A Study of Cash Management in Banking Sector PDF

PROJECT REPORT ON
A STUDY OF CASH MANAGEMENT IN BANKING SECTOR

SUBMITTED BY
SANGEETA RAMSINGAR VISHWAKARMA
19312A1030
M.COM ADVANCE & ACCOUNTANCY SEMESTER III
2020-21
SUBMITTED TO
VIDYALANKAR SCHOOL OF INFORMATION
TECHNOLOGY
(AFFILIATED TO UNIVERSITY OF MUMBAI)
VIDYALANKAR MARG, WADALA (E),
MUMBAI 400 037
UNDER THE GUIDANCE OF

VICE PRINCIPAL PROF. VIJAY GAWDE
IN PARTIAL FULFILLMENT OF
MASTER OF COMMERCE IN ADVANCE ACCOUNTANCY
UNIVERSITY OF MUMBAI
MUMBAI 4000 32.
VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(Affiliated to Mumbai University)
Certificate
This is to certify that
Ms sangeeta Vishwakarma of M.Com in Advance Accountancy, Semester (III) has
undertaken & completed the project work of title ‘A cash management of
banking sector’ during the academic year 2020-2021 under the guidance
of Prof vijay Gawde submitted on 20-1-2020 to this college in fulfillment of the
curriculum of M.Com.in advance accountancy , University of Mumbai.
This is a bonafide project work & the information presented is True & original to
the best of our knowledge and belief.
PROJECT COURSE EXTERNALOR
CO- ORDINATOR PRINCIPAL GUIDE EXAMINATION

DECLARATION
Vidyalankar School of Information Technology
(Affiliated to University of Mumbai)
Vidyalankar Marg, Wadala (E),
Mumbai 400 037
I SANGEETA RAMSINGAR VISHWAKARMA, student of M COM-part-2(Advance
&Accounting) sem-III, Vidyalankar School of Information Technology, hereby declare that
I have completed the project ‗A STUDY OF CASH MANAGEMENT IN BANKING
SECTOR in academic year 2020-21
The information submitted is true and original to the best of my knowledge.
Signature of the Student
SANGEETA VISHWAKARMA
ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me in drafting of this project
report. It would not have been possible for me to complete the task without their help and guidance.
First of all I would like to thank the principal Dr Rohini Kelkar and the prof. Vijay Gawde
coordinator Mrs Prathma Nemane who gave me the opportunity to do this project work. They also
conveyed the important instructions from the university time to time. Secondly, I am very much obliged
of my guide Prof vijay gawde for giving guidance in completing the project.
They not only rendered time out of their busy schedule but also answered my queries without any
hesitation. He/ She gave me information on their system of working in their organisation and told me
how Promotional Strategies are done in their organisation.
Last but not the least; I am thankful to the University of Mumbai for offering the project in the
syllabus. I must mention my hearty gratitude towards my family, other faculties and friends who
supported me to go ahead with the project.
TABLE OF CONTENT
Chapter Page & Title Page
No. No.
EXECUTIVE SUMMARY
(Introduction, objectives, conclusions of the project)
ch1 INTRODUCTION TO STUDY
Ch1.1 Introduction to Topic 1
Ch1.2 Objectives of the Study 2
Ch1.3 Limitations of the Study 3
Ch1.4 Hypothesis Research Methodology 3-4
Ch 2 LITERATURE REVIEW 5-6
Ch3 INTRODUCTION TO TOPIC 6-56
Ch4 DATA ANALYSIS AND INTERPRETATIONS

Ch4.1 Method of Data Collection 57
Ch4.2 Method of Data compilation, Tabulation and Graphical 58-69
presentations
CONCULSIONS AND SUGGESSTIONS
Ch5 Findings 71
Ch6 Conclusions 72-73
Ch7 Suggestions 73-74
Ch8 Bibliography 74-75
Ch9 Appendix 75-78
LIST OF TABLE
Chapter PAGE
No. TITLE NO.
4.1 Analysis of Q no. 1 58

EXECUTIVE SUMMARY
INTRODUCTION
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.
Having a traditional paper-based clearing system involving not only high processing cost but also
security risk, cash management in India has certainly undergone a paradigm change. From a product-
centric approach, the focus for almost all banks today has shifted emphatically towards the customer.
And, success is all about bringing the maximum possible delivery channels to the prospect‘s
doorstep.
Improper planning of Cash Management can lead any bank to disaster and losses, which close down
banks and banks loose out customers as such. How well Cash Management is used in today‘s
competitive world is to be known.
The topic has been chosen because Cash Management is very important part of any successful bank.
Proper Cash Management will help banks have liquid assets whenever required. Liquid assets provide
low risk to the bank and customers‘ cash requirements can be met.
OBJECTIVE
 To know about cash management of banks
 To analyze the cash management process of banks
 To analyze in detail, the way banks currently manage their finances and make decisions to achieve
tradeoff between profitability and liquidity
CONCLUSION
Cash management has been since banks inception. But, the complexity of banks functioning and rules
and regulations for banks are making banks functionality little difficult. Proper cash management will
reduce all the pressure and banks can work successfully.
CHAPTER :1 INTRODUCTION TO THE STUDY
1.1 INTRODUCTION TO TOPIC/RATIONALE

In a business anything done financially affects cash eventually.
―Cash Is To A Business Is What Blood Is To A Living Body‖.
A business cannot operate without its life blood cash, and without cash management there may
remain no cash to operate. Cash movement in a business is two way traffic. It keeps on moving in and
out of business. The inflow and outflow of cash never coincides. Important aspect which is unique to
cash management is time dimension associated with the movement of cash. Due to non-synchronicity
of cash inflow outflow, the inflow may be more than outflow or outflow maybe more than inflow at a
particular point of time. Hence there is a direct need to control its movement through skillful cash
management. The primary aim of cash management is to ensure that there should be enough cash
availability when the needs arise not too much but never too little.
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.
Having a traditional paper-based clearing system involving not only high processing cost but also
security risk, cash management in India has certainly undergone a paradigm change. From a product-
centric approach, the focus for almost all banks today has shifted emphatically towards the customer.
And, success is all about bringing the maximum possible delivery channels to the prospect‘s
doorstep.
1
The topic has been chosen because Cash Management is very important part of any successful bank.
Proper Cash Management will help banks have liquid assets whenever required. Liquid assets provide
low risk to the bank and customers‘ cash requirements can be met.
1.2 OBJECTIVES OF THE STUDY
The Cash Management is concerned with the collection, disbursement and the management of cash in
such a way that firm's liquidity is maintained. ... The objective of cash management is to have adequate
control over the cash position, so as to avoid the risk of insolvency and use the excessive cash in some
profitable way
There are certain objective of cash management of bank
 To know about cash management of banks
 To analyze the cash management process of banks
 To analyze in detail, the way banks currently manage their finances and make decisions to
achieve tradeoff between profitability and liquidity
 To evaluate cash flow position of the banks
 To study on cash management techniques of the banks
 To find sources for financial during periods of cash deficits
 To arrange for repayment / investments during periods of cash surplus
 To minimize idle cash
 To effectively monitor the cash positions.
 To minimize cash balance
 To better utilized of fund of bank
 To know long term planning requirement
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1.3SCOPE AND LIMITATIONS OF THE STUDY
Scope of the Study:

