 Explain how organization structure of commercial bank treasury facilitates in handling varioustreasury operations.Ans:-
The treasury organisation deals with analysing, planning, and implementing treasury functions. It dealswith issues of profit centre, cost centre etc. The organisations managing interfaces with treasury functionsinclude intragroup communications, taxation, recharging, measurement and cultural aspects.
Structure of treasury organisation
Figure 1.2 depicts the structure of treasury organisation which is divided into five groups.
Figure 1.2: Treasury Organisations
Fiscal – This group includes budget policy planning division, industrial and environmental division,common wealth state relationships, and social policy division.
Macroeconomic – This group deals with economic sector of the organisation. It includes domestic andinternational economic divisions, macroeconomic policy and modeling division.
Revenue – This group is concerned with the taxes in an organisation. It includes business tax division,indirect tax, international and treaties division, personal and income division, tax analysis and tax designdivision.
Markets – This group mainly deals with selling of products in the competitive market. It includescompetition and consumer policy, corporations and financial services policy, foreign investments and tradepolicy division.
Corporate services – This group deals with overall management of the treasury organisation. Itincludes financial and facilities division, human resource division, business solutions and informationmanagement division.
Treasury management in banks
In recent days, most of the Indian banks have classified their business into two primary business segmentslike treasury operations (investments) and banking operations (excluding treasury).
The treasury operations in banks are divided into:
Rupee treasury – The rupee treasury carries out various rupee based treasury functions like asset liabilitymanagement, investments and trading. It helps in managing the bank’s position in terms of statutoryrequirements like cash reserve ratio, statutory liquidity ratio according to the norms of the Reserve Bank of India (RBI). The various products in rupee treasury are:Money market instruments – Call, term, and notice money, commercial papers, treasury bonds, repo,reverse repo and interbank participation etc.Bonds – Government securities, debentures etcEquities
Foreign exchange treasury – The banks provide trading of currencies across the globe. It deals withbuying and selling currencies.
Derivatives – The banks make foundation for Over the Counter (OTC). It helps in developing newproducts, trading in order to lay off risks and form apparatus for much of the industry’s self-regulation.The role of policies in strategic management was described in this section. The next section deals withinter-dependency between policy and strategy.
Q.2 Bring out in a table format the features of certificate of deposits and commercial papers.Ans:-Features of commercial papers Features of CDs in Indian market
CPs is an unsecured promissory note. Schedule banks are eligible to issue
Features of commercial papers Features of CDs in Indian market
CPs is an unsecured promissory note. Schedule banks are eligible to issueCDsCPs can be issued for a maturity periodof 15 days to less than one year.Maturity period varies from threemonths to one yearCPs is issued in the denomination of Rs.5 lakh. The minimum size of the issue is Rs. 25 lakh.Banks are not permitted to buy back their CDs before the maturityThe ceiling amount of CPs should notexceed the working capital of th eissuing company.CDs are subjected to CRR andStatutory Liquidity Ratio (SLR)requirementsThe investors in CPs market are banks,individuals, business organisations andthe corporate units registered in Indiaan d incorporated units.They are freely transferable byendorsement and delivery. They haveno lock-in period.The interest rate of CPs depends on theprevailing interest rate on CPs market,forex market and call money market.The attractive rate of interest In any of these markets, affects the deman d of CPs.CDs have to bear stamp duty at theprevailing rate in the marketsThe eligibility criteria for thecompanies to issue CPs are as follows:The NRIs can subscribe to CDs onrepatriation basisThe tangible worth of the issuingcompany should not be less than Rs .4.5 Crores.The company should have a minimumcredit rating of P2 and A2 obtainedfrom Credit Rating InformationService of India (CRISIL) andInvestment Information and CreditRatin g Agency of India Limited.(ICRA) respectivelyThe current ratio of the issuingcompany should be 1.33:1.The issuing company has to be listedon stock exchange.

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