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A Summer Training Project Report

On Cash Management At Canara


In partial fulfilment of the requirement for the award of the

degree in Masters of Business Administration (MBA)

Submitted to- Submitted by-

Mr. Rashid Mandeep Kaur
Lecturer in Management MBA 3rd Sem
Roll no.- 1525961

Satyam Institute of Management & Technology,


The Harder you work .. The Luckier You Get

The successful completion of this project was a unique experience for us because by visiting
many place and interacting various person, I achieved a better knowledge about this project.
The experience which I gained by doing this project was essential at this turning point of my
carrier this project is being submitted which content detailed analysis of the research under
taken by me.
The research provides an opportunity to the student to devote her skills knowledge and
competencies required during the technical session.
The research is on the topic CASH MANAGEMENT AT CANARA BANK.

Mandeep Kaur

Knowledge is an experience gained in life, it is the choicest possession, which should not
be shelved but should be happily shared with others.
I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.
I am highly thankful to Mr. Rashid for their guidance and constant supervision, as well as for
providing necessary information regarding the project & also for their support in completing
the project.
My thanks and appreciations also go to my colleague in developing the project and people
who have willingly helped me out with their abilities.

Mandeep kaur
Sr Index Page
no. no.
Introduction to banking industry 1-5
History of banking India


Introduction to bank
History of the Canara bank 1-26
Profile of the Canara bank
Financial statement of canara bank
Products and services of Canara bank
McKinsey's 7s Framework


Introduction to Project
Cash management
Swot analysis 1-31
Research methodology
Data analysis

Conclusion and suggestions 1-2
Chapter1 :Introduction

Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans
or cosmopolitans in India. In fact, Indian banking system has reached even to the remote
corners of the country. This is one of the main reasons of India's growth process.
The government's regular policy for Indian bank since 1969 has

paid rich dividends with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a draft
or for withdrawing his own money. Today, he has a choice. Gone are days when the most
Efficient bank transferred money from one branch to other in two days. Now it is simple as
Instant messaging or dial a pizza. Money has become the order of the day. The first bank in
India, though conservative, was established in 1786. From 1786till today, the journey of
Indian Banking System can be segregated into three distinct phases. They areas mentioned
Early phase from 1786 to 1969 of Indian banks
Nationalization of Indian Banks and up to 1991 prior to Indian banking
sector Reforms.
New phase of Indian Banking System with the advent of Indian Financial &Banking
Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II
and Phase III.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809),Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.
These three banks were amalgamated in 1920 and Imperial Bank of India was established
which started as private shareholders banks, mostly Europeans shareholders
In 1865 Allahabad Bank was established and first time exclusively by Indians,
Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906
and1913,Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. Reserve Bank of India came in 1935.During the first phase
the growth was very slow and banks also experienced periodic failures between 1913 and
1948. There were approximately 1100 banks, mostly small. To streamline the functioning and
activities of commercial banks, the Government of India came up with The Banking
Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an after math deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders

Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In
1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale
especially in rural and semi-urban areas. It formed State Bank of India to act as the principal
agent of RBI and to handle banking transactions of the Union and State Governments all
over the country. Seven banks forming subsidiary of State Bank of India was nationalized in
1960on 19th July,1969, major process of nationalization was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country was nationalized. Second phase of nationalization Indian Banking Sector Reform was
carried out in1980 with seven more banks. This step brought 80% of the banking segment in
India under Government ownership

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:-
1949: Enactment of Banking Regulation Act.
1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions

Phase III

This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham a committee was
setup by his name which worked for the liberalization of banking practices. The country is
flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory
service to customers. Phone banking and net banking is introduced. The entire system
became more convenient and swift. Time is given more importance than money. The financial
system of India has shown a great deal of resilience. It is sheltered from any crisis triggered
by any external macroeconomics shock as other East Asian Countries suffered. This is all due
to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet
fully convertible, and banks and their customers have limited foreign exchange exposure
Currently (2010), overall, banking in India is considered as fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. Even in terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets-as compared
to other banks in comparable economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government. The stated policy of the Bank
on the Indian Rupees to manage volatility-without any stated exchange rate-and this has
mostly been true. With the growth in the Indian economy expected to be strong for quite
some time-especially in its services sector, the demand for banking services-especially retail
banking, mortgages and investment services are expected to be strong. M&As, takeovers,
asset sales and much more action (as it is unravelling in China) will happen on this front in
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in
Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has
been allowed to hold more than 5% in a private sector bank since the RBI announced norms
in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by
them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks
(that is with the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign
banks. They have a combined network of over 53,000 branches and 21,000 ATMs. According
to report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of
total assets of the banking industry, with the private and foreign banks holding 18.2% and
6.5%respectively.SBI is the only bank consisting 26% participation in public sector banks
and 39% participation in commercial banks in India
Banking in India Reserve Bank of India
1. Central Bank

2. Nationalized Banks State Bank of India, Allahabad Bank,

Andhra Bank, Bank of Baroda, Bank of
India, Bank of Maharashtra, Canara Bank,
Central Bank of India, Corporation Bank,
Dena Bank, Indian Bank, Indian overseas
Bank, Oriental Bank of Commerce, Punjab
and Sind Bank, Punjab National Bank,
Syndicate Bank, Union Bank of India,
United Bank of India, UCO Bank, and
Vijaya Bank
3. Private Banks Bank of Rajasthan, Bharat overseas Bank,
CatholicSyrian Bank, Centurion Bank of
Punjab, City UnionBank, Development
Credit Bank, Dhanalaxmi Bank,Federal
Bank, Ganesh Bank of Kurundwad, HDFC
Bank,ICICI Bank, IDBI, IndusInd Bank,
ING Vysya Bank,Jammu and Kashmir
Bank, Karnataka Bank Limited,KarurVysya
Bank, Kotak Mahindra Bank,
LakshmivilasBank, Lord Krishna Bank,
Niantic Bank, Ratnakar Bank,Sangli Bank,
SBI Commercial and International
Bank,South Indian Bank, Tamil Nadu
Mercantile Bank Ltd.,United Western Bank,
UTI Bank, YES Bank.

Structure of Indian Banking

Reserve Bank of India is the regulating body for the Indian Banking Industry. It is a mixture
of Public sector, Private sector, Co-operative banks and foreign banks. The private sector
banks are further spilt into old bank and new banks.
History of the canara bank:

Canara Banks rating reflects its strong market position, adequate capitalisation levels, and
comfortable liquidity profile. The rating also factors the banks business profile that is
supported by a good resources position, as well as its better asset quality as compared to its
peers. Crisil also considers the Government of Indias (GoI) majority ownership of Canara
Bank to be a positive rating factor. The banks earnings profile is characterised by moderate
although improving profitability.

Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late

ShriAmmembalSubbaRaoPai, a philanthropist, this small seed blossomed into a limited
company as 'Canara Bank Ltd.' in 1910 and became Canara Bank in 1969 after
"A good bank is not only the financial heart of the community, but also one with an
obligation of helping in every possible manner to improve the economic conditions of the
common people" - A. SubbaRaoPai.

Founding Principles:
1. To remove Superstition and ignorance.

2. To spread education among all to sub-serve the first principle.

3. To inculcate the habit of thrift and savings.

4. To transform the financial institution not only as the financial heart of the community
but the social heart as well.

5. To assist the needy.

6. To work with sense of service and dedication.

7. To develop a concern for fellow human being and sensitivity to the surroundings with
a view to make changes/remove hardships and sufferings.

Sound founding principles, enlightened leadership, unique work culture and remarkable
adaptability to changing banking environment have enabled Canara Bank to be a frontline
banking institution of global standards.

Significant Milestones::
1st July 1906: Canara Hindu Permanent Fund Ltd. formally registered with a
capital of 2000 shares of 50/- each, with 4 employees

1910: Canara Hindu Permanent Fund renamed as Canara Bank Limited

14 major banks in the country, including Canara Bank, nationalized

1969: on July 19

1976: 1000th branch inaugurated

Overseas branch at London inaugurated Cancard (the Banks credit
card) launched

1984: Merger of Laksmi Commercial Bank Limited with Canara Bank

1985: Takeover of Lakshmi Commercial Bank Limited Commissioning of

Indo Hong Kong International Finance Limited (now a full fledged

1987: Canbank Mutual Fund &Canfin Homes launched

Canbank Venture Capital Fund started

1989-90: Canbank Factors Limited, the factoring subsidiary launched

1992-93: Became the first Bank to articulate and adopt the directive
principles of Good Banking.

Became the first Bank to be conferred with ISO 9002 certification
for one of its branches in Bangalore

Opened a 'Mahila Banking Branch', first of its kind at Bangalore,
for catering exclusively to the financial requirements of women

Maiden IPO of the Bank

Launched Internet Banking Services

100% Branch computerization
Entered 100th Year in Banking Service. Launched Core Banking
Solution in select branches. Number One Position in Aggregate
Business among Nationalized Banks.

2006-07: Signed MoUs for Commissioning Two JVs in Insurance and Asset
Management with international majors viz., HSBC (Asia Pacific)
Holding and RobecoGroep N.V respectively.

Launching of New Brand Identity. Incorporation of Insurance and
Asset Management JVs. Launching of 'Online Trading' portal.
Launching of a Call Centre. Switchover to Basel II New Capital
Adequacy Framework.

The Bank crossed the coveted 3 lakh crore in aggregate business.
The Banks 3rd foreign branch at Shanghai commissioned.

The Banks aggregate business crossed 4 lakh croremark.
Net profit of the Bank crossed 3000 crore. The Banks branch
network crossed the 3000 mark.

Total number of branches reached 3600. The Banks 5th foreign
branch at Manama, Bahrain opened.

2012-13: Highest Dividend of 130% paid for the year

2013-14: 1027 branches and 2786 ATMs opened during the year. Global
business crossed the`7 lakh crore milestone.
As at March 2014, the total business of the Bank stood at 721790 crore


To emerge as a Best Practices Bank by pursuing global benchmarks in profitability,

operational efficiency, asset quality, risk management and expanding the global reach.


To provide quality banking services with enhanced customer orientation, higher value
creation for stakeholders and to continue as a responsive corporate social citizen by
effectively blending commercial pursuits with social banking


A Brief Profile of the Bank

Widely known for customer centricity, Canara Bank was founded by ShriAmmembalSubbaRaoPai,
a great visionary and philanthropist, in July 1906, at Mangalore, then a small port town in
Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred
years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization in
the year 1969, attaining the status of a national level player in terms of geographical reach and
clientele segments. Eighties was characterized by business diversification for the Bank. In June
2006, the Bank completed a century of operation in the Indian banking industry. The eventful
journey of the Bank has been characterized by several memorable milestones. Today, Canara Bank
occupies a premier position in the comity of Indian banks. With an unbroken record of profits since
its inception, Canara Bank has several firsts to its credit. These include:

Launching of Inter-City ATM Network

Obtaining ISO Certification for a Branch

Articulation of Good Banking Banks Citizen Charter

Commissioning of Exclusive Mahila Banking Branch

Launching of Exclusive Subsidiary for IT Consultancy

Issuing credit card for farmers

Providing Agricultural Consultancy Services

Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial
Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and
abroad. As at March 2014, the Bank has further expanded its domestic presence, with 4750
branches spread across all geographical segments. Keeping customer convenience at the forefront,
the Bank provides a wide array of alternative delivery channels that include over 6312 ATMs,
covering 3572 centres.Several IT initiatives were undertaken during the year. The Bank set up 102
hi-tech E-lounges in select branches with facilities like ATM, Cash Deposit Kiosk with voice
guided system, Cheque Deposit Kiosk, Self Printing Passbook Kiosk, Internet Banking Terminal,
Online Trading Terminal and Corporate Website Access. Canara e-Infobook an electronic
passbook and banking related information facility was introduced on mobile platforms - Android,
Windows8 &iOS. The Bank also launched Canara Bank RuPay Debit Card, Canara Club Card
Debit, Canara Secured Credit Card, Canara Elite Debit Card and EMV Chip Cards under debit and
credit cards. Online Savings Bank and PPF account opening were introduced during the year. The
Bank made several value additions under internet banking and mobile banking services.

