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"Title of The Project": An ISO 9001:2008 Certified Institute
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Student declaration i
Certificate of the guide ii
Acknowledgment iii
Executive summary iv
List of table of content v
List of graphs vi
List of charts vii
List of Abbreviations viii
Page no.
Chapter I
Chapter II
Chapter III
Research Methodology
3.3.3.1 Population……………………………………………………………..
3.3.4.2Drafting of a questionnaire………………………………….
3.3.5 Limitations……………………………………………………………………
Chapter IV
(This chapter will cover the analysis on the basis of questionnaire or whatever is applicable.
The analysis will be done and shown in a tabulated form and graphical representation with
pie-charts, bar-diagrams, graphs, etc will also be done. Below the graphs, diagrams and
charts, inferences have to be made. )
Chapter V
Chapter VI
Suggestion/ Recommendation
BIBLIOGRAPHY
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Enrollment No.
Cash is the money which a firm can disburse immediately without any restriction. The term
cash i n c l u d e s c o i n s , c u r r e n c y a n d c h e q u e s h e l d b y t h e f i r m , a n d
balances in its bank accounts. Sometimes near-cash items, such as
marketable securities or bank time‟s 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
Precautionary Motive
The precautionary motive i s t h e n e e d t o h o l d c a s h t o m e e t c o n t i n g e n c i e s i n
the future. It provides a cushion or buffer to withstand some
u n e x p e c t e d e m e r g e n c y. T h e p r e c a u t i o n a r y 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 firm‟s 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
p r e c a u t i o n a r y b a l a n c e . T h e 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 e a r n a n yt h i n g ; t h e r e f o r e , t h e
f i r m a t t e m p t t o e a r n s o m e p r o f i t o n i t . S u c h f u n d s s h o u l d b e 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 speculative motive r e l a t e s t o t h e h o l d i n g o f c a s h f o r i n v e s t i n g i n
p r o f i t - m a k i n g 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 an d 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
s e c u r i t i e s a r e : t h e transactions and the precautionary motives.
CASH PLANNING
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 firm‟s
profitability) and cash deficits (which can cause the firm‟s failure).
Cash planning protects the financial condition of the firm by developing a projected cashstate
ment 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.
A cash budget is a summary statement of the firm‟s 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. There are two types of cash forecasting:
1 Short-term Cash Forecasting
2 Long-term Cash Forecasting
Short-term Cash Forecasts
Generally, forecasts covering periods of one year or less are considered short-term cash
forecasting.It is comparatively easy to make short-term cash forecasts. The important
functions of carefully developed short-term cash forecasts are:
• To determine operating cash requirements
• To anticipate short-term financing
• To manage investment of surplus cash.
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
• Scheduling payments in connection with capital expenditures programmes
• Planning forward purchases of inventories
• Checking accuracy of long-range cash forecasts
• Taking advantage of cash discounts offered by suppliers
• Guiding credit policies.
Methods of Short-term Cash Forecasting:
Two most commonly used methods of short-term cash forecasting are:
• The receipt and disbursements method
• The adjusted net income method.
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 anddisbursements approach is followed. On the other hand, the adjusted income
approach is appropriate in showing a company‟s working capital and future financing needs.
Long-term Cash Forecasting
Long-term cash forecasts are prepared to give an idea of the company‟s 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 firm‟s financial condition
three, five, or more years in the future. The major uses of the long-term cash forecasts are:
•It indicates as company‟s future financial needs, especially for its working capitalrequireme
nts.
• 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, company‟s 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 MANAGEMENT
Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. It encompasses a company‟s level of liquidity, its management of cash
balance, and its short-term investment strategies. In some ways, managing cash flow is the
most important job of business managers.For some time now, technology has been the key
driving force behind every successful bank. In such an environment, the ability to recognize
and capture market share depends entirely on the bank‟s competence to evolve technically
and offer the customer a seamless process flow. The objective of a cash management system
is to improve revenue, maximize profits, minimize costs and establish efficient management
systems to assist and accelerate growth.
The Reserve Bank of India (RBI) has placed an emphasis on upgrading technological
infrastructure. Electronic banking, cheque imaging, enterprise resource planning (ERP), real
time gross settlement (RTGS) is just few of the new initiatives.
The evolution of payment systems such as RTGS has posed some tough challenges for cash
management providers. It is important that banks now look towards a shift to fees from float
although all those cash management providers who have factored in float money in their
product pricing might take a hit. But of course there are opportunities also attached like
collection and disbursal of payments on-line across the banks.