It will help to other who studies the cash management in banks.
Limitation of the study:
Following are the limitations faced by me during this project:
 The cash management conveyed in the proposed study can get affected due to market volatility
due to which the result expected and the result driven may differ.
 The project concentrates only on cash management in banks
 The Analysis is done only for the period of FY 2019- 2020 and 1st April 2019 to 31st March
2020.
 As this study is mainly based on quantitative studies, and all the data are secondary data the
outcome thus observed mat differ in case that of primary data.
 The research conducted is of relatively small size and thus could affect the reliability and
accuracy of findings.
1.4 RESEARCH DESIGN AND HYPOTHESIS
 Hypothesis-
 H0 (Null Hypothesis): Cash Management is not important for Banking
 H1 (Alternate Hypothesis): Cash Management is important for Banking
1. RESEARCH METHODOLOGY
Research Design-
The research is of Empirical Nature.
PERIOD OF STUDY
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This project covers the period FY 2019-20 and the period from 1st April 2019 to 31st March 2020
SAMPLING
SAMPLING UNIVERSE
The sampling universe consists of Banks as well as customers .
SAMPLING TECHNIQUE
The sampling technique used for the research is Judgment Sampling
SAMPLE SIZE
The size of the sample is below 100 distributed among public sector bank and private
Sector bank, foreign bank and co-operative bank
DATA
 TYPE OF DATA
Due to time constraint and data availability, the study is based on secondary data.
 DATA SOURCES
The data sources for the research are Magazines on banking, Reference from newspaper and websites
such as
https://economictimes.indiatimes.com/
https://www.moneycontrol.com/
https://www.investopedia.com/
https://www.rbi.org.in/
https://www.sc.com/in/
http://www.sbi.co.in/
https://www.hdfcbank.com/
 METHOD OF DATA COLLECTION
Data is collected through the questionnaire. Secondary data about cash Management shall be
collected from the Books, Newspapers, Magazines and Websites mentioned above.
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2. LITERATURE REVIEW
Cash management is a broad term that covers a number of functions that help individuals and
businesses process receipts and payments in an organized and efficient manner. Administering cash
assets today often makes use of a number of automated support services offered by banks and other
financial institutions (Malcolm & Harris, 2010). The range of cash management services range from
simple checkbook balancing to investing cash in bonds and other types of securities to automated
software that allows easy cash collection.
According to Malcolm & Harris (2010), when it comes to cash collections, there are a few popular
options today that can make the process of receiving payments from customers much easier.
Automated clearing houses make it possible to transact a business to business cash transfer that
deducts the payment from the customer account and deposits the funds in the vendor account.
Generally, this service is available for a fee at local banks.
According to Aksoy (2005), no matter what type of business you own, it is critical to manage your
cash flow properly. Without proper cash flow management techniques you could find yourself
running short of cash just when you need it the most. That could leave you unable to pay suppliers,
develop the marketing plan you need or even pay your employees. Fortunately there are a number of
techniques companies can use to maximize cash flow management and keep the business running
smoothly.
Külter, and. Demirgüneş (2007), noted that cash collection systems aim to reduce the time it takes to
collect the cash that is owed to a firm. Some of the sources of time delays are mail float, processing
float, and bank float. Obviously, an envelope mailed by a customer containing payment to a supplier
firm does not arrive at its destination instantly. Likewise, the payment is not processed and deposited
into a bank account the moment it is received by the supplier firm. And finally, when the payment is
deposited in the bank account oftentimes the bank does not give immediate availability to the funds.
These three "floats" are time delays that add up quickly, and they can force struggling or new firms to
find other sources of cash to pay their bills (Lazaridis, 2006).
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Cash management attempts, among other things, to decrease the length and impact of these "float"
periods. A collection receipt point closer to the customer perhaps with an outside third-party vendor
to receive, process, and deposit the payment (check) is one way to speed up the collection. The
effectiveness of this method depends on the location of the customer; the size and schedule of their
payments; the firm's method of collecting payment; the costs of processing payments; the time delays
involved for mail, processing, and banking; and the prevailing interest rate that can be earned on
excess funds. The most important element in ensuring good cash flow from customers, however, is
establishing strong billing and collection practices (Tryfonidis, 2006).
According to McLaney (1997), once the money has been collected, most firms then proceeds to
concentrate the cash into one center. The rationale for such a move is to have complete control of the
cash and to provide greater investment opportunities with larger sums of money available as surplus.
There are numerous mechanisms that can be employed to concentrate the cash, such as wire transfers,
automated clearinghouse (ACH) transfers, and checks. The tradeoff is between cost and time.
Another aspect of cash management is knowing a company's optimal cash balance. There are a
number of methods that try to determine this magical cash balance, which is the precise amount
needed to minimize costs yet provide adequate liquidity to ensure bills are paid on time (hopefully
with something left over for emergency purposes). One of the first steps in managing the cash balance
is measuring liquidity, or the amount of money on hand to meet current obligations (Myers, 2003).
Myers (2003) notes that there are numerous ways to measure this, including: the Cash to Total Assets
ratio, the Current ratio (current assets divided by current liabilities), the Quick ratio (current assets
less inventory, divided by current liabilities), and the Net Liquid Balance (cash plus marketable
securities less short-term notes payable, divided by total assets). The higher the number generated by
the liquidity measure, the greater the liquidity—and vice versa. However, there is a tradeoff between
liquidity and profitability which discourages firms from having excessive liquidity.
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3. INTRODUCTION TO TOPIC
MEANING AND DEFINITION
MEANING
Cash management refers to a broad area of finance involving the collection, handling, and usage of
cash. It involves assessing market liquidity, cash flow, and investments.
In banking, cash management, or treasury management, is a marketing term for certain services
related to cash flow offered primarily to larger business customers. It may be used to describe all
bank accounts (such as checking accounts) provided to businesses of a certain size, but it is more
often used to describe specific services such as cash concentration, zero balance accounting,
and automated clearing house facilities. Sometimes, private banking customers are given cash
management services. Financial instruments involved in cash management include money market
funds, treasury bills, and certificates of deposit.
A way that a bank will manage all aspects of the financial ends of the business, such as the collection
of revenue as well as the investing of the bank‘s cash and other assets. This helps banks to stay afloat
financially. That is called cash management in banks.
The Reserve Bank of India (RBI) has placed an emphasis on upgrading technological infrastructure to
manage cash efficiently. Electronic banking, Cheque imaging, enterprise resource planning (ERP),
real time gross settlements (RTGS) are just few of the new initiatives for efficient cash management.
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
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of clearing and settlement. Other innovations that have supported in streamlining the process are:
Introduction of the Centralized Funds Management Service to facilitate better management of fund
flows. Structured Financial Messaging Solution, a communication protocol for intra-bank and
interbank messages.
DEFINITION
Government Financial Statistics (GFS) has defined as ―Cash management is necessary because there
are mismatches between the timing of payments and the availability of cash‖.
Storkey (2003) provides the following definition: ―Cash management is having the right amount of
money in the right place and time to meet the government‘s obligations in the most cost-effective
way.‖
Cash Management helps the organization in properly timing the disbursements, Eliminating idle
cash balances, Ensuring timely deposit of collections, Monitoring exposure and reducing risks
Investopedia defines as ―Cash management is the corporate process of collecting and managing cash,
as well as using it for short-term investing. It is a key component of a company's financial stability
and solvency. Corporate treasurers or business managers are frequently responsible for overall cash
management and related responsibilities to remain solvent.‖
History of Banking in India

The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases:
 Early phase of Indian banks, from 1786 to 1969
 Nationalization of banks and the banking sector reforms, from 1969 to 1991
 New phase of Indian banking system, with the reforms after 1991
1 PHASE
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The first bank in India, the General Bank of India, was set up in 1786. Bank of Hindustan and Bengal
Bank followed. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840), and Bank of Madras (1843) as independent units and called them Presidency banks.
These three banks were amalgamated in 1920 and the Imperial Bank of India, a bank of private
shareholders, mostly Europeans, was established. Allahabad Bank was established, exclusively by
Indians, in 1865.
Punjab National Bank was set up in 1894 with headquarters in Lahore. Between 1906 and 1913, Bank
of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. The 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 1,100 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 the Banking Regulation Act,
1949 as per amending Act of 1965 (Act No. 23 of 1965). The Reserve Bank of India (RBI) was
vested with extensive powers for the supervision of banking in India as the Central banking authority.
During those days, the general public had lesser confidence in banks. As an aftermath, deposit
mobilization was slow. Moreover, the savings bank facility provided by the Postal department was
comparatively safer, and funds were largely given to traders.
2 PHASE
The government took major initiatives in banking sector reforms after Independence. In 1955, it
nationalized the Imperial Bank of India and started offering extensive banking facilities, especially in
rural and semi-urban areas.
The government constituted the State Bank of India to act as the principal agent of the RBI and to
handle banking transactions of the Union government and state governments all over the country.
Seven banks owned by the Princely states were nationalized in 1959 and they became subsidiaries of
the State Bank of India. In 1969, 14 commercial banks in the country were nationalized.
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In the second phase of banking sector reforms, seven more banks were nationalized in 1980. With
this, 80 percent of the banking sector in India came under the government ownership.
Nationalization Process
 1955: Nationalization of State Bank of India
 1959: Nationalization of SBI subsidiaries
 1969: Nationalization of 14 major banks
 1980: Nationalization of seven banks with deposits over Rs 200 crore
3 PHASE
This phase has introduced many more products and facilities in the banking sector as part of the
reforms process. In 1991, under the chairmanship of M Narasimham, a committee was set up, which
worked for the liberalization of banking practices. Now, 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 are
introduced. The entire system became more convenient and swift. Time is given importance in all
money transactions.
The financial system of India has shown a great deal of resilience. It is sheltered from crises triggered
by external macroeconomic shocks, which other East Asian countries often suffered.
This is all due to a flexible exchange rate regime, the high foreign exchange reserve, the not-yet fully
convertible capital account, and the limited foreign exchange exposure of banks and their customers.
PURPOSE OF CASH MANAGEMENT
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Cash management is the stewardship or proper use of an entity‘s 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.
 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 Treasury‘s account. Minimizing idle cash balances requires accurate
information about expected receipts and likely disbursements.
 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.
 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.
COMPONENTS IN CASH MANAGEMENT

 Account Reconciliation:- Managing cheques, monitoring their clearance, and keeping track of the
true cash balance can be an overwhelming task for businesses because of the huge number of cheques
that are processed on a daily basis.
Hence banks offer account reconcilement services wherein corporate customers can upload details
about the cheques issued on a daily basis. And at the end of the month, the bank statement shows
information on cheques which have been cleared and those which have not. This system is also
helpful in the process known as positive pay used by banks to prevent cheques from being
fraudulently cashed if they are not on the list.
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 Cash Concentration: This is a quick and cost-effective method of moving funds from different
accounts spread across the country to a single monitored and managed account. This allows
businesses to maximize the use of available cash, and to optimize returns on consolidated balances.
 Financial Risk Management: Risk management is the process of measuring risk, and developing
and implementing strategies to manage and mitigate risk. Financial risk management plays an
important role in cash management, because it focuses on managing risks in relation to changes in
interest rates, commodity prices, stock prices, exchange rates, among others.
 Liquidity Management: Forecasting the cash needs of a business is essential for managing cash
flows, short-term borrowings, among others in an efficient manner, in order to ensure that such cash
needs can be met if and when they arise. This requirement is addressed through liquidity
management services offered by banks. Liquidity management comprises of activities that release
the investments locked in working capital, enabling it to contribute to higher profits. It also refers to
the specific services provided by banks to enable their customers optimize their interest revenues and
reduce interest costs.
Why Cash Management?