Not just in commercial banking, the Bank has also carved a distinctive mark, in various corporate
social responsibilities, namely, serving national priorities, promoting rural development, enhancing
rural self-employment through several training institutes and spearheading financial inclusion
objective. Promoting an inclusive growth strategy, which has been formed as the basic plank of
national policy agenda today, is in fact deeply rooted in the Bank's founding principles. "A good
bank is not only the financial heart of the community, but also one with an obligation of
helping in every possible manner to improve the economic conditions of the common
people". These insightful words of our founder continue to resonate even today in serving the
society with a purpose. The growth story of Canara Bank in its first century was due, among
others, to the continued patronage of its valued customers, stakeholders, committed staff and
uncanny leadership ability demonstrated by its leaders at the helm of affairs. We strongly believe
that the next century is going to be equally rewarding and eventful not only in service of the nation
but also in helping the Bank emerge as a "Preferred Bank" by pursuing global benchmarks in
profitability, operational efficiency, asset quality, risk management and expanding the global reach.

Type Public (BSE:532483, NSE:CANBK)

Industry Banking
Financial services

Founded Canara Bank Hindu Permanent Fund (1906)

Canara Bank Ltd (1910)
Canara Bank (1969

Headquarters Bangloreindia
Key people Shri R.K.DUBEY, (Chairman & MD) , Shri Ashok Kumar Gupta (Executive

Investment BankingConsumer BankingCommercial BankingRetail

Products BankingPrivate BankingAsset ManagementPensionsMortgageCredit Cards

Employees 47,389 (2001314)



Awards and Achievements during 2012-13

Best Bank Award among large banks by IDRBT for "Use of Technology for Financial
Inclusion" handed over by RBI Governor Dr. D Subbarao.

Skoch Award for Financial Inclusion, handed over by Dr. C Rangarajan, Chairman,

1st Rank for Self Help Groups Linkage for the year 2011-12 in the State of Bihar.

Award for 'Best Online Bank' among Public Sector Banks- IBA Banking Technology
Awards 2011

Award for 'Best Customer Relationship Initiative' among Public Sector Banks - IBA
Banking Technology Awards 2011.

The Greatest Corporate Leaders of India Leadership in Banking Award, instituted by

World HRD Congress, Feb 2013.

Prestigious Platinum Greentech HR Award 2013 under HR Oriented CEO by M/s

Greentech Foundation, New Delhi.
Platinum awards, for Best HR Strategy and Training Excellence by M/s Greentech
Foundation, New Delhi.

National Vigilance Excellence Award 2012 for the second consecutive year from
Vigilance Study Circle, Hyderabad under the auspices of the Central Vigilance

Awards and Achievements during 2013-14

In recognition of the varied initiatives, the Bank was conferred with the following

Global CSR Excellence and Leadership Awards 2014 from CSR World Congress.

Best Home Loan Provider Award from Outlook Money for 2013.

Finger Print based Biometric Authorization for CBS declared as winner for secure
IT 2014 award.

The Banks Desktop Management System project awarded amongst Indias Best
-2013 in 33rd SKOCH Summit.

NFS Operational Excellence Award 2013 - Special Jury Award 2013 by NPCI in
recognition of Bank's excellent performance in Key Parameters in respect of ATMs
and switch connected to NFS ATM Network.

Corporate Collateral Awards under various categories by Public Relations Council of


Golden Peacock Award for excellence in Corporate Social Responsibility for the year

Greentech Award for excellence in Corporate Social Responsibility for the year 2013.

Skoch Renaissance Award 2013, with a Medal and Citation for being India's Best-
Board of directors

1. Shri. R.K. DUBEY Chairman & Managing Director

2. Shri. ASHOK KUMAR GUPTA Executive Director

3. Shri V. S. KRISHNAKUMAR Executive Director

4. Shri. PRADYUMAN SINGH Executive Director


5. Dr.RAJAT BHARGAVA Director representing Government of India

6. Smt. MeenaHemchandra Director representing Reserve Bank of India

7. Shri. G.V. SAMBASIVA RAO Workmen Employee Director

8. Shri G. V. Manimaran Officer Employee Director

9. Shri SUNIL HUKUMCHAND Part Time Non Official Director
KOCHETA under Chartered Accountant category

10. SHRI SUTANU SINHA Part Time Non Official Director

11. Shri. MOCHERLA SAIRAM Part Time Non Official Director


12. Shri. RAJINDER KUMAR GOEL Shareholder Director

13. Shri. SANJAY JAIN Shareholder Director

Financial position of Canara bank:

Financial statements and reports are the tools which provide information of the firms
financial affairs. This information is required for financial analysis & decision making. It
assesses the financial status of organization which is prepared with help of accounting
principle. Financial statement has mainly as follow:
Balance sheet
Profit & loss account

Financial statement is prepared on basis of generally accepted accounting principle. These

a. Business entity principle
b. Going concern principle
c. Monetary principle
d. Historical principle
e. Realizations principle
f. Accrual concept

Basic conventions under which financial statements prepared is:

Analyzing of financial statements helps to know the financial health of the borrower, which
provides the detail of the liabilities and the assets of the applicant. It also helps to study the
trends in the financial matters of the company. It helps to valuate the assets of the applicant
company. It assists in decision making process relating to the future activities.

Profit and Loss account:

Meaning:-profit and loss account is one of the essential document which shows the
summary of revenues, expenses and net income of the firm during the particular
financial period.

Functions of the Profit and Loss account:

It gives a concise summary of the firms revenue and expenses during the Particular
It measures the firms profitability.
It represents the activity of the firm.

BalanceSheet - Canara Bank:

Rs (in Crores)

Particulars Mar'14 Mar'13 Mar'12 Mar'11 Mar'10

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 461.26 443.00 443.00 443.00 410.00

Reserves & Surplus 29158.85 24434.79 20181.82 17498.46 12129.11

Net Worth 29620.11 24877.79 22689.96 20039.82 14671.78

Secured Loan 27230.64 20283.37 15525.39 14261.65 8440.56

Unsecured Loan 420722.82 355855.99 327053.73 293972.65 234651.44

TOTAL LIABILITIES 477573.57 401017.15 365269.07 328274.12 257763.78

Gross Block 6641.56 2862.72 4858.37 4686.15 4480.37

(-) Acc. Depreciation .00 .00 2000.84 1841.74 1620.99

Net Block 6641.56 2862.72 792.40 746.05 726.69

Capital Work in Progress .00 .00 .00 .00 .00

Investments 126828.26 121132.83 102057.43 83699.92 69676.95

Inventories .00 .00 .00 .00 .00

Sundry Debtors .00 .00 .00 .00 .00

Cash and Bank 44828.71 34714.70 28179.40 30708.12 19653.21

Loans and Advances 313623.33 253632.36 241065.83 218826.32 172551.55

Total Current Assets 358452.04 288347.06 269245.23 249534.43 192204.76

Current Liabilities 14348.29 11325.45 8891.12 7804.64 6977.30

Provisions .00 .00 .00 .00 .00

Total Current Liabilities 14348.29 11325.45 8891.12 7804.64 6977.30

ASSETS 344103.75 277021.61 260354.11 241729.79 185227.46

Misc. Expenses .00 .00 .00 .00 .00

ASSETS(A+B+C+D+E) 477573.57 401017.15 365269.07 328274.12 257763.78
Products and services provided by Canara bank:

Personal corporate NRI

Banking bankingBanking

1.Savings and deposits 1.Accounts and 1.SWIFT

deposits 2.lock box service
2.Loan products
2.anaraetax 3.Loan and advances
3. Technology products
3.Loan and advances 4.deposit products
4.Mutual funds
4.Merchant banking 5.remittance facilities
5.Insurance business
6.International services
5.Syndicate services
7. Card services
8.Depository services
1.Personal banking:
a) Savings and deposits:
1.Current Deposits

For traders, businessmen, corporate bodies etc. who operate the account
The minimum balance requirement for current account is as follows:
Metro/Urban - Rs.5000/-
Semi-Urban/Rural- Rs.1000/-
Not eligible for interest.
No ceiling on the number of withdrawals and credits.
Pass book, pass sheet, standing instructions, cheque collection facilities

2.Fixed Deposits
When you want to invest your hard earned money for a longer period of time and
get a regular income, our Fixed Deposit Scheme is ideal.

How much you can invest?

Minimum Rs. 1000/-
Maximum - No ceiling.

Period of Deposit
Minimum 15 days
Maximum 120 months

High Returns
Attractive rates as applicable from time to time.

Interest Payment
Monthly, Quarterly, Half-yearly or Annual intervals at depositor's choice

Easy liquidity
Loan against deposit.
Closure before maturity permissible.
Facility of part withdrawal of deposits in units of Rs.1000/- keeping the rest of
the deposit to earn contracted rate of interest.

Nomination facility

Scheme available at all branches.

3.Kamadhenu Deposits

How much you can invest?

Minimum Rs. 1000/-
Maximum - No ceiling.

Period of Deposit
Minimum 5 months
Maximum 120 months
(can be for odd period also)

High Returns
Attractive rates as applicable from time to time.
Interest compounded every quarter

Easy liquidity
Closure before maturity
Loan against deposit permissible.
Facility of part withdrawal of deposits in units of Rs.1000/- keeping the rest of
the deposit to earn contracted rate of interest.

Nomination facility

Scheme available at all branches.

Open a Kamadhenu Deposit Account and enjoy the way your money grows

4.Recurring Deposits

Amount of Deposit
As low as Rs.50/- per month ( in multiples of Rs. 50/-)
No ceiling on maximum amount..

High Returns
Attractive rates as applicable from time to time.
Interest compounded every quarter

Easy liquidity
Closure before maturity
Loan against deposit permissible.

Nomination facility

b).International Banking Services

Canara Bank entered Forex arena in 1953 with the opening of its first Foreign Exchange
Department in Mumbai.

We finance exports at pre-shipment stage as well as post shipment stage, which can be
availed either in foreign currency or Indian Rupees.

In addition we facilitate forfaiting. That is, discounting of deferred export receivables on

'without recourse basis' from an overseas forfaiting agency.

Canara Bank is pioneer in financing of LC based International Trade transactions in India.

The Bank not only finances at customers option in foreign currency at pre-shipment and post-
shipment stages at LIBOR related rates but also finance the import leg in foreign currency
where imported inputs are required for exports.