There are a number of regulatory and policy changes that have facilitated an efficient cash
management system (CMS). Fox example, the Enactment of Information Technology Act
gives legal recognition to electronic records and digital signatures. The establishment of the
Clearing Corporation of India in order to establish a safe institutional structure for the
clearing and settlement of trades in foreign exchange (FX), money and debt markets has
indeed helped the development of financial infrastructure in terms of clearing and settlement.
Other innovations that have supported in streamlining the process are:
Baumol model of cash management helps in determining a firm's optimum cash balance
under certainty. It is extensively used and highly useful for the purpose of cash management.
As per the model, cash and inventory management problems are one and the same. William
J. Baumol developed a model (The transactions Demand for Cash: An Inventory Theoretic
Approach) which is usually used in Inventory management & cash management.Baumol
model of cash management trades off between opportunity cost or carrying cost or holding
cost & the transaction cost. As such firm attempts to minimize the sum of the holding cash &
the cost of converting marketable securities to cash.
There are certain assumptions that are made in the model. They are as follows:
1. The firm is able to forecast its cash requirements with certainty and receive a specific
amount at regular intervals.
2. The firm‟s cash payments occur uniformly over a period of time i.e. a steady rate of cash
outflows.
3. The opportunity cost of holding cash is known and does not change over time. Cash
holdings incur an opportunity cost in the form of opportunity foregone.
4. The firm will incur the same transaction cost whenever it converts securities to cash. Each
transaction incurs a fixed and variable cost.
For example, let us assume that the firm sells securities and starts with a cash balance of C
rupees. When the firm spends cash, its cash balance starts decreasing and reaches zero. The
firm again gets back its money by selling marketable securities. As the cash balance
decreases gradually, the average cash balance will be: C/2. 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 firm‟s holding cost for maintaining an average cash balance is as follows:
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:
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.
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:
BANK OF INDIA
Bank of India was founded on 7th September, 1906 by a group of eminent businessmen
from Mumbai. The Bank was under private ownership and control till July 1969 when it was
nationalized along with 13 other banks.
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50
employees, the Bank has made a rapid growth over the years and blossomed into a mighty
institution with a strong national presence and sizable international operations. In business
volume, the Bank occupies a premier position among the nationalized banks.
The Bank has 3752 branches in India spread over all states/ union territories including
specialized branches. These branches are controlled through 50 Zonal Offices. There are 29
branches/ offices (including five representative offices) and 3 Subsidiaries and 1 joint venture
abroad.
The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions
Placement in February 2008. . Total number of shareholders as on 30/09/2009 is 2, 15,790.
While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront
of introducing various innovative services and systems. Business has been conducted with
the successful blend of traditional values and ethics and the most modern infrastructure. The
Bank has been the first among the nationalized banks to establish a fully computerized
branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank
is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health
Code System in 1982, for evaluating/ rating its credit portfolio.
The Bank's association with the capital market goes back to 1921 when it entered into an
agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is
an association that has blossomed into a joint venture with BSE, called the BOI Shareholding
Ltd. to extend depository services to the stock broking community. Bank of India was the
first Indian Bank to open a branch outside the country, at London, in 1946, and also the first
to open a branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a
network of 29 branches (including five representative offices) at key banking and financial
centers viz. London, New York, Paris, Tokyo, Hong-Kong and Singapore. The international
business accounts for around 17.82% of Bank's total business.
The Bank has a strong position in financing foreign trade. Over 270 branches provide export
credit. The expertise in this area has enabled the Bank to achieve a leading position in
providing export credit in certain areas like diamond export. The Bank has identified
specialized target groups to develop core advantage for future growth. The Bank has
specialized branches comprising of Corporate Banking Branches to undertake very large
credit business, Overseas Branches specializing in Foreign Exchange Business, NRI
Branches which specially cater to the requirements of Non-Resident Indians, Capital Market
Branches which undertake all activities relating to capital market such as collection of
applications, processing of refund orders, Merchant Banking etc. Commercial &Personal
Banking Branches cater to the requirements of high net worth customers. Apart from this, the
Bank also has specialized Branches for Asset Recovery, Small Scale Industries, Hi-tech
Agriculture Finance, Lease Finance and Treasury. To effectively meet the ever-growing
challenges and competition, the Bank has made a good headway in bringing about
technological up gradation. MIS and critical functions of controlling offices have been
computerized. At present, the operations at about 2618 branches are totally computerized. 26
branches operate in partially computerized mode besides these 1019 branches and 31
extension counters are migrated to Core Banking Solution. New facilities such as,
Telebanking, ATM & Signature Retrieval Systems have been introduced in a progressing
manner to add value to services. Telebanking facilities with Fax on Demand facility, Remote
Access Terminals for Corporate Customers are now available at many branches. The Bank
has installed ATMs in Mumbai and other centers in the country. The Bank is a member of the
RBI's VSAT Network and has installed 39 VSATs linking strategic branches/offices. The
Bank is making a paradigm shift from branch automation to bank automation and is in the
process of implementing a Multi-Branch Banking Project that facilitates City-wise
Connectivity of Computerized Branches. The Bank is in the process of installing BOINET, a
Wide Area Network for providing an inter- and intra-city connectivity, as a part of enhancing
its decision support system.