 Complete Visibility: Corporate customers increasingly expect superior cash forecasting ability, for
which they need complete enterprise level visibility into cash balances and movement of cash. This
is provided by banks in the form of status reports, direct enquiry, and through consolidated view of
accounts held with branches/banks across the globe.
 Rich Reporting Modules: In order to make corporate customers understand the need to adopt cash
management services, banks are showing cost-benefit analysis reports, and demonstrating the
benefits offered by cash management using graphs and illustrations.
 Integrated Services: Corporate customers prefer a single platform for all their financial needs in
place of disparate systems. Hence the focus is on integrating cash management systems with other
activities involving the bank.
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For example, linking of ERP solutions with banking systems facilitates cash management by
enabling effective trade finance process and investment management, among others.
 Remote Deposit Capture and Straight- Through Processing - (STP): In order to accelerate
transactions businesses are looking for solutions that offer straight through processing capability.
For example, corporate customers are trying to streamline their transactions and reduce downtime,
for which banks offer STP services which enable businesses to conduct entire trade processes and
payments electronically. And to better serve the needs of corporate customers, banks look to
technology vendors who offer optimal solutions that can enable more efficient cash management.
ISSUES FACE IN CASH MANAGEMENT

 How to estimate the cash inflows and cash outflows?
 How to manage the cash inflows and cash outflows?
 What is the optimum cash level?
 How to handle cash shortages?
 How to handle cash surpluses?
TOOLS & TECHNIQUE OF ANALYSIS

Graphical Analysis:
Graphical Analysis is a program dedicated to graphing data. This tool helps to analyze the data
quickly and hence is able conclude the performance of individual in comparison with others.
Statistical Analysis:
Statistics is described as a mathematical body of science that pertains to the collection, analysis,
interpretation or explanation, and presentation of data, or as a branch of mathematics concerned with
collecting and interpreting data. Because of its empirical roots and its focus on applications, statistics
is typically considered a distinct mathematical science rather than as a branch of mathematics. Some
tasks a statistician may involve are less mathematical; for example, ensuring that data collection is
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undertaken in a way that produces valid conclusions, coding data, or reporting results in ways
comprehensible to those who must use them.
EXPECTED CONTRIBUTION FROM THE STUDY

Efficient cash management processes are pre-requisites to execute payments, collect receivables and
manage liquidity. This study taking considerations of banking in India. With reference to experience
availed at bank. The study of this topic will help to get the knowledge about cash management policy
of banks in India. The mounting pressure from competitors forces the Banks to look for an
Information Technology vendor who can offer better solutions and services in cash management.
Hence the study will lead to analysis of policies and procedure of managing cash inflow and outflow,
also this project focus on RBI norms and rules regarding cash management policies. This will give
brief view about entire structure of liquidity management of banks and solutions offered by them.
DIRECTION FOR FUTURE STUDIES

In future a large sample size may be considered for evaluating cash management in Banks.
A comparative study on the basis of performance of private sector Bank, public sector bank, co-
operative bank and foreign Bank can be conducted.
A way that a bank will manage all aspects of the financial ends of the business, such as the collection
of revenue as well as the investing of the bank‘s cash and other assets. This helps banks to stay afloat
financially. That is called cash management in banks.
The cash flow statement is the main component of a banking cash flow management. The cash flow
statement comprehensively records all of the organization‘s or banking cash inflows and outflows. It
includes cash from operating activities, cash paid for investing activities, and cash from financing
activities. The bottom line of the cash flow statement shows how much cash is readily available for
an banking .
The cash flow statement is divided into three parts: investing, financing, and operating activities. The
operating part of cash activities is based heavily on the net working capital, which is presented on the
cash flow statement .
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FACETS OF CASH MANAGEMENT
Cash management is 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 firm‘s 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 management‘s considerable time is devoted in managing it. Indecent 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:
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 Optimum Utilization of Operating Cash
Implementation of a sound cash management programmed is based on rapid generation, efficient
utilization 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.
 Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected cash
problem, which it may encounter, thus assisting it to regulate further cash flow movements. Lack of
cash planning results in spasmodic cash flows.
 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.
 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 their inability to remain
liquid. Liquidity has an intimate relationship with efficient utilization of cash. It helps in the
attainment of optimum level of liquidity.
 Profitable Deployment of Surplus Funds

Due to non-synchronization of cash 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.
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 Economical Borrowings
Another product of non-synchronization 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.
Rising of funds at minimum cost is one of the important facets of cash management. The ideal cash
management system will depend on the firm‘s 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.
MOTIVES FOR HOLDING CASH

The firm‘s need to hold cash may be attributed to the following the motives:
The Transactions motive
The Precautionary motive
The Speculative motive
 Transaction Motive
The transaction motive 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 cashis receivedwhen 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, affirm may invest its cash in
marketable securities.
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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 precautionary motive is the need to hold cash to meet contingencies in the future.
It provides a cushion or buffer to withstand some unexpectedemergency. The precautionaryamount 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 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 speculative motives 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 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 p urposes.
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
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CASH COLLECTION INSTRUMENTS IN INDIA
1. The main instruments of collection used in India are: (i) Cheques,
2. (ii) Drafts, (iii) Documentary bills, (iv) Trade bills, and (v) Letter of credit.
Features of instruments of collection in India

INSTRUMENT PROS CONS
3. Cheques  No charge  Can bounce

 Payable through  Collection times can
clearing be long
 Can be discounted after  Collection charge
receipts
 Low discounting
charge
4. Drafts  Payable in local  Cost of collection

clearing  Buyers account
 Chances of bouncing debited on day one
are less
5. 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
6. Trade bills  No charge except  Procedure is relatively

stamp duty cumbersome
 Can be discounted  Buyers are reluctant to
 Discipline of payments accept the due date
on due date discipline
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7. Letter of credit  Good credit control as  Opening charges
goods are released on  Transit period interest
payment or acceptance  Negotiation charges
of bill  Need bank lines to
 Seller forced to meet open letter of credit
delivery schedule  Stamp duty on usance
because of expiry date bills
Table No.3.1- Features of instruments of collection in India
CASH MANAGEMENT SERVICES GENERALLY OFFERED BY BANKS

The following is a list of services generally offered by banks and utilized by larger businesses and
corporations:
 Account Reconcilement Services

Balancing a checkbook 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 company's 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 the end 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.
 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
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employees to send wires and access other cash management features normally not found on the
consumer web site.
 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.
 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.
 Balance Reporting Services

Corporate clients who actively manage their cash balances
usually subscribe to secure webbased reporting of their account and transaction information at their
lead bank. These sophisticated compilations of banking activity may include 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.
 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 not earning sufficient interest, many of these companies have an agreement set with
21
their primary bank, whereby their primary bank uses the Automated Clearing Housetoelectronically
"pull" the money from these banks into a single interest-bearing bank account.
 Lockbox Services
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.
 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 paychecks 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.
• 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 funds.
 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 all
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.
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 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 sent CD-ROMs of
images of their cashed checks.
3.2 OVERVIEW ABOUT BANKING IN INDIA

India cannot have a healthy economy without a sound and effective banking system. The banking
system should be hassle free and able to meet the new challenges posed by technology and other
factors, both internal and external.
In the past three decades, India's banking system has earned several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to metropolises or cities in
23
India. In fact, Indian banking system has reached even to the remote corners of the country. This is
one of the main aspects of India's growth story.
The government's regulation policy for banks has paid rich dividends with the nationalization of 14
major private banks in 1969. Banking today has become convenient and instant, with the account
holder not having to wait for hours at the bank counter for getting a draft or for withdrawing money
from his account.
THE BANKING STURCTURE IN INDIA
24
RESERVE
BANK OF
INDIA
NON
SCHEDULED
SCHEDULE
BANK
BANK
CO-
COMMERCIAL
OPERATIVE
BANK
BANKS
URBAN CO-
PUBLIC PRIVATE FOREIGN REGIONAL
OPERATIVE
SECTOR SECTOR BANKS RURAL BANKS
BANKS
STATE CO-
STATE BANK OLD PRIVATE
OPERATIVE
GROUP SECTOR
BANKS
NATIONALISE NEW PRIVATE

D BANKS SECTOR
REGIONAL
RURAL BANKS
Fig No: 3.1- THE BANKING STURCTURE IN INDIA
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HISTORICAL PERSPECTIVE OF THE TOPIC
BANKS PROFILE
PUBLIC SECTOR BANK (PSBs)
Public Sector Banks (PSBs) are a major type of bank in India, where a majority stake (i.e. more than
50%) is held by the government. The shares of these banks are listed on stock exchanges. There are a
total of 12 Public Sector Banks alongside 1 state-owned Payments Bank in India. Emergence of
public sector banks
The Central Government entered the banking business with the nationalization of the Imperial Bank
of India in 1955. A 60% stake was taken by the Reserve Bank of India and the new bank was named
State Bank of India. The seven other state banks became subsidiaries of the new bank in 1959 when
the State Bank of India (Subsidiary Banks) Act, 1959 was passed by the Union government.
The next major government intervention in banking took place on 19 July 1969 when the Indira
government nationalised an additional 14 major banks. The total deposits in the banks nationalised in
1969 amounted to 50 crores. This move increased the presence of nationalised banks in India, with
84% of the total branches coming under government control
STATE BANK OF INDIA
Founded in 1806, Bank of Calcutta was the first bank established in India and over a period of time
evolved into State Bank of India (SBI). SBI represents a sterling legacy of over 200 years. It is the
oldest commercial bank in the Indian subcontinent, strengthening the nation‟s trillion-dollar economy
and serving the aspirations of its vast population. The Bank is India‟s largest commercial Bank in
terms of assets, deposits, branches, number of customers and employees, enjoying the continuing
faith of millions of customers across the social spectrum.
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Headquartered at Mumbai, SBI provides a wide range of products and services to
personal, commercial enterprises, large corporates, public bodies and institutional
customers through its various branches and outlets joint ventures, subsidiaries and
associate companies.State Bank of India (SBI) is an Indian multinational, public
sector banking and financial services statutory body headquartered in Mumbai,
Maharashtra. SBI is the 43rd largest bank in the world and ranked 236th in the
Fortune Global 500 list of the world's biggest corporations of 2019. A nationalised
bank, it is the largest in India with a 23% market share by assets and a 25% share of
the total loan and deposits market.
SWOT Analysis of State Bank of India
 SWOT Analysis of State Bank of India focuses on (S) Strengths, (W) Weakness,
(O) Opportunities, and
 Threats. Internal Factors in the SWOT Analysis are Strengths and Weaknesses
and External Factors in the SWOT Analysis are Opportunities and Threats.
 SWOT Analysis is a proven management tool that helps organizations such as

