Treasury Management-shruti

7/28/2019 Treasury Management-shruti

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TreasuryManagement


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Most banks have whole departments devoted to

treasury management and supporting their

clients' needs in this area. Until recently, large

banks had the stronghold on the provision oftreasury management products and services.

However, smaller banks are increasingly

launching and expanding their treasury

management functions and offerings


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Bank Treasuries

Bank Treasuries may have the following departments-

A Fixed Income or Money Market desk that is devoted to buying and

selling interest bearing securities A Foreign exchange or "FX" desk that buys and sells currencies

A Capital Markets or Equities desk that deals in shares listed on the stock

market.


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For non-banking entities, the terms Treasury Managementand Cash Management are sometimes used interchangeably,while, in fact, the scope of treasury management is larger. In

general, a company's treasury operations comes under thecontrol of the CFO, Vice-President Director of Finance orTreasurer, and is handled on a day to day basis by theorganization's treasury staff, controller, or comptroller.


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What is Treasury Management

Collects funds and disburses money.

Managing Funds

Responsibilities fall under the scope of CFO

The CFOs responsibilities include capital

Management, risk management, strategic planning,

Investor relations and financial reporting


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Objectives of the Treasury

To take advantage of the attractive trading and arbitrageopportunities in the bond and Forex markets

To deploy and invest the deposit liabilities, internal generation andcash flow from maturing assets for maximum return on a current

and forward basis consistent with the banks risk policies appetite To fund the balance sheet on current and forward basis as cheaply

as possible taking in to account the marginal impact of these actions

To maintain statutory reserves- CRR and SLR- as mandated by theRBI on current and forward planning basis

To identify and borrow on the best terms from the market to meetthe clearing deficit of the bank


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Function of Treasury Management

The function of treasury mgt is concerned with both macro and microfacets of the economy

At the macro level, the pumping in and out of cash, credit and other

financial instruments are the functions of the government and businesssectors, which borrow from the public

These two sectors spend more than their means and have to borrow infinance their ever-growing operations. They accordingly issue securitiesin the form of equity or debt instruments.


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The latter are securities including promissory notes and treasury billswhich are redeemable after a stipulated time period.

Such borrowings for financing the needs of the government and thebusiness sector are met by surplus funds and savings of the householdsector and the external sector. these two sectors have a surplus of

incomes over expenditure. The micro units utilize these surpluses and build up their capacities

for production of output and this leads to the productive system anddistribution and consumption systems.


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Responsibility of a Treasurer

Balance Sheet Management:

Liquidity management

Projection for a twelve month on a monthly basis

If projection fails bank will have to finance long term liability with short term

borrowing i.e. call money market Asset Liability Management

Not just volume but the quality also matters

Capital is needed to maintain Capital Adequacy Ratio

Transfer Pricing Balance between asset and liability

Reserve Management and Investments


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SCOPE

Unit level- The performance of production, marketing and HRD functions isdependent upon the performance of the treasury department. the lubricant forday-to-day functioning of a unit is money or funds and these funds are arrangedby the treasury manager.

Domestic level- The scope is to channelise the savings of the community intoprofitable investment avenues. This job is performed by the commercial banks. TMis a crucial activity in banks and financial institutions as they deal with the funds,borrowings and lending and investments.

International level- Is concerned with management of funds in the foreigncurrencies.


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ROLES OF THE TREASURY MANAGER

Originating roles

Supportive roles

Leadership roles

Watchdog roles

Learning roles Informative roles


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RESPONSIBILITES OF THE TREASURY

MANAGER

Compliance with statutory guidelines

Equal treatment to all departments Ability to network

Integrity and impartial dealings

Willingness to learn and to teach.


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TOOLS OF TREASURY

MANAGER

Analytic and planning tools

Zero based budgeting

Financial statement analysis


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ENVIRONMENT FOR TREASURY

MANAGEMENT

Legal environment: refers to the legislations,which govern corporate functioning.

Regulatory environment: regardingemployment, wages, land laws, promotionof units and closure of units etc.

Financial environment: pertains to policiesregarding monetary and fiscal control,

financial supervision, exchange control etc.


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Present status of Treasury Management

in IndiaTreasury management is still in its infancy in India. It is still consideredas a sub function of the financial management. In most of thecompanies, it is the finance manager which is also taking care of the

treasury function. Treasury operations are carried out professionallyand systematically by some banks and financial institutions. The firststage of evolution in treasury management is the establishment of atreasury function. The second stage is running it as a profit center. InIndia, treasury operations at the micro level are expected to grow at a

fast pace with increasing integration of the Indian economy with theworld economy


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Documents

Treasury Management-shruti