The Bank has the expertise in handling project exports of goods and services.

The Bank has an excellent worldwide correspondent relationship and have the capability to
handle any export, import, remittance and related transactions anywhere in the world and in
any currency.

Non fund based transactions like adding confirmations to LC, issuing inward and outward
Bid bonds & guarantees, establishing LCs for import into India, arranging buyer's credit at
attractive terms etc. are our forte.

Canara Bank has branches in London, Hong Kong and Shanghai, China. We have a joint
venture with SBI at Moscow under the name Commercial Bank of India LLC. The Bank also
manages 2 Exchange houses in the Gulf and has arrangement with 20 Exchange Houses and
17 Banks for drawing DDs from Gulf Countries on our select branches through out India.

The Bank has an integrated Treasury with a forex dealing room located in Mumbai in India.
Our London branch has a dealing room of its own. We are active in the Indian forex market
as well as in Overseas forex market. We provide a whole range of services and products like
purchase and sale of 7 world currencies, forward bookings and other forex hedging
instruments like currency swaps.

The above services are offered at attractive cost to the customers of the Bank subject to the
Bank's policies and exchange control / FEMA provisions laid down by the Regulatory
Authorities from time to time.

Our 16 Foreign Departments located in major cities in India have the requisite expertise to
guide you and inform you in any matter connected with our products and services as well as
the current forex regulations.

The Bank has Forex Relationship Managers stationed in the metro cities exclusively for this
c).TeleBanking Services:

Canara Bank offers one more value added service, i.,e Tele Banking services to its customers
for handling banking related services right from their home. By dialing the number allotted
by the bank, customers can transact most of the banking transactions. Presently Telebanking
facility is available throughout the day. This facility is available only for the account holders
in our Core Banking branches. The customers can dial toll free no. 1800 425 0018 within
India to get the following services from the Bank.

Balance inquiry in respect of all the accounts of the customer.

Details of last 5 transactions of the account.
Cheque Status Inquiry.Request for Account statement through Fax, email or post.
Stop Payment Instructions
Loan details of the customer.
Bank product information.
Funds Transfer Facility.(Will be available in next phase)
Reporting of ATM/Debit/Credit card lost.(Will be available in next phase)
Facility to change password.
Demat Account details.
Facility to talk to Phone banker/Relationship Manager/Call Centre


Customer Identification Number (CIN) Unique 6 digit number allotted by


Telephone Personal Identification Number (TPIN) Password for query


Financial Telephone Personal Identification Number (FTPIN)

Password for transaction purpose. (Will be available in next phase)


Joint Account holders with either or survivor operation condition.
Proprietorship concern
PA/LA holder of NRIs.

2.Corporate banking:
a).term laon:
1.Housing loan:

Planning to own a home is one of life's most rewarding challenges.

Plan building a home / buying a flat.
Leave the financing to us.
We have the right housing finance scheme for you..


For construction / purchase / repairs / additions / renovations of residential house / flat

including the purchase of land and construction thereon. For taking over of the Housing Loan
liability with other recognized Housing Finance Companies, Housing Boards, Co-operative
Banks, Co-operative Societies and Commercial Banks at our prevailing low rate of interest.


SSalaried individuals, individuals engaged in business / professionals and self-

employed persons. NRIs are also eligible to avail loans without specific permission of
Persons above the age of 55 years are also eligible subject to certain stipulations of

How much you are entitled to :

We finance upto:

4 years of gross salary to salaried individuals.

4 years' gross annual income to individuals engaged in business or to self-employed


For NRIs up to 2 years' gross income and selectively up to 3 years' gross income.

Selectively loan upto 5 years' gross salary/ income also permitted

Rs.15.00 lacs for repairs / renovations.

What is your contribution?

Amount of Housing Loans New House / Flat Old House / Flat

UptoRs. 20 Lakhs 20% 20%
Above Rs. 20 Lakhs and 20% 25%
UptoRs. 75 Lakhs
Above Rs. 75 Lakhs 25% 25%

Rate of Interest

Please visit interest rate page for current rates.


Mortgage of House / Flat


In convenient equated monthly instalmentsupto 30 years or borrow attaining age of 70

years whichever is earlier (subject to conditions).

Processing Charges:

Nominal processing fee of 0.50% (Min Rs.1500/- and Max. Rs.10,000/-) is charged.
(Waived during Retail Loan Festival period valid till 15.01.2012).

Prepayment :

At your choice. In case of take over of liability by other banks / HFIs, no prepayment
penalties in respect of Housing Loans carrying floating rate of interest.

Documents / Formalities:

Stipulated Loan Application with 2 passport size photos of applicant / guarantor

Sale Deed

Agreement for Sale

Copy of the approved plan for the proposed construction / extension / addition

Detailed cost estimate / valuation report from Bank's Panel Chartered Engineer /

Allotment letter of Co-operative Housing Society / Apartment Owners' Association /

Housing Board / NOC from the Society / Association / Builders / Housing Board

Legal Scrutiny Report, EC for the past 13 years, Property Tax paid receipt, Khata and
permission for mortgage, wherever necessary
Salary Certificate and Form No.16 (in case of salaried persons)

IT Returns filed for the past two years (in case of non-salaried persons)

A brief note on the nature of business, year of establishment, type of organization,

etc., (in case of self-employed)

Balance Sheet and P&L Account for the past three years (in case of self-employed)

b).Syndicate services:

A new value added fee based service of the Bank for Corporates.

Supported by a pool of experienced professionals with Engineering and Finance


Strong underwriting capabilities of the Bank.

The services shall be either on Best Efforts basis or on Underwriting basis.

Direct participation in projects syndicated.

An end to end project finance solution provider.

Reasonable fee structure.

Benefits for Corporates:

Complete menu of financing options.

Borrowers can access from a diverse group of financial institutions for funding .

Funds can be raised at competitive price.

Flexibility in structuring &pricing .

Options such as multi currency options, risk management techniques etc.

Save the time and efforts of approaching / negotiating with individual banks for
1.LockBox Service

A new facility, exclusively to cater to the long felt need of NRIs based in USA.
Remittances by way of Cheque to anywhere in India through our 3000 plus strong
network of branches made very simple and speedier
No need to send cheques to India and again to USA for collection.
Get the chequesrealised in USA itself, at a marginal cost, in fact less than wire transfer
cost, that too at a faster pace than the present system of Cheque collection.
All you have to do is deposit your personal cheques in a local Post Box of Bank of
America in USA and get proceeds credited in INR in Canara Bank account in India or for
opening an FCNR account in Foreign Currency.

Lock Box Facility offers the following advantages:

Simple way to send: NRI Customers/Remitters can post a Cheque from the
comfort of their home
Speed : To and fro transit of instrument is totally avoided, thereby
saving time.
Wide Network : Customers can transfer the amounts to accounts in any of
the 3000 plus branches of our bank across India
Exchange Rates : Most competitive exchange rate
Categorization of canara bank services:

Core services Facilitating services Supporting services

Payment services Making payment at door

2.foreign currency step
4.traveller charges Internet banking
5.IT Telephone banking
Current account and saving 1.ATM card Credit cards
account 2.Payments Debit cards
3.transfer funds
4.saftey funds Telephone banking
Loan products: consumer loan, 1.current account Time period
housing loan, personal loan, 2.saving account
educational loan 3.time deposit account Rate of interest option:

Legal services for


Counseling on real estate

Insurance products: 1.current account Additional insurance
Life insurance, pension schemes 2.saving account facility for family
3.time deposit
4.saftety vaults Counseling on post
retirement savings

Area of Operation

As a premier commercial bank in India, Canara Bank has a distinct track record in the
Service of the nation for over 105 years. Today, Canara Bank has a strong pan India
presence with 3432 branches and 2623 ATMs, catering to all segments of an ever
growing clientele base of 4.04 crores. Across the borders, the Bank has 5 branches,
one each at London, Hong Kong, Shanghai, Leicester and Manama and a
Representative Office at Sharjah, UAE.Canara Bank is recognized as a leading
financial conglomerate in India, with as many as nine subsidiaries/sponsored
institutions/joint ventures in India and abroad.

Infrastructure Facilities

The bank took several initiatives in the InfoTech front. The Bank covered all its
branches/Offices under Core Banking Solution (CBS). With 100% CBS, the Bank
now offers technology banking services, such as, Internet Banking, Funds transfer
through NEFT and RTGS, SMS alerts. The bank also offers online trading facility to
its clients through its subsidiary M/s Canara Bank Securities Ltd. The ATMs have
been enabled to offer value added services like Travel ticket booking, Mobile top up
and utility bill payments.
In view of the increased attacks of phishing and pharming the Bank has put in place
24X7 centralized monitoring system of anti phishing and anti malware. To make the
Internet Banking facility more secure a slew of measures like implementation of OTP
(One Time Password) module, two live validation of account number for
NEFT/RTGS transaction through Net Banking and mutual authentication of Internet
Server customer PC (CAN Secure) were introduced. With increased confidence, the
number of customers enrolled for internet banking has moved up to 3.86 Lakhs
(March, 2011).
The Bank upgraded its Data Centre infrastructure to comply with ISO 27001
standards and did the upward migration of database to Oracle 11G version. The bank
has a well designed and secured corporate network covering all the branches and
A customer terminal has also been provided in the branches for easy and ready
reference to own accounts of customers. The Bank has also implemented Electronic
Data Interchange Module for payment of customs duty and fulfilling the related
formalities in electronic mode.
To connect with the youth of the country and obtain first hank unrestricted feedback,
the bank has a presence at Twitter (

Know Your Customer (KYC)

The Bank took several measures for the effective implementation of KYC and Anti
Money Laundering (AML) guidelines and for ensuring KYC compliance by all
To ensure better compliance of guidelines on KYC/AML following steps have been
1. All Zonal/ Circles have nominated an Executive as Nodal Compliance Officer for
monitoring and ensuring compliance of guidelines on KYC/AML/Combating of
Financial of Terrorism (CFT).
2. Branches were advised to strictly adhere to the guidelines on KYC/AML/CFT to
prevent abuse of banking system by money launderers using money mules.
3. NREGA (National Rural Employment Guarantee Act) job card/Aadhar document
has to be accepted as identification document for opening of accounts. Accounts
opened with these documents will have restrictions applicable to 'small accounts'.
4. Printing and dispatch of Thanks giving letters to new account holders and
introducers are done centrally at Zonal/Circles Offices.
Future growth and Prospectus
The coming years are likely to be of strong but uneven global growth. As financial
markets continue to normalize and households and firms reduce their indebt ness,
growth is projected to gradually strengthen the emerging and developed economies.
The IMF projected global growth at 4.5% for 2012. Emerging economies will
continue to lead global growth. However, uncertainties in the form of higher oil and
non-oil commodity prices and public debt pose risk to global growth.
Indian economy is expected to continue its broad based growth momentum in FY12
backed by strong investment and consumption demand. Domestic demand will
continue to hold the key to GDP growth. Inflation is under control after a long period.
A strong saving and investment and consumption rates, favorable capital market
conditions, capital flows and positive business outlook will also help the economy to
maintain its growth momentum. Services sector will be a major contributor in the
positive domestic outlook and banking sector will continue to be among the
performing sectors in FY12. Efforts to bring in more inclusive growth and focus on
the rural economy would propel the growth engine of the economy further.

McKinsey's 7s Framework
The McKinsey 7S framework is developed in the early 1980s by Tom Peters and
Robert Waterman, two consultants working at the McKinsey & Company consulting
firm, the basic premise of the model is that there are seven internal aspects of an
organization that need to be aligned if it is to be successful. The 7S model can be used
in a wide variety of situations where an alignment perspective is useful.
The McKinsey 7S model involves seven interdependent factors which are categorized
as either "hard" or "soft" elements:
"Hard" elements are easier to define or identify and management can directly
influence them: These are strategy statements; organization charts and reporting lines;
and formal processes and IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are less
tangible and more influenced by culture. However, these soft elements are as
important as the hard elements if the organization is going to be successful

The key elements for the Bank's business strategy are;
To focus on quality growth opportunities by maintaining and enhancing the
strengths in services
Use technology for competitive advantage and customer centric progressive
Branch expansion to provide services to a larger customer segment during
2010-11 210 branches were added. On January 2012, there were 3432 branches
of the Bank.
To become one stop financial supermarket, the Bank has forayed into newer
areas of banking products and services to meet the increasing needs of the

The Bank has taken various proactive technology initiatives to maintain its
competitive edge in Indian banking industry. Canara Bank has chosen Flex cube from
Oracle Financial Services as the software application. Now all branches of Canara
Bank are live on core banking application Flex cube.
Flex cube is a universal banking solution for retail, corporate, internet and investment
banking, from front to back office work. Flex cube also has the ability to support
multi-bank, multi-currency, and multi-channel operations, using a widely recognized
data model that will keep abreast of market dynamics. Canara Bank has a strong pan
India presence with 2623 ATMs


In Canara Bank, the decisions are taken by the top management concerning matters
related to the organization. The decisions relating to department matters are taken by
the departmental heads. The bank follows a participative leadership style which
allows the ideas, suggestions etc. for the betterment of the bank. The team members
are cooperative rather than being competitive.


The departments in the Bank consist of Senior Manager/Manager, Officers, Clerks

and sub-staff. The HR policies of the Bank have been reinvented and refocused time
and again to suit to the changing banking scenario. HR interventions like SPANDAN
for bringing attitudinal change among front line staff, PRATIBHA for grooming inhouse
talents in varied specialized areas and executive grooming through reputed
institutes and other significant HR tools like Quality Circles, Staff meetings and Brain
Storming Sessions have been implemented for effective team building and fostering
collective excellence. Specialized trainings to the Senior Management level/ Top level
executives are conducted based on the requirement. Canara Bank has more than
45,800 employees and business per employee and profit per employee is Rs. 12.28
crores and Rs. 9.76 Lakhs respectively.

Training policies and programs are suitably designed, modified and updated on a
continuous basis to upgrade the knowledge levels and skills of its Executives,
Officers, and Workmen on par with the best in the industry. While several new
programs are introduced in tune with the corporate goals, the existing programs are
made more interactive and learner friendly. Risk management and Basel II are the
focus areas of their training programs.

Shared Values:
Canara Bank was founded on these Principles,
1. To remove Superstition and ignorance.
2. To spread education among all to sub-serve the first principle.
3. To inculcate the habit of thrift and savings.
4. To transform the financial institution not only as the financial heart of the
community but the social heart as well.
5. To assist the needy.
6. To work with sense of service and dedication.
7. To develop a concern for fellow human being and sensitivity to the
surroundings with a view to make changes/remove hardships and sufferings.

"A good bank is not only the financial heart of the community, but also one with an
obligation of helping in every possible manner to improve the economic conditions of
the common people"
- A. SubbaRaoPai

SWOT Analysis


1. The Bank have well experienced, well trained, most dedicated and committed
staff. There are sustained and focused efforts at every level, by each employee of
the Bank, to continue to build up core deposits.
2. Strong rural presence.
3. It is well equipped to meet the challenges of 21st century, in the areas of IT,
Knowledge and competition.
4. It has launched Core Centralized banking solutions where all branches are
connected live.
5. The Bank has specialized branches catering to the specific clientele segment.

1. The Bank does not have many overseas branches.

2. As the employees are experienced the Bank has more number of aged workforces.


1. Controlling NPA through cash recovery. NPA was at 1.11% (Rs. 2347 crores) for
the year ended 31st March, 2011.
2. To expand overseas business.
3. Upward revision in Deposit/interest rates attracts new customers/deposits.
4. Up gradation in technological products saves time and improves business.

1. The Bank face competition from other public sector bank, private sector banks,
foreign banks and other financial institutions.
2. Changing economic policies of Government will have direct impact on interest
3. Globalization has allowed other industries, such as IT industry, to attract talent
human resource.

Introduction to project
Cash management
Cash is the important current asset for the operations of the business. Cash is the basic
inputneeded to keep the business running on a continuous basis; it is also the ultimate output
expectedto be realized by selling the service or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firms profitability. Thus, a major function of the financial manager is to
maintain a soundcash position
Cash is the money which a firm can disburse immediately without any restriction. The term
cash includes coins, currency and cheques held by the firm, and balances in its bank accounts.
Sometimes near-cash items, such as marketable securities or bank times deposits, are also
included in cash. The basic characteristic of near-cash assets is that they can readily be
converted into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm


Cash managementis concerned with the managing of: (i) cash flows into and out of
the firm,(ii) cash flows within the firm, and (iii) cash balances held by the firm at a point
of time by financing deficit or investing surplus cash. Sales generate cash which has to be
disbursed out. The surplus cash has to be invested while deficit has to be borrowed. Cash
management seeks to accomplish this cycle at a minimum cost. At the same time, it also
seeks to achieve liquidity and control. Cash management assumes more importance than
other current assets because cash is the most significant and the least productive asset that
a firm holds. It is significant because it is used to pay the firms obligations. However,
cash is unproductive. Unlike fixed assets or inventories, it does not produce goods for
sale. Therefore, the aim of cash management is to maintain adequate control over cash
position to keep the firm sufficiently liquid and to use excess cash in some profitable way.
Cash management is also important because it is difficult to predict cash flows accurately,
particularly the inflows, and there is no perfect coincidence between the inflows and
outflows of cash. During some periods, cash outflows will exceed cash inflows, because
payment of taxes, dividends, or seasonal inventory builds up. At other times, cash inflow
will be more than cash payments because there may be large cash sales and debtors may
be realized in large sums promptly. Further, cash management is significant because cash
constitutes the smallest portion of the total current assets, yet managements considerable
time is devoted in managing it. In recent past, a number of innovations have been done in
cash management techniques. An obvious aim of the firm these days is to manage its cash
affairs in such a way as to keep cash balance at a minimum level and to invest the surplus
cash in profitable investment opportunities. In order to resolve the uncertainty about cash
flow prediction and lack of synchronization between cash receipts and payments, the firm
should develop appropriate strategies for cash management. The firm should evolve
strategies regarding the following four facets of cash management

1. Optimum Utilisation of Operating Cash

Implementation of a sound cash management programme is based on rapid generation,
efficient utilisation and effective conversation of its cash resources. Cash flow is a circle. The
quantum and speed of the flow can be regulated through prudent financial planning
facilitating the running of business with the minimum cash balance. This can be achieved by
making a proper analysis of operative cash flow cycle along with efficient management of
working capital.

2. Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected
cash problems, which it may encounter, thus assisting it to regulate further cash flow
movements. Lack of cash planning results in spasmodic cash flows.

3. Cash Management Techniques:

Every business is interested in accelerating its cash collections and decelerating cash
payments so as to exploit its scarce cash resources to the maximum. There are techniques in
the cash management which a business to achieve this objective.

4. Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the businesses that failed, he would find that the major reason for the failure was
theirinability to remain liquid. Liquidity has an intimate relationship with efficient utilisation
of cash. It helps in the attainment of optimum level of liquidity.

5. Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus cash may arise at
certain points of time. If this cash surplus is deployed judiciously cash management will itself
become a profit centre. However, much depends on the quantum of cash surplus and
acceptability of market for its short-term investments.

6. Economical Borrowings
Another product of non-synchronisation of cash inflows and cash outflows is emergence of
deficits at various points of time. A business has to raise funds to the extent and for the period
of deficits. Raising of funds at minimum cost is one of the important facets of cash
The ideal cash management system will depend on the firms products, organization
structure, competition, culture and options available. The task is complex, and decisions
taken can affect important areas of the firm. For example, to improve collections if the credit
period is reduced, it may affect sales. However, in certain cases, even without fundamental
changes, it is possible to significantly reduce cost of cash management system by choosing a
right bank and controlling the collections properly.


The firms need to hold cash may be attributed to the following the motives:
1. The transactions motive
2. The precautionary motive
3. The speculative motive

Transaction Motive
The Transactionmotive requires a firm to hold cash to conducts its business in the ordinary
course. The firm needs cash primarily to make payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. The need to hold cash would not arise if there
were perfect synchronization between cash receipts and cash payments, i.e., enough cash is
received when the payment has to be made. But cash receipts and payments are not perfectly
synchronized. For those periods, when cash payments exceeds cash receipts, the firm should
maintain some cash balance to be able to make required payments. For transactions purpose,
afirm may invest its cash in marketable securities. Usually, the firm will purchase securities
whose maturity corresponds with some anticipated payments, such as dividends, or taxes in
the future. Notice that the transactions motive mainly refers to holding cash to meet
anticipated payments whose timing is not perfectly matched with cash receipts.

Precautionary Motive
The Precautionarymotive is the need to hold cash to meet contingencies in the future. It
provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flow can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firms ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice, less the need for precautionary
balance. The precautionary balance may be kept in cash and marketable securities.
Marketable securities play an important role here. The amount of cash set aside for
precautionary reasons is not expected to earn anything; therefore, the firm attempt to earn
some profit on it. Such funds should be invested in high-liquid and low-risk marketable
securities. Precautionary balance should, thus, held more in marketable securities and
relatively less in cash.
Speculative Motive
The speculativemotive relates to the holding of cash for investing in profit-making
opportunities as and when they arise. The opportunity to make profit may arise when the
security prices change. The firm will hold cash, when it is expected that the interest rates will
rise and security prices will fall. Securities can be purchased when the interest rate is
expected to fall; the firm will benefit by the subsequent fall in interest rates and increase in
security prices. The firm may also speculate on materials prices. If it is expected that
materials prices will fall, the firm can postpone materials purchasing and make purchases in
future when price actually falls. Some firms may hold cash for speculative purposes. By and
large, business firms do not engage in speculations. Thus, the primary motives to hold cash
and marketable securities are: the transactions and the precautionary motives.

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to
invest in inventory, receivable and fixed assets and to make payment for operating expenses
in order to maintain growth in sales and earnings. It is possible that firm may be taking
adequate profits, but may suffer from the shortage of cash as its growing needs may be
consuming cash very fast. The cash poor position of the firm can be corrected if its cash
needs are planned in advance. At times, a firm can have excess cash with it if its cash inflows
exceed cash outflows. Such excess cash may remain idle. Again, such excess cash flows can
be anticipated and properly invested if cash planning is resorted to. Cash planning is a
technique to plan and control the use of cash. It helps to anticipate the future cash flows and
needs of the firm and reduces the possibility of idle cash balances (which lowers firms
profitability) and cash deficits (which can cause the firms failure).
Cash planning protects the financial condition of the firm by developing a projected cash
statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the operating plans of the firm.
Cash planning can be done on daily, weekly or monthly basis. The period and frequency of
cash planning generally depends upon the size of the firm and philosophy of management.
Large firms prepare daily and weekly forecasts. Medium-size firms usually prepare weekly
and monthly forecasts. Small firms may not prepare formal cash forecasts because of the non-
availability of information and small-scale operations. But, if the small firm prepares cash
projections, it is done on monthly basis. As a firm grows and business operations become
complex, cash planning becomes inevitable for its continuing success.

Cash Forecasting and Budgeting

Cash budget is the most significant device to plan for and control cash receipts and payments.
Acash budget is a summary statement of the firms expected cash inflows and outflows over a
projected time period. It gives information on the timing and magnitude of expected cash
flows and cash balances over the projected period. This information helps the financial
manager to determine the future cash needs of the firm, plan for the financing of these needs
and exercise control over the cash and liquidity of the firm. The time horizon of the cash
budget may differ from firm to firm. A firm whose business is affected by seasonal variations
may prepare monthly cash budgets. Daily or weekly cash budgets should be prepared for
determining cash requirements if cash flows show extreme fluctuations. Cash budgets for a
longer intervals may be prepared if cash flows are relatively stable.
Cash forecasts are needed to prepare cash budgets. Cash forecasting may be done on short or
long-term basis. Generally, forecasts covering periods of one year or less are considered
short-term; those exceeding beyond one year are considered long term.

Short-term Cash Forecasts

It is comparatively easy to make short-term cash forecasts. The important functions of
carefullydeveloped short-term cash forecasts are:
To determine operating cash requirements
To anticipate short-term financing
To manage investment of surplus cash
The short-term forecast helps in determining the cash requirements for a predetermined
period torun a business. If the cash requirements are not determined, it would not be possible
for themanagement to know-how much cash balance is to be kept in hand, to what extent
bank financing be depended upon and whether surplus funds would be available to invest in
marketable securities.
To know the operating cash requirements, cash flow projections have to be made by a firm.
As stated earlier, there is hardly a perfect matching between cash inflows and outflows. With
the short-term cash forecasts, however, the financial manager is enabled to adjust these
differences infavour of the firm.
It is well known that, for their temporary financing needs, most companies depend upon
banks. One of the significant roles of the short-term forecasts is to pinpoint when the money
will be needed and when it can be repaid. With such forecasts in hand, it will not be difficult
for the financial manager to negotiate short-term financing arrangements with banks. This in
fact convinces bankers about the ability of the management to run its business.
The third function of the short-term cash forecasts is to help in managing the investment of
surplus cash in marketable securities. Carefully and skillfully designed cash forecast helps a
firm to: (i) select securities with appropriate maturities and reasonable risk, (ii) avoid over
and under-investing and (iii) maximize profits by investing idle money.
Short-run cash forecasts serve many other purposes. For example, multi-divisional firms use
them as a tool to coordinate the flow of funds between their various divisions as well as to
make financing arrangements for these operations. These forecasts may also be useful in
determining the margins or minimum balances to be maintained with banks. Still other uses
of these forecasts are:
Planning reductions of short and long-term debt
Planning forward purchases of inventories
Checking accuracy of long-range cash forecasts
Taking advantage of cash discounts offered by suppliers
Guiding credit policies.

Short-term Forecasting Methods

Two most commonly used methods of short-term cash forecasting are:
1. The receipt and disbursements method
2. The adjusted net income method.
3. The receipts and disbursements method is generally employed to forecast for limited
periods, such as a week or a month. The adjusted net income method, on the other
hand, is preferred for longer durations ranging between few months to a year. Both
methods have their Pros and Cons. The cash flows can be compared with budgeted
income and expenses items if the receipts and disbursements approach is followed.
On the other hand, the adjusted income approach is appropriate in showing a
companys working capital and future financing needs.

Receipts and disbursements method:

Cash flows in and out in most companies on a continuous basis. The prime aim of receipts
and disbursements forecasts is to summarize these flows during a predetermined period. In
case of those companies where each item of income and expense involves flow of cash, this
method is favoured to keep a close control over cash. Three broad sources of cash inflows can
be identified: (i) operating, (ii) non-operating, and (iii) financial. Cash sales and collection
from customers form the most important part of the operating cash inflows. Developing a
sales forecast is the first step in preparing cash forecast. All precautions should be taken to
forecast sales as accurately as possible. In case of cash sales, cash is received at the time of
sale. On the other hand, cash is realized after sometime if sale is on credit. The time realizing
cash on credit sales depends upon the firms credit policy reflected in the average collection
It can easily be noted that cash receipts from sales will be affected by changes in sales
volume and the firms credit policy. To develop a realistic cash budget, these changes should
be accounted for. If the demand for the firms products slackens, sales will fall and the
average collection period is likely to be longer which increases the chances of bad debts. In
preparing cash budget, account should be taken of sales discounts, returns and allowances
and bad debts as they reduce the amount of cash collections from debtors.
Non-operating cash inflows include sale of old assets and dividend and interest income. The
magnitude of these items is generally small. When internally generated cash flows are not
sufficient, the firm resorts to external sources. Borrowings and issuance of securities are
external financial sources. These constitute financial cash inflows
The next step in the preparation of a cash budget is the estimate of cash outflows. Cash
outflows include: (i) operating outflows: cash purchases, payment of payables, advances to
suppliers, wages and salaries and other operating expenses, (ii) capital expenditures, (iii)
contractual payments: repayment of loan and interest and tax payments; and (iv) discretionary
payments: ordinary and preference dividend. In case of credit purchases, a time lag will exist
for cash payments. This will depend on the credit terms offered by the suppliers.
It is relatively easy to predict the expenses of the firm over short run. Firms usually prepare
capital expenditure budgets; therefore, capital expenditures are predictable for the purposes of
cash budget. Similarly, payments of dividend do not fluctuate widely and are paid on specific
dates. Cash out flow can also occur when the firm repays its long-term debt. Such payments
are generally planned and, therefore, there is no difficulty in predicting them.
Once the forecasts for cash receipts and payments have been developed, they can be
combined to obtain the net cash inflow or outflow for each month. The net balance for each
month would indicate whether the firm has excess cash or deficit. The peak cash
requirements would also be indicated. If the firm has the policy of maintaining some
minimum cash balance, arrangements must be made to maintain this minimum balance in
periods of deficit. The cash deficit can be met by borrowings from banks. Alternatively, the
firm can delay its capital expenditures or payments to creditors or postpone payment of
One of the significant advantages of cash budget is to determine the net cash inflow or out
flow so that the firm is enabled to arrange finances. However, the firms decision for
appropriate sources of financing should depend upon factors such as cost and risk. Cash
budget helps a firm to manage its cash position. It also helps to utilize ideal funds in better
ways. On the basis of cash budget, the firm can decide to invest surplus cash in marketable
securities and earn profits. The virtues of the receipt and payment methods are:
It gives a complete picture of all the items of expected cash flows.
It is a sound tool of managing daily cash operations. This method, however, suffers
from the following limitations:
Its reliability is reduced because of the uncertainty of cash forecasts. For example,
collections may be delayed, or unanticipated demands may cause large disbursements.
It fails to highlight the significant movements in the working capital items.

Adjusted net income method:

This method of cash forecasting involves the tracing of working capital flows. It is sometimes
called the Sources and Uses approach. Two objectives of the adjusted net income approach
are: (i) to project the companys need for cash at a future date and(ii) to show whether the
company can generate the required funds internally, and if not, how much will have to be
borrowed or raised in the capital market.
As regards the form and content of the adjusted net income forecast, it resembles the cash
flow statement discussed previously. It is, in fact a projected cash flow statement based on
performfinancial statements. It generally has three sections: sources of cash, uses of cash and
the adjusted cash balance. This procedure helps in adjusting estimated earnings on an accrual
basis to a cash basis. It also helps in anticipating the working capital movements.
In preparing the adjusted net income forecasts items such as net income, depreciation, taxes,
dividends etc., can easily be determined from the companys annual operating budget.
Normally, difficulty is faced in estimating working capital changes; especially the estimates
of accounts receivable (debtors) and inventory pose problem because they are influenced by
factors such as fluctuations in raw material costs, changing demand for the companys
products and possible delays in collections. Any error in predicting these items can make the
reliability of forecast doubtful.
One popularly used method of projecting working capital is to use ratios relating accounts
receivable and inventory to sales. For example, if the past experience tells that accounts
receivable of a company range between 32 percent to 36 percent of sales, an average rate of
34 percent can be used. The difference between the projected figure and that on the books
will indicate the expected increase or decrease in cash attributable to receivable.
The benefits of the adjusted net income method are:
It highlights the movements in the working capital items, and thus helps to keep a
control on s firms working capital.
It helps in anticipating a firms financial requirements.
The major limitation of this method is:
It fails to trace cash flows, and therefore, its utility in controlling daily cash operations
is limited.

Long-term Cash Forecasting

Long-term cash forecasts are prepared to give an idea of the companys financial
requirements in the distant future. They are not as detailed as the short-term forecasts are.
Once a company has developed long-term cash forecast, it can be used to evaluate the impact
of, say, new product developments or plant acquisitions on the firms financial condition
three, five, or more years in the future. The major uses of the long-term cash forecasts are:
It indicates as companys future financial needs, especially for its working capital
It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well as the cash to be generated by the company to support them.
It helps to improve corporate planning. Long-term cash forecasts compel each
division to plan for future and to formulate projects carefully.
Long-term cash forecasts may be made for two, three or five years. As with the short-term
forecasts, companys practices may differ on the duration of long-term forecasts to suit
their particular needs.
The short-term forecasting methods, i.e., the receipts and disbursements method and the
adjusted net income method, can also be used in long-term cash forecasting. Long-term
cash forecasting reflects the impact of growth, expansion or acquisitions; it also indicates
financing problems arising from these developments.

Cash Collection Instruments in India

The main instruments of collection used in India are: (i) cheques, (ii) drafts, (iii) documentary
bills, (iv) trade bills, and (v) letter of credit.
Features of instruments of collection in India
instruments pros Cons
1. Cheques No charge Can bounce
Collection times can Payable through
be long clearing
Collection charge Can be discounted
after receipts
Low discounting

2. Drafts Payable in local Cost of collection

clearing Buyers account
Chances of bouncing debited on da one
are less

3. Documentary bills Low discounting Not payable through

charge clearing
Theoretically, goods High collection cost
are not released till Long delays
payments are made
or the bill is accepted

4. Trade bills No charge except Procedure is

stamp duty relatively cumbersome
Can be discounted Buyers are reluctant
Discipline of to accept the due
payment on due date date discipline

5. Letters of credit Good credit control Opening charges

as goods are released Transit period
on payment or interest
acceptance of bill Negotiation charges
Seller forced to meet Need bank lines to
delivery schedule open LC
because of expiry Stamp duty on
date. usance bills

Determining the Optimum Cash Balance

One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that the dues are settled in time. The firm needs cash to purchase raw
materials and pay wages and other expenses as well as for paying dividend, interest and
taxes. The test of liquidity is the availability of cash to meet the firms obligations when they
become due.
A firm maintains the operating cash balance for transaction purposes. It may also carry
additional cash as a buffer or safety stock. The amount of cash balance will depend on the
risk-return trade-off. If the firm maintains small cash balance, its liquidity position weakens,
but its profitability improves as the released funds can be invested in profitable opportunities
(marketable securities). When the firm needs cash, it can sell its marketable securities (or
borrow). On the other hand, if the firm keeps high balance, it will have a strong liquidity
position but its profitability will be low. The potential profit foregone on holding large cash
balance is an opportunity cost to the firm. The firm should maintain- just enough, neither too
much nor too little- cash balance. How to determine optimum cash balance if cash flows are
predictable and if they are not predictable?