State Bank of India (SBI) to assess the market of SBI and its success against rival
companies. State Bank of India (SBI) has been one of the leading Stationery
companies. Around the year 1959, SBI took over 8 state-owned banks and, since
then, has started to develop in the service of citizens at various economic
rates.The following are the
STRENGTHS ANALYSIS OF SBI
 State Bank of India has been ranked in the Fortune Global 500 list.
 SBI is India‟s biggest bank in terms of market share, sales, and reserves.
 According to recent reports, the bank has more than 22141 branches and 58555
ATM‟s.
 The SBI bank is active in 36 countries involved in currency traders around the
world.
 The first-mover edge of commercial banking facilities.
 The bank has recently updated its vision and mission statements indicating an
27
indication of inclination towards new-age banking services.
 The Bank has huge employee base of 257252 employees.
 The SBI Bank has revenue of 143306 Crore rupees (20 billion US Dollars).
 The Government of India is owner of the State Bank of India.
 The Bank has many subisidaries are as follows
 SBI Cards
 SBI Life Insurance
 Jio Payment Bank
 Andhra Pradesh Grameena Bank
 Kavenri Grameena Bank
 Vikas Bank
WEAKNESSES ANALYSIS OF SBI
 There is lack of adequate technology-driven infrastructure relative to private
banks
 The SBI banks pay a large sum on their leased houses.
 Despite the modernization, the bank still conveys the perception of the traditional
bank to new-age clients.
 SBI does not draw corporate payroll accounts, government employee‟s payroll
accounts are now transferred to private banks for ease of service, unlike before.
OPPORTUNITIES ANALYSIS OF SBI
 The merger of SBI with five other banks, namely, the State Bank of Patiala, the
State Bank of Hyderabad, the State Bank of Bikaner and Jaipur, the State Bank of
Travancore and the State Bank of Mysore, is at the approval stage.
 Mergers would result in a rise in market share to protect its number one spot.
 SBI goal to expand and invest in foreign activities due to a strong inflow of
capital from the Asian economy.
 As some of the banking activities are yet to be modernized, there is a greater

opportunity for leveraging the new technology and applications to enhance
customer ties.
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THREATS ANALYSIS OF SBI
 There is Decrease in the Net profit for the year 2010 i.e. 9166.05 to 7.370.35 for
the year 2011.
 Some other Private Banks, such as HDFC AXIS Banks, etc.
 This indicates that the market share of its close rival ICICI is that.
 FDIs permitted in the banking sector was increased to 49%, which is a major
challenge to SBI as citizens continue to turn to international banks for better
banking services facilities and technology. Government banks, such as GNP,
Andhra, Allahabad Bank, and Indian Bank, are coming up.
 A Customer prefer to switch to private banks and financial service providers for
loans and mortgages, asSBI involves strict verification procedures and takes a
long time to process.
4. STATE BANK OF INDIA
State Bank of India is a multinational banking and financial services company based
in India. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. As of December 2013, it had assets of US$388 billion and 17,000
branches, including 190 foreign offices, making it the largest banking and financial
services company in India by assets.
State Bank of India is one of the Big Four banks of India, along with ICICI
Bank, Punjab National Bank and Bank of Baroda.
The bank traces its ancestry to British India, through the Imperial Bank of India, to
the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in
the Indian Subcontinent. Bank of Madras merged into the other two presidencies
banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India,
which in turn became the State Bank of India. Government of India owned the
Imperial Bank of India in 1955, with Reserve taking a 60% stake, and renamed it the
State Bank of India. In 2008, the government took over the stake held by the Reserve
Bank of India.
SBI is a regional banking behemoth and has 20% market share in deposits and loans
among Indian commercial banks
29
CASH MANAGEMENT IN STATE BANK OF INDIA
STATE BANK OF INDIA provides cash management services to Corporate Clients
under the brand name SBI FAST (Funds Available in Shortest Time).
 SBI FAST ensures optimization of collections and payouts while ensuring

predictability in the cash flows.
 SBI FAST ensures getting Funds in time, quick transfers, account reconciliation,
easy disbursements, controlled processes and customized MIS.
 SBI FAST eliminates the inherent delays of the traditional funds transfer
mechanism and enhances liquidity to ensure optimum planning and utilization of
funds.
 SBI FAST also offers File upload facility on our web based portal and provides
complete Host to Host facility (a secure, seamless file transfer facility)
FEATURES & BENEFITS:

 Centralized Control of cash.
 Interest Cost reduction on borrowings.
 Enhanced Liquidity.
 Interchange of Information between Treasury & Operating units.
 Cash forecasting & scheduling.
 Effective control over disbursements.
 Efficient Financial Management.
 SBI FAST Cash Management Services Offerings:
1. COLLECTIONS:
o LOCAL COLLECTIONS: (Cheques/Drafts etc.)
 Collection of instruments tendered at various CMP collection centres. Depending

on the clearing practices prevailing at the various centres (i.e. Day-0, Day-1, or
Day-2), credit is afforded, as mandated, to the client's main account at the pooling
30
centre the same day as the proceeds are cleared.
 Convenient collecting locations across the country with pooling facility at any of
our branches as per client‘s choice, which are physically connected to our central
hub at Mumbai.
 Instruments can be deposited at the collection centers either by their dealers/

distributors/representatives or through couriers as per the arrangement.
 Client is not required to open any account at the Centre from which this facility is
availed.
 Collection of instruments in General/MICR Clearing, drawn on local branch and

drawn on other local SBI Branches.
 No correspondent arrangements. Collections are handled exclusively through our

own network and hence cost effective.
 SBI is the acknowledged leader in the collection services.
 Centralized Reconciliation Support.
o OUTSTATION CHEQUES COLLECTION:
 Outstation Cheques can also be deposited at our CMP Cell branches and we
afford Guaranteed Credit facility with credit available on Day 1 to Day 7.
 Outstation cheques drawn on our own branches are paid the same day at very
concessional charges.
o CASH COLLECTION:
 We also offer the facility of Cash Deposit at our CMP Cell branches on CMP
software which facilitates automatic pooling of funds with MIS.
 Cash pick up facility from client‘s end available at most major centers
o UNCLEARED FUNDS:
 Option of credit against Uncleared Instruments presented in General/MICR or

High Value clearing offered selectively at Bank's discretion.
31
 A nominal limit is required to be set up to take care of returns.
o BALANCE SWEEP:
 Transfer of day-end-balances in collection accounts maintained at various CMP

centers across the country to the pooling account.
 Clients can use the account for crediting local and outstation collections as well
as for meeting payments and the residual balance at the end of the day swept to
the main account.
 Swept balances can be swept back to the respective accounts by reverse sweep at
the beginning of next day.
o DEBIT TRANSFERS:
 Debit Balances in operating accounts, where drawls are permitted up to a pre-

fixed daylight limit, maintained at CMP centers transferred to the main account at
the end of the day.
 The facility dispenses the use of allocated limits and thereby ensures better
control, for the client over debits.
o CUSTOMISED MIS:
 Daily presentation/credit/return reports provided to the representative/dealer at

the local Centre.
 Daily location-wise/product-wise presentation/credit/return reports provided to

the Corporate Office through E-mails.
 Customized weekly/fortnightly/monthly consolidated reports in soft-form,

compatible with the clients accounting system, through E-Mail/ Floppy/CD-ROM
as required, for easier and speedier reconciliation.
 Daily Credit forecast reports through E-Mail.
 Uncluttered/Pure MIS is our USP since the product is operated entirely through
32
SBI‘s own network.
o ELECTRONIC COLLECTIONS:
1) DIRECT DEBIT
 For Collection of invoice payment from Dealers, SIP/Premium etc.
 Payment can be pulled from any account at any of our CBS (12,500).
 Mandate of Account holders required, which is validated by us.
2) RTGS/NEFT RECEIPTS
 Dealer codes are set up by the corporate.
 Funds received through RTGS/NEFT modes are credited to the Corporate pooling
Account.
 MIS is generated giving Dealer Name, Invoice no and amount received.
PRICING
The pricing of the product is competitive but volume driven and depends on the
location, type of facilities and amount of individual instruments.
2. PAYMENTS
o Real Time Gross Settlement