The Bank's corporate personality and philosophy are fully reflected in the emblem,
which is a five-pronged Star -- a harmonious blend of traditional and the functional.
The elongated prong pointingupwards conveys the Bank's drive to achieve ascending
goals. The Star is a beacon and guide to those in need of direction.
BANK‟S NEW INITIATIVES
1. ACQUISITION
The Bank has finalized acquiring 76% stake in P T Bank SwadesiTbk, a listed Bank
in Indonesia and the formalities to take over the management of the said Bank is in
final stages
2. JOINT VENTURE
Bank entered into an arrangement with Dai-Ichi Mutual Life Insurance Company,
second largest Japanese company in the field of Life Insurance (sixth largest in the
world) and Union Bank of India for setting up a Joint Venture Life Insurance
Company with capital stake of 51%, 26%, and 23% respectively. Formalities for
incorporation of JV Company are in advanced stage.
3. BRANCH EXPANSION
Bank opened 63 new branches and converted 41 Extension counters to full-fledged
branches. Total number of domestic outlets is 2845.
4. INTERNATIONAL OPERATIONS
a) With the opening of a branch at Antwerp (Belgium), number of overseas offices
stands at25 spread in 13 countries. Shenzen Representative Office in China was
upgraded as a Branch in March 2007. A new Representative Office was opened in
Beijing (China).
b) Bank has taken over management of Almana Exchange House in Doha Qatar.
c) Arrangements with Bank Azizi, Kabul in Afghanistan made for money remittance
to India.
d) Bank‟s International Operations contribute 20% of Bank‟s total Business.
e) Bank is holding approval of Reserve Bank of India for setting up:
Subsidiaries in Tanzania and Canada,
Branches in DIFC (Dubai) and Dhaka (Bangladesh), and
Representative Offices in Dubai, Johannesburg (South Africa) and Doha
(Qatar).
BACK OFFICE SERVICES OF BANK
Delegation of powers
Bank will ensure that authorities at various levels will be empowered with adequate powersto
take prompt decisions with regard to sanctioning of loans and advances, issuance of
guarantees, settlement of claims of deceased depositors, issuance of duplicate demand
drafts,deposit receipts, other claims and administrative matters concerning customer service.
Reorganization
In order to facilitate quick decision-making and to suit the changing requirements, the
organizational structure has been revamped. More specialized branches like Personal
Banking Branches, Corporate Branches, Small Scale Industries Branches, Hi-tech
Agricultural Finance Branches, Housing Finance Branches, Capital Market Branches,
Overseas and NRI Branches have been opened at important centers. in all business operations
at all stages. Customers will be educated about the various products and facilities available.
A uniform strategy will always be adopted to eliminate any possibility of discrimination on
caste, creed and religion or economic status of the clients. Secrecy norms will be
simultaneously observed to protect the interests of our customers.
Surveys by outside agencies
All steps will be taken by bank to improve Customer Service and enhance customer
satisfaction. Towards this end, bank services will be got evaluated through outside reputed
marketing agencies with a view to assessing the quality of services extended at the branches
and to ensure that bank customer service match the expectations of bank‟s variousclientele.
12.Controlled Disbursement: T h i s i s a n o t h e r p r o d u c t o f f e r e d b y
b a n k s u n d e r C a s h 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. T h i s
early knowledge of daily funds req uirement allows the customer
t o i n v e s t a n y surplus in intraday investment opportunities, typically money
market investments. This is d i f f e r e n t f r o m d e l a ye d d i s b u r s e m e n t s ,
w h e r e p a ym e n t s a r e i s s u e d t h r o u g h a r e m o t e 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 sendof images of their cashed checks.
CORPORATE SOCIAL RESPONSIBILITY FOLLOWED BY
BANK:
1. Bank as part of its centenary celebrations promoted a Trust, „ABHAY‟, to offer credit
counseling services, free of cost, with the following objectives:
Advising on gaining access to structured financial system including banking
Counseling people who are struggling to meet the repayment obligations and helping
debt resolution
Helping in rehabilitation of borrowers in distress
2. Bank has pioneered a Mega Project for Integrated Development of 129 villages in
78Districts and 17 States covering 60,000 households, identified for holistic development
and showcased as Model Villages. The Bank has so far extended financial assistance over
Rs.150 crores to the rural households in the identified villages. An evaluation study
conductedin select villages has revealed that there is 20-25% improvement in the
household income after the implementation of the scheme.