Optimum Cash Balance under Certainty:

Baumols Model
TheBaumol modelof cash management provides a formal approach for determining a
firmsoptimum cash balance under certainty. It considers cash management similar to an
inventorymanagement problem. As such, the firm attempts to minimize the sum of the cost of
holding cash (inventory of cash) and the cost of converting marketable securities to cash.
The Baumols model makes the following assumptions:
The firm is able to forecast its cash needs with certainty.
The firms cash payments occur uniformly over a period of time
The opportunity cost of holding cash is known and it does not change over time.
The firm will incur the same transaction cost whenever it converts securities to cash.
Let us assume that the firm sells securities and starts with a cash balance of C Rupees. As the
firm spends cash, its cash balance decreases steadily and reaches to zero. The firm
replenishes its cash balance toC.Rupees by selling marketable securities. This pattern
continues over time. Since the cash balance decreases steadily, the average cash balance will

This can be shown in following figure:

The firm incurs a cost known as holding cost for maintaining the cash balance. It is known as
opportunity cost, the return inevitable on the marketable securities. If the opportunity cost is
k, then the firms holding cost for maintaining an average cash balance is as follows:

Holding cost = k (C/2)

Whenever the firm converts its marketable securities to cash, it incurs a cost known as
transaction cost. Total number of transactions in a particular year will be total funds required
(T), divided by the cash balance (C) i.e. T/C. The assumption here is that the cost per
transaction is constant. If the cost per transaction is c, then the total transaction cost will be:

Transaction cost = c (T/C)

The total annual cost of the demand for cash will be:

Total cost = k (C/2) + c (T/C)

Optimum level of cash balance

As the demand for cash, C increases, the holding cost will also increase and the transaction
cost will reduce because of a decline in the number of transactions. Hence, it can be said that
there is a relationship between the holding cost and the transaction cost.

The optimum cash balance, C* is obtained when the total cost is minimum.

Optimum cash balance (C*) = 2cT/k

Where, C* is the optimum cash balance.
T is the total cash needed during the year.
k is the opportunity cost of holding cash balances.
With the increase in the cost per transaction and total funds required, the optimum cash
balance will increase. However, with an increase in the opportunity cost, it will decrease.

Limitations of the Baumol model:

1. It does not allow cash flows to fluctuate.

2. Overdraft is not considered.
3. There are uncertainties in the pattern of future cash flows.

The Miller-Orr Model

Most firms dont use their cash flows uniformly and also cannot predict their daily cash
inflows and outflows. Mille-Orr Model helps them by allowing daily cash flow variation.

Under the model, the firm allows the cash balance to fluctuate between the upper control
limit and the lower control limit, making a purchase and sale of marketable securities only
when one of these limits is reached. The assumption made here is that the net cash flows are
normally distributed with a zero value of mean and a standard deviation. This model provides
two control limits the upper control limit and the lower control limit as well as a return
point. When the firms cash limit fluctuates at random and touches the upper limit, the firm
buys sufficient marketable securities to come back to a normal level of cash balance i.e. the
return point. Similarly, when the firms cash flows wander and touch the lower limit, it sells
sufficient marketable securities to bring the cash balance back to the normal level i.e. the
return point.
The lower limit is set by the firm based on its desired minimum safety stock of cash in
hand The firm should also determine the following factors:
1. An interest rate for marketable securities, (i)
2. A fixed transaction cost for buying and selling marketable securities, (c)
3. The standard deviation if its daily cash flows, (s)

The upper control limits and return path are than calculated by the Miller-Orr Model as
Distance between the upper limits and lower limits is 3Z.

(Upper limit Lower limit) = (3/4 C Transaction Cost C Cash Flow Variance/Interest

Z = (3/4 C cs2/i) 1/3

If the transaction cost is higher or cash flows shows greater fluctuations, than the upper limit
and lower limit will be far off from each other. As the interest rate increases, the limits will
come closer. There is an inverse relation between the Z and the interest rate. The upper
control limit is three times above the lower control limits and the return point lies between the
upper and lower limits. Hence,
Upper Limit = Lower Limit + 3Z
Return Point = Lower Limit + Z

So, the firm holds the average cash balance equal to:
Average Cash Balance = Lower Limit + 4/3 Z

The Miller-Orr Model is more realistic as it allows variation in cash balance within the lower
and upper limits. The lower limit can be set according to the firms liquidity requirement. To
determine the standard deviation of net cash flows the pasty data of the net cash flow
behaviour can be used. Managerial attention is needed only if the cash balance deviates from
the limits.


There is a close relationship between cash and money market securities or other short-term
investment alternatives. Investment in these alternatives should be properly managed. Excess
cash should normally be invested in those alternatives that can be conveniently and promptly
converted into cash. Cash in excess of the requirement of operating cash balance may be held
for two reasons.
First, the working capital requirements of the firm fluctuate because of the elements of
seasonality and business cycles. The excess cash may build up during slack seasons but it
would be needed when the demand picks up. Thus, excess cash during slack season is idle
temporarily, but has a predictable requirement later on.
Second, excess cash may be held as a buffer to meet unpredictable financial needs. A firm
holds extra cash because cash flows cannot be predicted with certainty. Cash balance held to
cover the future exigencies is called the precautionary balance and is usually invested in the
short-term money market investments until needed.
Instead of holding excess cash for the above-mentioned purpose, the firm may meet its
precautionary requirements as and when they arise by making short-term borrowings. The
choice between the short-term borrowings and liquid assets holding will depend upon the
firms policy regarding the mix of short-term financing.
The excess amount of cash held by the firm to meet its variable cash requirements and future
contingencies should be temporarily invested in marketablesecurities, which can be regarded
as near moneys. A number of marketable securities may be available in the market. The
financial manager must decide about the portfolio of marketable securities in which the firms
surplus cash should be invested

Types of Short-term Investment Opportunities

The following short-term investment opportunities are available to companies in India to
invest their temporary cash surplus:

1. Treasury bills-- Treasury bills (TBs) are short-term government securities. The usual
practice in India is to sell treasury bills at a discount and redeem them at par on maturity. The
difference between the issue price and the redemption price, adjusted for the time value of
money, is return on treasury bills. They can be bought and sold any time; thus, they have
liquidity. Also, they do not have the default risk.

2. Commercial papers Commercial papers (CPs) are short-term, unsecured securities

issued by highly credit worthy large companies. They are issued with a maturity of three
months to one year. CPs are marketable securities, and therefore, liquidity is not a problem.

3. Certificates of deposits Certificates of deposits (CDs) are papers issued by banks

acknowledging fixed deposits for a specified period of time. CDs are negotiable instruments
that make them marketable securities.

4.Bank deposits A firm can deposit its temporary cash in a bank for a fixed period of
time. The interest rate depends on the maturity period. For example, the current interestrate
for a 30 to 45 days deposit is about 3 percent and for 180 days to one year is about 6-7
percent. The default risk of the bank deposits is quite low since the government owns most
banks in India.
5.Inter-corporate deposits Inter-corporate lending borrowing or deposits (ICDs) is a
popular short-term investment alternative for companies in India. Generally a cash surplus
company will deposit (lend) its funds in a sister or associate companies or with outside
companies with high credit standing. In practice, companies can negotiate inter-corporate
borrowing or lending for very short periods. The risk of default is high, but returns are quite

6.Money market mutual funds Money market mutual funds (MMMFs) focus on
short-term marketable securities such as TBs, CPs, CDs, or call money. They have a
minimum lock-in period of 30 days, and after this period, an investor can withdraw his or her
money any time at a short notice or even across the counter in some cases. They offer
attractive yields; yields are usually 2 percent above than on bank deposits of same maturity.
MMMFs are of recent origin in India, and they have become quite popular with institutional
investors and some companies

Cash Management Services generally offered

The following is a list of services generally offered by banks and utilised by larger businesses
and corporations:

1.Account Reconcilement Services: Balancing a check book can be a difficult process

for a very large business, since it issues so many checks it can take a lot of human monitoring
to understand which checks have not cleared and therefore what the companys true balance
is. To address this, banks have developed a system which allows companies to upload a list of
all the checks that they issue on a daily basis, so that at theend of the month the bank
statement will show not only which checks have cleared, but also which have not. More
recently, banks have used this system to prevent checks from being fraudulently cashed if
they are not on the list, a process known as positive pay

2.Advanced Web Services: Most banks have an Internet-based system which is more
advanced than the one available to consumers. This enables managers to create and authorize
special internal logon credentials, allowing employees to send wires and access other cash
management features normally not found on the consumer web site.

3.Armored Car Services: Large retailers who collect a great deal of cash may have the
bank pick this cash up via an armored car company, instead of asking its employees to
deposit the cash.

4.Automated Clearing House: services are usually offered by the cash management
division of a bank. The Automated Clearing House is an electronic system used to transfer
funds between banks. Companies use this to pay others, especially employees (this is how
direct deposit works). Certain companies also use it to collect funds from customers (this is
generally how automatic payment plans work). This system is criticized by some consumer
advocacy groups, because under this system banks assume that the company initiating the
debit is correct until proven otherwise.

5.Balance Reporting Services: Corporate clients who actively manage their cash
balances usually subscribe to secure web-based reporting of their account and transaction
information at their lead bank. These sophisticated compilations of banking activity
mayinclude balances in foreign currencies, as well as those at other banks. They include
information on cash positions as well as 'float' (e.g., checks in the process of
collection).Finally, they offer transaction-specific details on all forms of payment activity,
including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits
and credits), investments, etc.

6.Cash Concentration Services: Large or national chain retailers often are in areas
where their primary bank does not have branches. Therefore, they open bank accounts at
various local banks in the area. To prevent funds in these accounts from being idle and
notearning sufficient interest, many of these companies have an agreement set with their
primary bank, whereby their primary bank uses the Automated Clearing
Housetoelectronically "pull" the money from these banks into a single interest-bearing bank

7.Lockboxservices:Often companies (such as utilities) which receive a large number of

payments via checks in the mail have the bank set up a post office box for them, open their
mail, and deposit any checks found. This is referred to as a "lockbox" service.

8.Positive Pay:Positive pay is a service whereby the company electronically shares its
check register of all written checks with the bank. The bank therefore will only pay checks
listed in that register, with exactly the same specifications as listed in the register (amount,
payee, serial number, etc.). This system dramatically reduces check fraud.

9.Sweep Accounts:are typically offered by the cash management division of a bank.