 Inter Bank Product - Settlement through RBI.
 Minimum Transaction Amount Rs.2.0 lac.
 Settlement on the day of transaction.
 Competitive market related rates
 Payment file upload facility available through SBI CMP Portal / Host to Host
Connectivity
33
o National Electronic Fund Transfer
 Inter Bank Product - Settlement through RBI.
 Used for amount less than Rs.2.0 lac.
 Settlement on the same day or next day.
 Any NEFT enabled Bank anywhere.
Connectivity
o Electronic Clearing Scheme

 Electronic mode of payment at all 72 ECS centers and across India through
NECS for banks on corp. Banking.
 Useful for payment of interest, dividend, salary, pension to a large number of

investors/ shareholders/ employees/ ex-employees.
Connectivity
o Direct Credit
 Intra-Bank of SBI for electronic payment that uses ' Core Power '.
 Settlement online & available between CBS branches (Over 12,500 & growing).
 Can be used for payment for Purchases, Rent, Incentives, and Salaries etc.
Connectivity
o DRAFTS
 Meets Bulk Drafts requirement on day '0'.
 Facsimile signature enabled up to Rs.5.0 lacs.
 Printed with forwarding letter also.
34
 Provision for direct dispatch to the beneficiary from our office.
Connectivity
o Multi City Cheques

 Client's facsimile signatures affixed for amount up to Rs.5 lacs.
 Printed with customized forwarding letter.
 Provision for direct dispatch to the beneficiary.
 Maximum amount per cheque Rs.10 lacs.
 Payable at all CBS branches of the Bank.
Connectivity
o Dividend Warrants
 All electronic and paper modes handled with widest reach.
 ECS – Across all 72 RBI/SBI/Other Bank Centers.
 RTGS/NEFT – Across all RTGS/NEFT enabled banks branches.
 Direct Credits – Across all branches of SBI.
 Dividend Warrants Payable at par at all 12500 plus branches
 Validation of Instrument No. & amount at the time of payment.
 Drafts issued at any of the 12500plus branches.
 Regular paid / unpaid status provided.
35
PRIVATE SECTOR BANK (PSBs)
Private banking consists of personalized financial services and products offered to the
high-net-worth individual (HNWI) clients of a retail bank or other financial
institution. It includes a wide range of wealth management services, and all provided
under one roof. Services include investing and portfolio management, tax services,
insurance, and trust and estate planning. While private banking is aimed at an
exclusive clientele, consumer banks and brokerages of every size offer it. This
offering is usually through special departments, dubbed "private banking" or "wealth
management" divisions. Private banking consists of personalized financial and
investment services and products from a dedicated personal banker. Private banking
clients typically receive discounts or preferential pricing on financial products.
However, the range of products and investment expertise offered by a private bank
may be limited compared to other providers.
HDFC BANK
HDFC Bank Ltd is one of India's premier banks. Headquartered in Mumbai HDFC
Bank is a new generation private sector bank providing a wide range of banking
services covering commercial and investment banking on the wholesale side and
transactional/branch banking on the retail side. As of 30 September 2017 the bank's
distribution network was at 4729 branches and 12259 ATMs across 2669 cities and
towns. HDFC Bank also has one overseas wholesale banking branch in Bahrain a
branch in Hong Kong and two representative offices in UAE and Kenya. The Bank
has two subsidiary companies namely HDFC Securities Ltd and HDB Financial
Services Ltd. In March 1995 HDFC Bank launched Rs 50-crore initial public offer
(IPO) (5crore equity shares at Rs10 each at par) eliciting a record 55 times
oversubscription. HDFC Bank was listed on the Bombay Stock Exchange on 19 May
1995. The bank was listed on the National Stock Exchange on 8 November 1995.In
the year 1996 the Bank was appointed as the clearing bank by the NSCCL.
36
SWOT Analysis of HDFC Bank
STRENGTHS ANALYSIS OF HDFC BANK
 HDFC bank is the second largest private banking sector in India having 2,201
branches and 7,110 ATM‟s.
 HDFC bank is located in 1,174 cities in India and has more than 800 locations to
serve customers through Telephone banking.
 The bank‟s ATM card is compatible with all domestic and international
Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express.
This is one reason for HDFC cards to be the most preferred card for shopping
and online transactions.
 HDFC bank has the high degree of customer satisfaction when compared to other
private banks.
 The attrition rate in HDFC is low and it is one of the best places to work in
private banking sector.
 HDFC has lots of awards and recognition, it has received „Best Bank‟ award
from various financial rating institutions like Dun and Bradstreet, Financial
express, Euro money awards for excellence, Finance Asia country awards etc.
 HDFC has good financial advisors in terms of guiding customers towards right
investments.
WEAKNESSES ANALYSIS OF HDFC BANK
 HDFC bank doesn‟t have strong presence in Rural areas, where as ICICI bank its
direct competitor is expanding in rural market.
 HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard
core loyal in terms of banking services.
 HDFC lacks in aggressive marketing strategies like ICICI
 The bank focuses mostly on high end clients
 Threats in the SWOT Analysis of SBI – SWOT Analysis of State Bank of India.
 Net profit of the year decreased from 9166.05 in the year 2010 to 7.370.35 in the
37
year 2011.This indicates that the market share of its close rival ICICI is that.
Other private banks, such as HDFC, AXIS bank, etc
 FDIs permitted in the banking sector was increased to 49%, which is a major
challenge to SBI as citizens continue to turn to international banks for better
banking services facilities and technology.
 Other government banks, such as GNP, Andhra, Allahabad Bank, and Indian
Bank, are coming up.
 Customers prefer to switch to private banks and financial service providers for
loans and mortgages, as SBI involves strict verification procedures and takes a
long time to process.
OPPORTUNITIES ANALYSIS OF HDFC BANK
 HDFC bank has better asset quality parameters over government banks; hence the
profit growth is likely to increase.
 The companies in large and SME are growing at very fast pace. HDFC has good
reputation in terms of maintaining corporate salary accounts.
 HDFC bank has improved its bad debts portfolio and the recoveries of bad debts
are high when compared to government banks.
 HDFC Bank has very good opportunities in abroad.
THREATS ANALYSIS OF HDFC BANK
 HDFC‟s nonperforming assets (NPA) increased from 0.18 % to 0.20%.
Though it is a slight variation it‟s not a good sign for the financial health of the
bank.
38
 The Non-banking financial companies and new age banks are increasing in India.
 The HDFC is not able to expand its market share as ICICI imposes major threat.
 The government banks are trying to modernize to compete with private banks.
 RBI has opened up to 74% for foreign banks to invest in Indian market.
HDFC BANK (HOUSING DEVELOPMENT FINANCE

CORPORATION LIMITED)
The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an ‗in principle‘ approval from the Reserve Bank of India (RBI) to set
up a bank in the private sector, as part of RBI‘s liberalization of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of ‗HDFC
Bank Limited‘, with its registered office in Mumbai, India. HDFC Bank commenced
operations as a Scheduled Commercial Bank in January 1995.
On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank
was formally approved by Reserve Bank of India to complete the statutory and
regulatory approval process. As per the scheme of amalgamation, shareholders of
CBoP received 1 share of HDFC Bank for every 29 shares of CBoP.
The amalgamation added significant value to HDFC Bank in terms of increased
branch network, geographic reach, and customer base, and a bigger pool of skilled
manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited

(another new private sector bank promoted by Bennett, Coleman & Co. / Times
Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the
first merger of two private banks in the New Generation Private Sector Banks. As per
the scheme of amalgamation approved by the shareholders of both banks and the
Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank
for every 5.75 shares of Times Bank.
HDFC Bank is headquartered in Mumbai. As of December 31, 2013, the Bank‘s

distribution network was at 3,336 branches in 2,104 cities. All branches are linked on
39
an online real-time basis. Customers in over 1397 locations are also serviced through
Telephone Banking. The Bank‘s expansion plans take into account the need to have a
presence in all major industrial and commercial centers, where its corporate customers
are located, as well as the need to build a strong retail customer base for both deposits
and loan products. Being a clearing / settlement bank to various leading stock
exchanges, the Bank has branches in centers where the NSE / BSE have a strong and
active member base.
The Bank also has a network of 11,473ATMs across India. HDFC Bank‘s ATM
network can be accessed by all domestic and international Visa / MasterCard, Visa
Electron / Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.
CASH MANAGEMENT SERVICES PROVIDE BY HDFC BANK

Cash management is the stewardship or proper use of an entity‘s 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. At the same time the organizations have
the responsibility to use timely, reliable and comprehensive financial information
systems.
Cash management helps the organization in:

 Eliminating idle cash balances.
 Monitoring exposure and reducing risks.
 Ensuring the timely deposit of collections
 Proper timing of the disbursements.
Cash Management Services (CMS) is one of our thrust areas. Today, we have large
number of satisfied CMS customers, many of whom are in the top segment of the
Indian Corporate and Public Sectors. This has been a result of a robust, end to end
cash management product which offers innovative and reliable solutions by
combining an efficient collections and disbursements product, backed by state-of-the-
art systems to ensure customized delivery. The bank has constructed a wide range of
CMS products covering collections and disbursements of operating flows, as well as
40
specialized cash flow streams such as rights/public issue collections, dividends,
interest/principal repayments, excise and sales tax payments etc. We operate out of a
large and expanding network of over 3,200 outlets across the country. This is the
largest network of online, electronically linked branches in the country. This provides
us with a clear competitive advantage over the rest of the competition, which naturally
translates into a lower cost and faster credit to corporates. In addition to our network,
we have an extensive correspondent banking arrangement, which allows us to offer
you Cash Management Services (CMS) - over 1500+ locations covered for collections
and over 2,000+ locations for payments.
Benefits to the Corporate:
If your organization is multi-location and managing outstation funds collections and

payments, it can often be time consuming and expensive. Delay of days or even
weeks in realizing outstation cheques, constant tracking and follow-up to transfer
funds from outstation collection accounts, uncertainty and delays regarding
information on the fate of cheques etc. are common.
At HDFC Bank we offer a comprehensive range of collections and payments
solutions under our Cash Management Services (CMS) umbrella to meet your needs
and put you in control of your cash position.
HDFC Bank's Cash Management Services will enable you to:
 Lower Interest Costs
Our collection services enable you to receive funds in your main (concentration)
account with the bank with a minimum transit time thereby reducing interest costs.
 Improve liquidity
Saving on transit time enables you to realize cheques and use funds earlier and
therefore gives you an enhanced liquidity.
 Better Accounting and Reconciliations
41
Detailed information on cheques deposited are made available on a daily/weekly
basis/periodically thus simplifying accounting, reconciliation and query resolution.
HDFC Bank can also provide customized MIS as per your requirements.
 Achieve Overall Operational Convenience
HDFC Bank's Collection Services enable you to derive convenience in banking

operations thereby facilitating management of cash positions through a central
treasury. Also, the same may be used for improved control over different business
segments. The advantages of our collection products can also be availed without
opening a Current Account with HDFC Bank.
 Interconnectivity
Experience a real time online banking on E-Net with your CMS account. E-Net is a
Internet based software, which allows you to view current a/c balances, download
statements, view CMS collections, effect payments/receive payments online, plus a
host of other activities.
COLLECTION SERVICES
HDFC Bank's Collection Services is aimed at ensuring quick realization of local and
outstation cheques and providing the funds in a central collection account. This
enables you to manage your funds flow position most effectively from a central
location. This service can be availed with/without a current account with HDFC Bank.
HDFC Bank provides the following Collection Products:

 Local Cheque Collections
This product provides quick realization of local cheques deposited at the same
location. This product is available at all locations of HDFC Bank ("SPEED") and over
18 locations of our correspondent Bank ("RAPID").
42
 Outstation Cheque Collections
This product enables you to deposit outstation cheques drawn on any HDFC Bank
location at any HDFC Bank location ("SPRINT"). Similarly, cheques drawn on over
300 locations of our correspondent bank ("EXPRESS") can be deposited at any
HDFC Bank locations.
 Transfer Cheque Collections
This product provides quick realization of local/outstation cheques drawn on any

branch of HDFC Bank Ltd. This product is available at all locations of HDFC Bank
("HDFCTRF") locations.
 Clean Collections
Cheques drawn on any locations which are not covered by HDFC Bank or our
correspondent bank are also collected at any of our locations and proceeds credited to
your account as soon as credit is received by HDFC Bank.
HDFC Bank's comprehensive MIS includes:
 Daily report of deposits made at various locations
 Location-wise report
 Credit forecast report
 Monthly cumulative report - date-wise/location-wise
 Monthly charging statement
 Monthly cheque return statement
 The customized reports as per mutual agreement
43
PAYMENT SERVICES
HDFC Bank can structure a number of payment products to suit your various needs.
Structures could include:
 Payable at Par Cheque Book
This product enables you to issue local cheques at all HDFC Bank branch locations
through one cheque book thereby eliminating the hassles of obtaining demand drafts
or opening current account at each location.
 At Par facility for Statutory Payments
This facility can be utilized by you to make various statutory payments such as
dividend, interest/redemption of debentures, IPO refunds etc.
This facility is available for 3,200+ HDFC Bank locations.
This product includes the following features:
 HDFC Bank branch locations - cover over 98% of shareholders/beneficiaries

for most of our clients. Hence reconciliation, query resolution and pricing are
superior.
 There is no dependency on correspondent bank due to wide coverage of HDFC

Bank.
 The maximum limit on warrant can be mutually agreed upon - substantially

reducing draft costs and efforts.
 It has the ability to meet your requirement of a large number of drafts in a short
time at very competitive rates.
 An at par cheque book is provided on branch locations, after revalidation

thereby eliminating the need for Demand Drafts (DD) on branch location
44
 Pay Quick
This product caters to your requirement of large volume of Demand Drafts/Pay orders at
over 3,200 HDFC Bank locations
.
Under correspondent arrangement, HDFC Bank issues drafts at more than 11,000 locations.
This product includes the following features:
 Option to forward data in soft copy form (floppy) in a secure environment.
 New age data transfer facility i.e. file transfer through HDFC Bank eNet
banking.
 Quick & easy data transferability from your office to HDFC Bank.
 Multiple payment instructions through one file.
 Exclusive advice template with maximum coverage of details.
 Upload option for bulk issuance resulting in quick and error free delivery.
 Payment instrument to include payment details.
 Facility to mail to beneficiary directly. Also the committed courier turnaround

time enables you to make payments as close as possible to the payment date -
resulting in additional cost savings.
 Various value added MIS & exclusive report.
 One Stop dedicated Service Desk at our Centralized Cash Management

Operations Unit for prompt attention to your queries.
 Extensive coverage of Pay order printing - over 800 locations.
 Status of DD - paid / unpaid - can be provided on HDFC Bank location on a

case to case basis.
45
 ECS Credit & Debit
RBI offers Electronic Clearing System (ECS) for faster collections (ECS Debit) and
payments (ECS Credit).
ECS credit can be utilized for payments like interest /dividend etc. ECS Debit is
normally used for collection which include payment of utility bills (electricity,
telephone), EMI of loans etc.
ECS credit/debit facility can be availed at all available locations
Following broad steps are common for both ECS Credit and ECS Debit:
 The company needs to obtain a mandate from the beneficiary/payee which

would provide all the details as stipulated by Reserve Bank of India.
 The Company will have to route the ECS through a Sponsor Bank. The
Company is required to submit a E1 form to get a User code from RBI through
the Sponsor Bank. One user code is obtained for ECS at all RBI locations.
 The company then submits the data in soft form to affect the ECS. The data is
provided in separate files sorted city wise.
 The data has to be provided to the Sponsor Bank at least 5 working days before
the settlement date. The settlement date is the date on which the account of the
beneficiary will be credited (ECS Credit) or payee's account will be debited
(ECS Debit).
 ECS Credit: Returns turnaround time varies from T+1 to T+3 after the
settlement date for ECS credit, RBI provide a list of unaccredited / returned items.
 ECS Debit: Returns turnaround time vary from T+1 to T+3 after the settlement
date for ECS Debit, RBI provides the final list of accounts debited and as per RBI
regulations, no late rejects are accepted by RBI.
 NECS Credit: It is a centralized process and turnaround time for data

submission is 2 days prior to settlement date and Returns is provided on next
working day of the settlement date. All the documentation is similar to ECS credit
and only single E1 form is required.
46
 RECS Credit & Debit: This is region wise processing and turnaround time for
data submission is 2 days prior to settlement date. Returns are provided on next
working day of the settlement date. All the documentation is similar to credit &
debit and only single E1 form is required at a region.
(The above are indicative steps and schedules, as per current rules. Please refer to
guidelines issued by RBI for more detailed and exact schedules).
1. STANDARD CHARTERED BANK

Standard Chartered Bank was formed in 1969 through the merger of two separate
banks, the Standard Bank of British South Africa and the Chartered Bank of India,
Australia and China.
These banks had capitalized on the expansion of trade between Europe, Asia and
Africa.
The Chartered Bank

 The Chartered Bank was founded by James Wilson following the grant of a Royal
Charter by Queen Victoria in 1853.
 The bank opened in Mumbai (Bombay), Kolkata and Shanghai in 1858, followed
by Hong Kong and Singapore in 1859.
 The traditional trade was in cotton from Mumbai, indigo and tea from Kolkata,
rice from Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and
silk from Yokohama.
 The bank played a major role in the development of trade with the East following
the opening of the Suez Canal in 1869 and the extension of the telegraph to China
in 1871.
 In 1957 Chartered Bank bought the Eastern Bank, together with the Ionian Bank's
47
Cyprus Branches and established a presence in the Gulf.
The Standard Bank

 The Standard Bank was founded in London in 1858 by John Paterson from the
Cape Colony in South Africa, and started business in Port Elizabeth in the
following year.
 The bank was prominent in financing the development of the diamond fields of
Kimberley from the 1870s. It later extended its network further north to the new
town of Johannesburg when gold was discovered there in 1886.
 The bank expanded in Southern, Central and Eastern Africa and had 600 offices
by 1953.
 In 1965, it merged with the Bank of West Africa, expanding its operations into
Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
 In 1987 Standard Chartered Bank sold its stake in the Standard Bank, which now
operates as a separate entity.
 Standard chartered bank one of the world's most international banks, with over
1,600 branches, offices and outlets in 70 countries across the globe.
 They are dealing in india for over 160 years.
CASH MANAGEMENT IN STANDARD CHARTERED BANK