MISSION AND VISION OF BANK OF INDIA
MISSION
To provide superior, proactive banking services to niche markets globally, while providing
cost-effective, responsive services to others in our role as a development bank, and in so
doing, meet the requirements of our stakeholders.
VISION
To become the bank of choice for corporates, medium businesses and upmarket retail
customers and to provide cost effective developmental banking for small business, mass
market and rural markets.
Chapter3
ResearchMethodology
OBJECTIVE OF THE PROJECT
RESEARCH DESIGN:
POPULATION:
All the employees who are directly or indirectly related to the Bank of India, New Delhi.
SAMPLE UNIT:
All the employees who are directly or indirectly related to the Bank of India, New Delhi.
SOURCE OF DATA:
Primary Data: - Structured direct Interviews with the concerned persons of Finance &
Stores Department
Secondary Data: - Annual Report, Store Records & various books.
In today‟s competitive world the key differentiator between a successful bank and other bank
is the stress each lays on technology.
The above chart gives a clear explanation regarding the Cash Management infrastructure
provided by all the three sectors. The network, technology and the corporate relationship
services provided by all the three sectors are highly sophisticated and good but the
scalability, marketing provided by the Public sector is low in terms of the Private and MNC
sector. As well as the services provided by the public sector is not fairly good and up to the
standard. As Cash management is constantly changing to meet the needs of the corporate
treasurer. The challenge for both corporation and provider is to keep up with developments,
technology, changing regulations and fitting these in with normal business. A changing
regulatory environment, new technology and mergers that expand the scope of traditional
banking are redefining the traditional treasury management paradigm for both banks and
corporations. Electronic commerce is evolving far beyond simply ordering goods online or
buyer-to supplier commerce.
In a vast country like India Providing Cash Management Services do posses a challenge to
the Cash Manager as well as the banks. Considering the present Indian scenario, where
Cheques are the basic form of payment and cheque clearing takes a long time, cash
management services need to devise innovative methods and means to expedite the clearing
to benefit the corporate customer. As the Indian economy becoming an open market
economy, residents may maintain accounts in other countries and non-residents may hold
accounts in India. As a result, Indian treasurers may often find themselves managing cash
across geographies and time zones. In India the transaction types run from the classic paper
cheque to the latest Internet initiated electronic payment. Corporations initiate and receive
paper-based transactions, as well as high value and low value electronic transactions on a
daily basis. Expectations from new services may not eliminate or fully replace the older
traditional services. Change will be gradual but, probably, it will be firm. Fee structures for
cash management services in India vary from bank to bank and also from customer to
customer. Many banks price the services based upon the overall relationship, especially for
multiple product solutions. As Indian banks become more consultative and total solution
oriented rather than product-driven, pricing will become even more customized. Corporate
treasurers will consider the amount they can save on banking fees and the level of efficiency
in their departments as a sequel to the new cash management services. After they have
negotiated the best possible price, treasurers then focus on the return on excess balances.
SWOT Analysis of Competition in the CMS Market
The above Chart gives the explanation of the SWOT analysis and the competition in the cash
management services in the market. It tells about the products offered and the services it
provides.
There is a need to put in place a specialized cash management system by Corporates. Good
Cash Management is a conscious process of knowing when, where, and how a company‟s
cash needs will occur; knowing what the best sources for meeting additional cash needs; and
being prepared to meet these needs when they occur by keeping good relationships with
bankers and other creditors. Cash management results in significant savings in time decrease
in interest costs, less paper work and greater accounting accuracy. Proper cash management
creates more control over time and funds; provides timely access to information; enables
easy employee related payments; supports electronic payments; produces faster electronic
reconciliation; allows for detection of bookkeeping errors; reduces the number of cheques
issued and earns interest income or reduces interest expense. Corporations with subsidiaries
worldwide can pool everything internationally so that the company can offset the debts with
the surplus monies from various subsidiaries. The end result will transform treasury function
as a profit-centre by optimizing cash and put it to good use. Creative and pro-active cash
management solutions can contribute dramatically to a company‟s profitability and to its
competitive edge. The ultimate purpose of proper management of liquidity, needless to
emphasize, is to improve the overall productivity of funds.
Internet:Websites
1- www.google.com
2- www.wikipedia.org/
3- http://wiki.answers.com
4- http://www.slideshare.net
5- www.wikipedia.org/inventory
6- www.pdfsearchengine.com/cashmanagement
7- www.scribd.com
Books: