TREASURY MANAGEMENT

PRESENTED BY
RAMYA
 Treasury Management
 Treasury forms a vital part of any commercial bank’s activities. It is the
window through which the bank raises funds from or places funds in markets.
 Traditionally, banks in India, the role of Treasury was limited to ensuring the
maintenance of RBI’s stipulated norms for cash reserve ratio (CRR)- which
mandates that a minimum proportion of defined liabilities must be kept on
deposit with the central bank- and the Statutory Liquidity Ratio(SLR) – which
obliges banks to invest a specified percentage of their liabilities in approved
securities issued by the Government of India and State Governments.
Whereas activities in foreign exchange were mostly confined to meeting
merchants’ and customers’ requirements for imports, exports, remittances
and deposits.
 The deregulation of financial markets began with the shift to market-
determined exchange rates and moved ahead with the freeing of Bank
deposit and lending rates. The RBI began using monetary intervention tools
such as LAF and Open Market Operations (OMOs) to manage liquidity.
 The deregulation of financial markets began with the shift to market-
determined exchange rates and moved ahead with the freeing of Bank
deposit and lending rates. The RBI began using monetary intervention
tools such as LAF and Open Market Operations (OMOs) to manage
liquidity.
 The volatility in interest rates (yields) is at the heart of the
transformation of Bank Treasuries from mere maintenance of CRR and
SLR to become to a profit centre. Downwards and upward movements
in yields offer excellent scope and opportunities to trade in securities
and earn profits for the Bank, as also trading in forex to take advantage
of currency variations.
 An active Treasury also earns profit by doing arbitrages. New products,
such as derivatives, currency Futures enable spotting and capitalizing
on such opportunities.
 Another key (modern) function of Treasury is asset-liability
management and hedging (i.e. insulating) the bank’s balance sheet
from interest and exchange rate fluctuations.
OBJECTIVES OF INTEGRATED TREASURY MANEGEMENT POLICY
To maintain Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR)
in terms of RBI guidelines.
To achieve optimum level of return from the investment operation including
forex transactions keeping in mind the liquidity and risk aspects of the
portfolio.
To manage liquidity i.e to bridge temporary mismatch in fund position by
resorting to various options viz Call, CBLO etc.
To maintain maturity pattern of investments consistent with the bank’s need
for funds and in line with Asset Liability management Policy of the Bank.
To manage credit risks, liquidity risk, market risk and operational risk in
tune with bank’s risk management policies.
To maintain a healthy and well diversified portfolio of investments
consisting of both SLR and NON SLR categories in relation to pricing,
maturity, coupons ,market prices etc.
FUNCTIONS
 Reserve management and investment
 Liquidity and fund management
 ALM
 Risk management
 Transfer pricing
 Capital adequacy
 Arbitrage
ORGANIZATION OF TREASURY
FRONT OFFICE
The Front office of a treasury has a responsibility
to manage investment and market risks in
accordance with the instructions received from the
bank’s ALCO. This is undertaken through the
Dealing room which acts as the banks interface to
international and domestic financial markets.
The dealers enter into transactions on the basis of
current market price which is ascertained by them
through the information network made available.
MID-OFFICE

Mid office is responsible for onsite risk measurement,

monitoring and management reporting. The other
functions of Mid-Office are:
Limit setting and monitoring exposures in relation to
limits.
Evolving hedging strategies for assets and liabilities.
Monitoring open currency positions.
Risk-return analysis.
Marking open positions to market to asses unrealised
gain and losses.
BACK-OFFICE FUNCTIONS

The key functions of back-office are:

Deal slip verification
Generation and dispatch of interbank confirmations
Monitoring receipt of confirmations from counterparty
banks
Monitoring receipt of confirmations of forward
contracts
Statutory reports to the RBI
Monitoring approved exposure and position limits
List of Banks Treasury
DOMESTIC TREASURY
Asset Products/Instruments
Call/Notice Money Lending
Term Money Lending/Inter-bank deposits
Investments in CDs
Commercial Paper
Inter-bank participation certificates
Reverse Repos/CBLO- backed leading through CCIL
SLR bonds (notified as such by the RBI)
Issued by the Government of India as securities and T-
bills
Issued by State Governments
Guaranteed by Government of India
Guaranteed by State Governments
Bonds (Issued by)
Financial Institutions
Banks/NBFCs (Tier II capitals)
Corporate
State-level enterprises
Infrastructure projects
Assets- backed securities (PTCs)
Private placements
Floating rate bonds
Tax- free bonds
Preference shares
Listed/unlisted equity
Mutual funds
THANK YOU