Standard chartered bank cash management services include local and cross border
payments, collections, information management, account services, liquidity
management and investment services for both corporate and institutional clients.
PAYMENT SERVICES
Standard chartered bank can help customer to save time and money by reducing
processing costs while providing a value-added service to customers suppliers.
48
Comprehensive Payments Solutions
Standard Chartered's payment solutions can help to reduce your overall processing
costs – for domestic and global payments – saving you time and money while
providing a value-added service to customer suppliers.
Our comprehensive payment services will be tailored to enhance customer accounts
payable process. This will eliminate many manual tasks involved in making
payments, allowing you and your staff to spend more time focusing on your core
business needs.
Standard chartered bank understand that most of customer effort in the payment cycle
is directed towards initiation; difficulties in the subsequent reconciliation process can
jeopardize the whole process.
With Straight 2 Bank Channels you can now track the exact status of each payment
through timely reports that can be uploaded seamlessly into your company's system.
Standard chartered bank offer a full range of payment capabilities including:
 Cross-border payments
 Telegraphic transfers
 International bank Cheques / Drafts
 Domestic payments
 Local bank Cheques / Drafts / Cashiers order
 Corporate cheque
 Direct credits – ACH / Credit vouchers
 Local bank transfers (RTGS)
 Book transfers (account transfer between Standard Chartered branches)
 Payroll
49
Figure No. 3.2- Standard Chartered Payment Service
Payments System Integration

Straight2Bank channels caters to different levels of customer payment sophistication,
including simple online transaction via Internet, bulk file payment via internet or lease
line, and the ability to send industry standard messages directly to the bank. Standard
chartered bank in-country specialists are available to help customize a solution that
enables you to manage customer working capital in a more efficient manner.
COLLECTION SERVICES
Comprehensive receivables management solution
Standard Chartered understands that operating and sustaining a profitable business
these days is extremely tough. Your key business concerns could be:
 Receivables Management – ensuring receivables are collected in an efficient and

timely manner to optimize utilization of funds
 Risk Management – ensuring effective management of debtors to eliminate risk

of returns and losses caused by defaulters and delayed payments
50
 Inventory Management – ensuring efficient and quick turnaround of inventory to
maximize returns
 Cost Management – reducing interest costs through optimal utilization of funds
Standard chartered bank solution

The Standard Chartered Collections Solution leverages the Bank's extensive regional
knowledge and widespread branch network across our key markets to specially tailor
solutions for customer regional and local collection needs.
This Collections Solution, delivered through a standardized international platform,
has the flexibility to cater to customer local needs, thus enabling you to meet
customer objectives of reducing costs and increasing efficiency and profitability
through better receivables and risk management. The key components of our solution
include the following:
Extensive Clearing Network

Standard chartered bank extensive branch network, complemented by standard
chartered bank correspondent banks' network, provides customer with a wide
coverage of clearing locations to ensure customer get the benefit of early availability
of funds. This is further enhanced by our cheque purchase and guaranteed credit
services.
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 utilized to their maximum advantage. customer need a
partner bank that can help you:
 Maximize interest income on surplus balances; minimize interest expense on

deficit balances for domestic, regional and global accounts
 Minimize FX conversion for cross-currency cash concentration
 Customize liquidity management solutions for different entities in different

countries
 Centralize information management of consolidated account balances
51


With standard chartered bank global experience and on-the-ground market
knowledge, Standard Chartered will help customer define an overall cash
management strategy which incorporates a liquidity management solution that best
meets customer needs.
Fig 3.3: Standard Chartered's liquidity management propositions
CLEARING SERVICES
Making the right connections for financial institutions
With increasing business globalization, customer banking network may not have
sufficient reach. Customer may not want to put in the extra infrastructure or resources
to expand customer network but still want to ensure clients' transactions are serviced
efficiently. Clearing is one of the important services in which customer bank would
need support to facilitate clients‘ smooth international trade and cross-border
transactions.

Standard Chartered's international network and multi-currency capabilities are well
placed to provide customer with a seamless service for all your clearing requirements
52
worldwide. Standard chartered bank network extends across Africa, the Middle East,
South Asia, Latin America, the USA and the UK. You can count on our over 150
years of on-the-ground experience to tailor a clearing solution that meets customer
needs. Standard Chartered is a correspondent banking partner you can trust to make
this potentially complicated process much easier for customer.
Standard chartered bank tailor clearing solutions to address customer specific needs
whether in one or multiple countries, or to complement our other services.
Standard Chartered offers "Best in Class" technology and processes in standard
chartered bank clearing systems.
With the modest beginning in 1972 in the co-operative field, the dynamism infused by
the Board of Directors, unflinching loyalties of clientele and devotion of staff has
propelled the sound foundation of The TJSB Sahakari Bank Ltd (TJSB) and has
emerged as one of the leading multi-state scheduled co-operative Bank in the country.
TJSB presently is catering to the needs of society through a close network of 77
Branches and 1 Extension Counters spread all over the city of Thane, Mumbai, Navi
Mumbai, Nasik, Pune, Satara, Aurangabad, Kolhapur, Nagpur, latur, goa and
Karnataka. All these branches have made remarkable progress on all fronts in all these
years.
CASH MANAGEMENT IN THANE JANATA SAHAKARI BANK LTD.

Generally cash management in banks done in two ways:
 Actual transfer of cash among branches
 Proper management of surplus cash
 Interbank transfer of cash in TJSB
Guideline and system for effective cash management
 in TJSB every branch has maximum retention limit i.e. amount of cash every branch
can hold with them, this limit can decided by estimated transaction takes place in
particular branch i.e. as per inflow and outflow of cash in that branch.
53
 In any branch of TJSB, retention limits decided as per business mix by board
authority, maximum retention limit for any branch should not exceed 1% total
deposits and advances.
 It is necessary to run the software/programmed installed at cash pool regarding daily

cash balance of all branches. After running the said software programmed will show
the daily current balance at the time of running the software programmed along with
the receipt & payment and cash retention limit of the respective branch at the time of
running the same.
 It is necessary to take into account each branch‘s cash position & cash limit while
managing the daily cash requirement. Many of the branches are not indeed of cash
viz-a-viz they are having surplus cash which they need to deposit with the cash pool
where as some of the branches have to fulfill their cash requirement daily or on
alternate days. The cash pool has to fulfill all the cash needs as & when necessary.
 The corporate office has decided the limit of branches which also includes the ATM
cash. Also, likewise cash pool, the branches have also to run the
software/programmed in respect of daily cash balance and closely monitor that
whether the cash limit of their respective branch do not exceed.
However at present while running the said programmed, the ATM cash is not shown
separately in the said programmed. The official have to keep record in the register
maintained at the cash pool by telephonic enquiry with the branches volume of
average daily cash they require for ATM transactions which enables the cash pool to
take into account the daily cash requirement of the branches. The total daily cash
required for the ATM transaction and across the counter is to be considered while
managing cash and the branch heads should be communicated asked to deposit the
excess cash if any, with the cash pool.
 On 7th & 10th of every month on which generally the salaries of the customer are
being credited at the branches and so also, the huge withdrawals from the customers
takes place on the said dates which results into increase in daily cash requirement up
54
to Rs 50 lacs to 70 lacs. The cash pool has to provide this cash requirement to the
branches. This cash requirement gets reduced after15th of every month.
 It is the duty & responsibility of the cash pool to bring down cash requirement by Rs
1.50 crores to Rs.2 crores than the total prescribed cash limit after 15th to 30th of
every month.
 On Saturday, many of the branches in thane city function during 9 a.m. to 12.15
afternoon. As such cash pool should provide the cash on Sunday only to local
branches and cash should be provided to the branches such as, Airoli and Vashi on
Friday itself and not on Saturday.
 The cash pool should ask telephonically to the branches at western suburbs about their
cash requirement or deposit of excess cash if any and accordingly cash should be
provided or to be carried out for depositing the same with the cash pool. This will
enable the cash pool to manage the carrying of cash on the same day only.
 Cash pool can easily find out the exact daily cash requirement of the branches by
running the above software. While managing daily cash requirement, the cash pool
should ask telephonically the branches during 7 pm to 7.30 p.m. about the exact cash
requirement of their respective branches and note the said into their diaries. To keep
the balance between the required / excess cash the cash pool should inform daily to
the accounts department of the corporate office to enable them to issue the cheque for
withdrawal from the state bank of India. The cash pool should maintain their total
cash limit prescribed by proper co-ordination & communication with the branches.
 As per existing practice, the cash pool withdrew the required cash from the state bank
of India as & when necessary. It is the duty & responsibility of the manager and all
the official of the cash pool to maintain relationship with the official of the state
bank of India, their cash department in charge, subordinate staff etc. this will enable
the cash pool to obtain new notes in required denomination from both the above SBI
branches. It is mandatory for every bank to affix the round seal of the respective
branch on each soiled note while depositing the soiled cash with SBI on and after 10th
55
every month the cash pool should collect the soiled cash along with the letter
addressed to bank where the soiled cash is to be deposited as per the norms prescribed
in the clean note policy of the RBI. A copy of the said letter should be kept at the
respective branches for record purpose.
 The cash pool should ensure that the said cash is deposited with the SBI, TCC branch
by the accounts department of the corporate office and the acknowledgement of the
same & the counter foil number should be sent to the accounts department on same
day and the zerox copy of the same should be kept on record of the cash pool. As it is
mandatory to follow this procedure during 11 th to 20th of every month. The cash
pool scrupulously adhere the same and the soiled cash should not be kept in the
custody of the cash pool for more than two days.
 Cash pool officials should submit the letter of intimation one & half month in advance
for denomination wise cash requirement of Rs 25 cores during the festivals seasons,
especially at the time of Ganpati and Diwali to the manager currency cash ,HDFC
bank , kamal mill compound, Wadala, Mumbai so also such denomination wise letter
of intimation for Rs 20 crores should be submitted to the SBI, TTC one month before
the festival season start.The cash pool should ensure that confirmation for collection
of the cash the cash pool in charges of respective banks three days before Ganpati &
Diwali to enable the cash pool official to distribute the same to the branches.
 For example, maximum retention limit for Noupada branch of TJSB is 75 lakh this is
a industrial area where need for cash is maximum due to business transaction,
whereas for thane east branch maximum limit is 30 lakh as there are less transaction.
56
4 . DATA ANALYSIS AND INTERPRETATIONS
4.METHOD OF DATA COLLECTION