Under this system, excess funds from a company's bank accounts are automatically moved
into a money market mutual fund overnight, and then moved back the next morning. This
allows them to earn interest overnight. This is the primary use of money market mutual

10.Zero Balance Accounting:can be thought of as somewhat of a hack . Companies

with large numbers of stores or locations can very often be confused if all those stores are
depositing into a single bank account. Traditionally, it would be impossible to know which
deposits were from which stores without seeking to view images of those deposits. To help
correct this problem, banks developed a system where each store is given their own bank
account, but all the money deposited into the individual store accounts are automatically
moved or swept into the company's main bank account. This allows the company to look at
individual statements for each store. U.S. banks are almost a converting their systems so that
companies can
tell which store made a particular deposit even if these deposits are all deposited into a single
account. Therefore, zero balance accounting is being used less frequently.

11.Wire Transfer: A wire transfer is an electronic transfer of funds. Wire transfers can be
done by a simple bank account transfer, or by a transfer of cash at a cash office. Bank wire
transfers are often the most expedient method for transferring funds between bank accounts.
A bank wire transfer is a message to the receiving bank requesting them to effect payment in
accordance with the instructions given. The message also includes settlement instructions.
The actual wire transfer itself is virtually instantaneous, requiring no longer for transmission
than a telephone call.
Controlled Disbursement: This is another product offered by banks under Cash
Management Services. The bank provides a daily report, typically early in the day, that
provides the amount of disbursements that will be charged to the customer's account. This
early knowledge of daily funds requirement allows the customer to invest any surplus in
intraday investment opportunities, typically money market investments. This is different from
delayed disbursements, where payments are issued through a remote branch of a bank and
customer is able to delay the payment due to increased float time. In the past, other services
have been offered the usefulness of which has diminished with the rise of the Internet. For
example, companies could have daily faxes of their most recent transactions or be sentCD-
ROMs of images of their cashed checks.

Purpose of Cash Management

Cash management is the stewardship or proper use of an entitys cash resources. It serves as
the means to keep an organization functioning by making the best use of cash or liquid
resources of the organization.
The function of cash management at the U.S. Treasury is threefold:
1. To eliminate idle cash balances. Every dollar held as cash rather than used to augment
revenues or decrease expenditures represents a lost opportunity. Funds that are not needed to
cover expected transactions can be used to buy back outstanding debt (and cease a flow of
funds out of the Treasury for interest payments) or can be invested to generate a flow of funds
into the Treasurys account. Minimizing idle cash balances requires accurate information
about expected receipts and likely disbursements.
2. To deposit collections timely. Having funds in-hand is better than having accounts
receivable. The cash is easier to convert immediately into value or goods. A receivable, an
item to be converted in the future, often is subject to a transaction delay or a depreciation of
value. Once funds are due to the Government, they should be converted to cash-in-hand
immediately and deposited in the Treasury's account as soon as possible.
3. To properly time disbursements. Some payments must be made on a specified or legal date,
such as Social Security payments. For such payments, there is no cash management decision.
For other payments, such as vendor payments, discretion in timing is possible. Government
vendors face the same cash management needs as the Government. They want to accelerate
collections. One way vendors can do this is to offer discount terms for timely payment for
goods sold
Cash Management Services

The speedier you are, its easier for you to address the challenges of globalisation. Corporate
Cash Management Services (CCMS), an innovative service offered by Canara Bank for speedy
collection of cheques and other instruments, places corporate on a faster-track. In more ways
than one-such as definite funds flow, better cash management and deployment of funds, better
monitoring of funds flow, optimum allocation of funds and effective planning of investment

What is CCMS?

An innovative service specifically tailored to meet the requirements of

Corporate/Business houses/Partnership firms

Speedy collection of outstation cheques and other instruments

Pooling of funds at designated centres

More importantly, providing funds to the Corporate as per their need

Customised MIS reports

What We Offer?

Under CCMS we offer the state of the art technology products

SUPERFAST SERVICE - Local cheque collection services

FASTRACK SERVICE - Upcountry cheque collection services

BULK COLLECTION SERVICE - Bulk cheques collection services

Under 'SUPERFAST SERVICE', agents or offices of Corporate can deposit the cheques to be
cleared in the local clearing and funds will be pooled at any pooling branch designated by the

Under 'FASTRACK SERVICE', agents or offices of Corporate can deposit the cheques
drawn on outstation centres and proceeds will be pooled at any pooling branch designated by

Under 'BULK COLLECTION SERVICE', agents or offices of Corporate can deposit their
bulk (large number) instruments of small value to be cleared in the local clearing and funds
will be pooled at any pooling branch designated by the Corporate.

Benefits to the Corporates

Funds available as per need on day zero, day one, day two, day three etc.

Corporate can plan their cash flows

Bank interest saved as instruments are collected faster

Affordable and competitive rates

MIS reports customised to meet individual Corporate requirement

Single point enquiry for all queries

Pooling of funds at desired locations

Operational in 148 Cities/Centres

Cash Management
As part of CANARA Bank's global transaction solutions to Corporate and Institutions, we
provide Cash Management, Securities Services and Trade Services through our strong market
networks in Asia. We are committed to providing you with
Integrated, superior cross-border and local services
Efficient transaction processing
Reliable financial information
Innovative products
World-class clearing services thus ensuring a full suite of transactional products for
your needs

For Corporate
Canara Bank is highly recognized as a leading cash management supplier across the emerging
markets. Our Cash Management Services cover local and cross border Payments, Collections,
Information Management, Account Services and Liquidity Management for both corporate
and institutional customers. With State Bank's Cash Management services, you'll always
know your exact financial position. You have the flexibility to manage your company's
complete financial position directly from your computer workstation. You will also be able to
take advantage of our outstanding range of Payments, Collections, Liquidity and Investment
Services and receive comprehensive reports detailing your transactions. With State Bank, you
have everything it takes to manage your cash flow more accurately.
Payments Services
Collection Services
Liquidity Management

For Financial Institutions

Standard Chartered is highly recognized as a leading cash management supplier across the
emerging markets. Our Cash Management Services cover local and cross border Payments,
Collections, Information Management, Account Services and Liquidity Management for both
corporate and institutional customers. If you are looking for a correspondent banking partner
youcan trust, Standard Chartered can help you. We have more than 500 offices located in
50countries throughout the world and, with 150 years of on-the-ground experience, we can
help our bank clients with all their cash management needs.
Clearing Services
Asian Gateway
Payment Services Global payments solution for efficient transaction processing Looking to
outsource your payments to enable: Efficient processing of all your payables in the most cost
effective way
Straight through processing both at your end as well as your bank's back-end
Efficient payables reconciliation with minimal effort and delay
Quick approval of payments from any location
Minimum hindrance to automation due to local language difficulties
Centralized management of payables across departments, subsidiaries and countries

Our Solution
State Bank's Straight through Services (STS) Payments Solution can be tailored to the
different payment needs of companies, whatever industry, size or country you may be in.With
a comprehensive End-to-end Payment Processing Cycle, STS allows companies to process
variety of payment types, whether they be domestic or international, local or central in
different countries, all in a single system file. To realise the benefits of STS, please contact
your local Relationship Manager or Cash Management representative. Our CoverageWe are
the foreign bank having the largest geographical representation in the country. We are the
only bank which provides draft status to you on the website.

Collection Services
Comprehensive receivables management solution State Bank understands that operating and
sustaining a profitable business these days is extremely tough. In an environment of constant
changes and uncertainties, most businesses face challenges of costs and efficiency. Key
concerns include:
Receivables Management - ensuring receivables are collected in an efficient and
timely manner to optimise utilisation of funds.
Risk Management - ensuring effective management of debtors to eliminate risk of
returns and losses caused by defaulters and delayed payments
Inventory Management - ensuring efficient and quick turnaround of inventory to
maximise returns.
Cost Management - reducing interest costs through optimal utilisation of funds Our
The State Bank Collections Solution leverages the Bank's extensive regional knowledge and
widespread branch network across our key markets to specially tailor solutions for your
regional and local collection needs. This Collections Solution, delivered through standardised
international platform, has the flexibility to cater to your local needs, thus enabling you to
meet your objectives of reducing costs and increasing efficiency and profitability through
better receivables and risk management. The key components of our solution include the
Extensive Clearing Network
Guaranteed Credit
Comprehensive MIS
System Integration
Outsourcing of Collection
Liquidity Management
Solutions for efficient management of your funds A corporate treasurer's main challenge often
revolves around ensuring that the company's cash resources are utilised to their maximum
advantage. You need a partner bank that can help you:
Maximise interest income on surplus balances; minimise interest expense on deficit
balances for domestic, regional and global accounts
Minimise FX conversion for cross-currency cash concentration
Customise liquidity management solutions for different entities in different countries
Centralise information management of consolidated account balances
Our Solution With our global experience and on-the-ground market knowledge, State Bank
will help you define an overall cash management strategy which incorporates a liquidity
management solution that best meets your needs Key Features Based on your needs and the
regulatory environment that you are in, you can choose any of the following features:
Physical Sweeping
Notional Pooling

Liquidity Management in Canara bank

Measuring and managing the liquidity needs are vital for effective operation of commercial
banks. By assuring a bank's ability to meet its liabilities as they become due, liquidity
management can reduce the probability of an adverse situation developing. The importance of
liquidity transcends individual institutions, as liquidity shortfall in one institution can have
repercussions on the entire system. Bank managements should measure, not only the liquidity
positions of banks on an ongoing basis, but also examine how liquidity requirements are
likely to evolve under different conditions. Banks are in the business of maturity
transformation. They lend for longer time periods, as borrowers normally prefer a longer time
frame. But their liabilities are typically short term in nature, as lenders normally prefer a
shorter time frame (liquidity preference). This results in long-term interest rates typically
exceeding short-term rates. Hence, the incentive for banks for performing the function of
financial intermediation is the difference between interest receipt and interest cost which is
called the interest spread. It is implicit, therefore, that banks will have mismatched balance
sheet, with liabilities greater than assets in short term, and with assets greater than liabilities
in the medium and long term. These mismatches, which represent liquidity risk, are with
respect to various time horizons. Hence, the overwhelming concern of a bank is to maintain
adequate liquidity. Liquidity has been defined as the ability of an institution to replace
liability run off and fund asset growth promptly and at a reasonable price. Maintenance of
superfluous liquidity will, however, impact profitability adversely. It can also be defined as
the comprehensive ability of a bank to meet liabilities exactly when they fall due or when
depositors want their money back. This is a heart of the banking operations and distinguishes
a bank from other entities.

Cash Reserve Ratio

A scheduled bank is under the obligation to keep a cash reserve called the Statutory Cash
Reserve, with the Reserve Bank of India (RBI) under Section 42 of the Reserve Bank of India
Act, 1934. Every scheduled bank is required to maintain with the Reserve Bank an average
daily balance equal to least 3% of its net demand and time liabilities. Average daily balances
mean the average of balances held at the close of business on each day of the fortnight. The
Reserve Bank is empowered to increase the rate of Statutory Cash Reserve from 3% to 20%
of the Net Demand and Time Liabilities (NDTL).

Statutory Liquidity Ratio

Section 24(2A) of Banking Regulation Act, 1949, requires every banking company to
maintain in India in Cash, Gold or Unencumbered Approved Securities or in the form of net
balance in current accounts maintained in India by the bank with a nationalized bank,
equivalent to an amount which shall not at the close of the business on any day be less than
25% or such other percentage not exceeding 40% as the RBI may from time to time, by
notification in the Gazette of India, specify, of the total of its demand and time liabilities in
India as on the last Friday of the second preceding fortnight, which is known as SLR. At
present, all Scheduled Commercial Banks are required to maintain a uniform SLR of 25% of
the total of their demand and time liabilities in India as on the last Friday of the second
preceding fortnight which is stipulated under Section 24 of the RBI Act, 1949.
RBI can enhance the stipulation of SLR (not exceeding 40%) and advise the banks to keep a
large portion of the funds mobilized by them in liquid assets, particularly government and
other approved securities. As a result, funds available for credit would get reduced. All banks
have to maintain a certain portion of their deposits as SLR and have to invest that amount in
these Government securities.
Government securities are sovereign securities. These are issued by the RBI on behalf of the
Government of India, in lieu of the Central Government's market borrowing program. The
term government securities include:
Government Dated Securities, i.e., Central Government Securities
State Government Securities
Treasury Bills
The Central Government borrows funds to finance its fiscal deficit. The market borrowing of
the Central Government is raised through the issue of dated securities and 364 days Treasury
Bills, either by auction or by floatation of fixed coupon loans.
In addition to the above, Treasury Bills of 91 days are issued for managing the temporary
cash mismatches of the government. These do not form part of the borrowing program of the
Based on the required CRR and SLR per day, the treasury department of the bank ensures
that sufficient balance is maintained in the Reserve Bank (at its different branches). The fund
manager calculates on a daily basis the RBI balances based on opening RBI balances and
taking into account various inflows and outflows during the day. The fund manager takes the
summary of inflows and outflows and the net effect is added to/subtracted from the opening
RBI balances. By this method, an RBI balance of all the 14 days is arrived at. For instance,
on the opening day of the fortnight, if there is an anticipated surplus, banks can generally lend
it at an average, subject to subsequent inflows/outflows. Conversely, for a shortfall, the bank
may borrow the required amount in call/repo/Collateralized Borrowings and Lending
Obligations (CBLO) markets on a daily basis.
Successful functioning of the funds department depends mostly on the prompt collection of
information from branches/other departments regarding the inflow and outflow of funds. The
information should also be collected accurately and collated properly/correctly. Improper
maintenance of liquidity and CRR position by the fund manager may lead to either a default
or an excess which does not earn any interest for the bank.

A Framework for Measuring and Managing Liquidity

Measuring and managing liquidity needs are vital for effective operation of commercial
banks. By assuring a bank's ability to meet its liabilities as they become due, liquidity
management can reduce the probability of an adverse situation developing. The importance of
liquidity transcends individual institutions, as liquidity shortfall in one institution can have
repercussions on the entire system. Bank managements should measure not only the liquidity
positions of banks on an ongoing basis, but also examine how liquidity requirements are
likely to evolve under different assumptions. Experience shows that assets like government
securities and other money market instruments, which are generally treated as liquid could
also become illiquid when the market and players are unidirectional. Therefore, liquidity has
to be tracked through maturity or cash flowmismatches.
The framework for assessing and managing bank liquidity has three dimensions:
Measuring and managing net funding requirements
Managing market access and
Contingency planning

SWOT Analysis

1. The Bank have well experienced, well trained, most dedicated and committed
staff. There are sustained and focused efforts at every level, by each employee of
the Bank, to continue to build up core deposits.
2. Strong rural presence.
3. It is well equipped to meet the challenges of 21st century, in the areas of IT,
Knowledge and competition.
4. It has launched Core Centralized banking solutions where all branches are
connected live.
5. The Bank has specialized branches catering to the specific clientele segment.

1. The Bank does not have many overseas branches.

2. As the employees are experienced the Bank has more number of aged workforces.


1. Controlling NPA through cash recovery. NPA was at 1.11% (Rs. 2347 crores) for
the year ended 31st March, 2011.
2. To expand overseas business.
3. Upward revision in Deposit/interest rates attracts new customers/deposits.
4. Up gradation in technological products saves time and improves business.


1. The Bank face competition from other public sector bank, private sector banks,
foreign banks and other financial institutions.
2. Changing economic policies of Government will have direct impact on interest
3. Globalization has allowed other industries, such as IT industry, to attract talent
human resource.
Research DesignandMethodology

Research is a systematic process of collecting and analysing information (data) in order to
increase our understanding of the phenomenon about which we are concerned or interested.
AResearch Design is the framework or plan for a study which is used as a guide in collecting
and analysing the data collected. It is the blue print that is followed in completing the study.
The basic objective of research cannot be attained without a proper research design. It
specifies the methods and procedures for acquiring the information needed to conduct the
research effectively. It is the overall operational pattern of the project that stipulates what
information needs to be collected, from which sources and by what methods


Objectives of a project tell us why project has been taken under study. It helps us to know
more about the topic that is being undertaken and helps us to explore future prospects of that
organisation. Basically it tells what all have been studied while making the project.
1. To understand how cash is being managed bycanara bank
2. To gain knowledge about the system prevailing in Banks.
3. To suggest methods for improving cash management in Banks.

There are two types of data used. They are primary and secondary data. Primary data is
defined as data that is collected from original sources for a specific purpose. Secondary data
is data collected from indirect sources.

These include the survey or questionnaire method, as well as the personal interview methods
of data collection.

These include books, the internet, company brochures, the company website, competitors
websitesetc., newspaper articles etc.

Sampling refers to the method of selecting a sample from a given universe with a view to
draw conclusions about that universe. A sample is a representative of the universe selected for
study. The sample size is 50


Following are the limitations faced by me during this project:
1. The allotted time period of 8 weeks for the study was relatively insufficient, keeping
in mind the long duration it can take at times, to close a particular corporate deal
2. The study might not produce absolutely accurate results as it was based on a sample
taken from the population.
3. It was difficult getting time and access to senior level Finance/HR managers (who had
to be talked to, to get required information) due to their busy schedules and prior
4. A few of the managers refrained from giving the required information as he
considered me to be from their confidential domains.
Analysis andInterpretationof Data

Q1. On which bank you depend for your regular transaction?

No. of people
Options response Percentage
SBI 10 20
HDFC 7 14


20% 60% OTHER

Analysis of the above diagram

It has been observed that approximately 60% correspondents are using the service of
CANARA bank for their daily transaction, around 20% of people are using SBI Bank for
their transaction and only14% & 6% of people are using HDFC & other Bank service

Q2. Are you aware of products & services provided by CANARA BANK?
Option response Percentage
YES 35 70
No 15 30

yes no



Analysis of the above diagram

From the above data it is clear that most of the customers (around 70%) have the idea about
the product & services of CANARA BANK, the rest 30% have the idea about the product
they are using

Q3. Are you aware of CANARA Banks straight to bank services?

Option Response Percentage
Yes 25 50
no 25 50
yes no

50% 50%

Analysis of the above diagram

Its very good for canara bank as most of the companies are aware of the cash management
services provided by the bank. The bank can look into companies as to propose its services to
theconcerned company personals.

4.Are you satisfied with the Canara bank services?

Option Response Percentage

satisfied 35 69
Not satisfied 10 20
Not decided 5 11
satisfied not satisfied not decided




In this survey 69% of customer can satisfied with Canara bank services because of Canara
can provide core services. Also 20% of customer cannot satisfied with services & rest, 11%
cannot decide anything

Q5. What are your main modes of premium collection?

Option response Percentage
Cash 15 30
Cheque 30 60
Demand draft 5 10
cash cheque demand draft



Analysis of the above diagram

Most of the companies accept premium in the form of cheque as its a safer instrument
thancash and is easily handled as compared to demand draft CANARA can provide various
chequecollections options to the companies.

Q6. What are your main modes making payments?

Option Response Percentage
Cheque 30 60
Cash 15 30
Demand Draft 5 10
cheque cash demand draft



Analysis of the above diagram

Like premium most of the companies distribute their payments through cheques only DD
andcash are made out under special circumstances.

Q7. Does the financial crisis in US affecting your functioning here in

options Response Percentage
Yes 40 80
No 10 20
yes no



Analysis of the above diagram

From the pie chart its quite evident that the financial crisis in US are affecting people
globallyand even insurance companies are gravely affected by the crisis
Features of CANARA BANK CMS:
Exclusive CMP desks with infrastructure
Debit Transfers
Courier pick-up at branches
No collection a/cs needed at branches
Customized Reports
Transmission of data through Internal LAN system
Direct credit to accounts
Benefits to Customers:
Centralized Control of cash
Cost reduction
Enhanced Liquidity
Interchange of Information between treasury & operating units
Reduced excess cash balance
Cash forecasting & scheduling
Effective control over disbursements
Timely & effective investments

The study allowed us get answers regarding the service awareness among people and the
problems it faces. The key findings and analysis of the survey showed the following
A large number of clients and customers call the branch frequently to handle banking
issues; this shows the keenness of the customers to call the branch for almost every
small issue. The service Straight2bank does provide an answer to the problem of the
customers. The service provided by staright2bank does offer the main requirements of
the customers for which they visit or call the branch
All the respondents wanted to carry out the banking needs at their convenience. This
means the service caters the banking needs that customers generally require and its
main benefit of banking while sitting at office is desired by one and all, thereby
proving that the service does have the potential usage.
Few of the respondents were aware about the service which was desired by
100%respondents clearly showing that there has been a falter in its promotion
and awareness strategies.
Customers were not aware that the service was a free one, this is clear that almost all
the attributes of the services are favourable to the customers still customers are not
using the service and are not even aware of it.
Almost all customers once educated about the service readily enrolled for it whereas
amere portion did not trust the bank and thought that the bank would have some
hidden charges that they are not putting forward
Many clients who enrolled for the staright2bank service would have problems using it as
the drop boxes are not strategically placed many areas do not even have drop box facility;
State Bank must look into the policies of installing the drop box. They should assign it to
the regional office or allow branches to put up boxes where the branch thinks it would be
optimally utilized no matter which area of the city as of now that branches are allowed
to put up drop boxes in a radius which falls in close by areas to the branch. A customer
who lives close by to the branch would not use this service whereas customers who are
far of require the service, however the branch cannot provide them with the facility as
they cannot install the boxes in that area and it is the duty of the local branch of that area
to put up boxes which is not happening they hardly know where customers of the
other branch are located
We suggest following measures, which State Bank could take so as to take on heavy
competition from HSBC Bank and ABN AMRO Bank:
Try to reduce cost, so that benefits can be passed on to customers. Senior managers at
SBI keep on telling that it is difficult to reduce cost, because of services we provide.
But the fact is, India being a price sensitive market; people at times go for monetary
benefits rather than for long-term non- monetary benefits. If charges cant be reduced
because of costs involved, make the services customized, so that services are provided
to only those customers who are willing to pay the price for services they are getting
and let the other customers enjoy costs benefits without getting services.
SBI should provide competitive prices as nowadays a lot business is being acquired
by AXIS bank and HSBC bank and SBI is facing a lot competition from these banks
SBI should contact with their clients regularly for knowing the problems faced by
them. This will help SBI in providing best services to customers. This will result in
additional customer base by getting further references from satisfied clients.
SBI should focus on getting the business other business clients other than its existing
customers as it would help them to increase their business opportunities.