Data is collected through the questionnaire. 12 Question were distributed over all
banks.
QUESTIONNAIRE
I am Ms. Sangeeta Vishwakarma 3th semester MCOM (Accounting &
FINANCE) in Vidyalankar school of Information technology , I am working on a
project titled ―CASH MANAGEMENT IN BANKING SECTOR”.
In this regard I request you to spend your valuable time in filling this questionnaire
(Tick the appropriate box). This information will be used only for academic purpose
and will be kept confidential.
INSTITUTIONAL INFORMATION
1. Name of your bank:
2. Please indicate the name of Name:

the contact person for this Age:
questionnaire Sex:
Occupation:
Education:
Married status:
3. To which of the following o Public sector bank
types of banks does your bank
belong?
o Private sector bank
o Foreign Bank
o Co-operative bank
Table No. 4. Institutional Information
57
Q1.HOW OFTEN DOES BANK UNDERGO RECONCILIATION OF ITS TRANSACTION.
DAILY 20
MONTHLY 37
WEEKLY 22
FORTNIGHTLY 14
TOTAL NO. OF PEOPLE 93
RESPONSE OF PEOPLE IN PERCETAGE
15% 21%
Daily
24%
Monthly
Weekly
40% Fortnightly
Fig. No. 4.1: Responses of people in percentage
ANALYSIS OF THE ABOVE DIAGRAM

At the end of every fiscal week,month and quarter or fortnightly , it is good practice
to reconcile there transation , after reconcile,we verify all that every transaction sums
to the correct ending account balance.
58
It has been observed that approximately 20 Banks are using the daily reconciliation
transaction, around 37 of banks are using monthly reconciliation their transaction and
only 22 and 14 of bank are using Weekly & fortnightly bank reconciliation of their
transaction . It also shows that Monthly have the highest Bank position to
reconciliation of their transaction.
Q2. WHAT ARE THE STEP TAKEN BY THE BANK TO AVAID FINANCIAL RISK .
MONIETOR THE EXCHANGE RATE 22
CHECK ACCURACY IN INTEREST 34
RATE CALULATION
MONIETOR STOCK COMMODITY 20
PRICE
ALL OF THE ABOVE 18
RESPONSES OF PEOPLE IN PERCENTAGE
19% 24% Monietor the exchange rate
Check accuracy in interest

21% ratecalulation
monietor stock commodity
36% price
all of the above
59
From the above data it is clear that around 22 bank have to monitor the exchange rate
to avoid financial risk for out off 34 bank for avoiding financial risk to checking
accuracy in interest rate calculation,20 bank monitor the stock commodity price and
18 bank take all the above procedure to avoid finanacial risk.
Q3. FORCASTING THE CASH NEEDS FOR BUSINESS IS ESSENTIAL FOR MANAGING CASH
FLOWS .
YES 60
NO 35
37%
yes
63% No
60
In the above chart 63 bank given the option for forcasting is important for managing
the cash , so that it is helpful for business man need cash in the future , there is banefit
for forcasting cash ,for business purpose ,after in the above only 35 of bank doesnt
follow to forcasting the cash .
Q4. WHAT ARE THE PRINCIPLE OF CASH MANAGEMENT.

Complete Visibility 24
Reporting Modules 30
Integrated Service 27
All of the above 14
15%
25%
Complete Visibility
28%
Reporting Modules
32%
Integrated service
All of the above
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From the above analysis this are the principle of cash management to maintain cash,
Out off 24 of bank have the principle of complete visibility, 30 of bank having the
principle of reporting modules .27 bank have to managed integrated service . In this
14 all bank have principle Authority to managed cash management .
Q5. .WHAT IS THE RISK ASSOCIATED WITH IN CASH FLOW POSSITION OF

THE BANK.
Low 22
Moderate 50
High 21
22% 24%
Low
Moderate
High
54%
.
62
Banks in the process of financial intermediation are confronted with various kinds of
financial and non-financial risks viz., credit, interest rate, foreign exchange rate,
liquidity, equity price, commodity price, legal, regulatory, reputational, operational,
etc. These risks are highly interdependent and events that affect one area of risk can
have ramifications for a range of other risk categories. Out off the above chart 22
bank have to associates Low risk ,50 to 21% bank associates Moderate or hight risk .
Q6. HOW MANY NUMBER OF PEOPLE TAKE THE ADVATAGE OF CASH MANAGEMENT
FACILITY.
10% 8
30% 38
60% 36
80% 12
13% 9%
10%
40% 30%
38%
60%
80%
63
There are the number of people take the Cash management facility, in that 8 bank take
the 9% of cash management facility and 38 bank take the 40% of cash management
facility in that 36 or 12 bank take 38% and 13% cash management facilty.
Q. 7. IS THERE A PARAMETER TO CHECK CASH DEFICIT OR CASH SURPLUS

YES 59
NO 32
35%
YES
65% NO
64
A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities
exceed assets in a particular year.
In that 65% of bank are using a parameter check cash deficit or that are 35% people
don‘t know the financial position of banks so that they are not aware about the
parameter
Q.8. HOW DOES THE BANK MANAGE IDLE CASH

By Investing 21
By Offering Loan for interest 37
By Both 31
By None of the above 6
Responses of people in percentage
6%
22%
33% By Investing
By Offering loan for interest
Both
39% None of the above
65
The bank manage idle cash for depositing it in a bank account , either a checking or a
saving account, idle cash use for either investing in an instrument
In the above chart 21 Bank Manage Idle cash for investing money in the bank and
37 bank manage idle cash for offering loan for interest ,In bank giving 31 both
investment or offering loan for interest for managing cash ,in that 6 of bank doenot
manage idle cash .
Q.9. HOW MUCH OPTIMUM CASH BALANCE MAINTAINANCE .

Cash Forcast 15
Cash Budget 40
Using tools for cash Analysis 29
All of the above 11
12% 16%
Cash Forcast
30%
Cash Budget
42% Using tools for cash Analysis
All of the bank
66
Without monitoring your cash, we can not measure it, invest it, borrow it, and collect it—
you can cheat yourself out of extra profits or even avoid trouble with creditors and
bankruptcy, The main objective of cash management is an optimal cash balance, proportion
so that the company has the ability to invest the excess cash for a return [profit] and at the
same time have sufficient liquidity for future needs. In that 15 bank have to forcast bank
,40 bank can focus on cash budget,29 bank using tools for managing cash analysis ,11
bank managed all of this technic
Q.10 WHAT FACTORS ARE CONSIDERED FOR FINAL SELECTION OF
REVEANUE FOR INVESTING CASH BALANCE
Return 17
Risk 31
Liquidity 32
Legal 13
RESPONSES OF PEOPLE IN
PERCENTAGE
14% 69%
return
risk
35%
13% Liquidity
Legal Requirement
67
The objective of cash management requires the people to think about the possibility of
investing the excess cash balance on short term basis. 69 bank giving their opinion for
inveting cash for highter the return better the investment,13 bank given opinion to invest in
risk ,high return investment involve high risk ,8 bank Liquidity associated with the
investment opportunity becomes an important criteria.7 bank Sometimes organizations
need to fulfill some legal formalities before considering any investment portfolio.
Q.11 WHAT IS THE PURPOSE OF CASH MANAGEMENT
Eliminate Idle cash Balance 13

Deposit Collection Timely 36
Properly Time Disbursement 32
All the above 14
15% 13%
To eliminate idle cash balance

To Deposit collection timely
34% 38% To Properly time disbursement
all above
68
In day-to-day life managing cash inflows and outflows is more important for running
business . ultimate goal of cash management is to maximize liquidity and minimize
the cost of funds,The main Purpose of cash management to eliminate idle cash
balance ,13 bank managed idle cash , 36 bank do collection on timely , 32 bank do
properly time disbursement ,14 bank do all this function to managed cash properly
Q.12 WHAT IS THE INSTRUMENTS FOR COLLECTING CASH

Cheque 28
Demand Draft 24
Documentory bills 22
Trade Bills 13
Letter of Credit 7
8%
30%
24%
Cheque
Demand Draft
Trade Bills
14% Documentory
24% Letter of credit
69

Most of the peoples accept premium in the form of cheque as it’s a safer instrument
than cash and is easily handled as compared to demand draft bank can provide
various cheque collections options to the peoples. diffrence is, check will be issued
by an account holder and whereas DD can be issued by a banker only. Cheque may
get rejected due to lot many reasons....but DD will not get rejected if u present. A
Bank Guarantee is similar to a Letter of credit in that they both instil confidence in
the transaction and participating parties.in that 28 banks opinion to collect check ,
24 & 22 banks collect demand draft , documentary bill, 13 & 7 bank collect trade bill
and letter of credit .
SECTION IV
CONCLUSION AND SUGGESTIONS
70
4. FINDINGS
 These are some key points which analyzed while studying this project which reflects
some major factors about cash management of banks as follows: bank manages its
daily requirement of CRR as per guidelines of RBI every day. Every day it calculates
its CRR requirement and try to maintain this requirement as per norms of RBI, if there
is shortfall of cash it borrow through CBLO and vice versa.
 It doesn‘t maintain more cash as CRR, it try to avoid cash remain ideal. Bank
purchase government securities according to the availability of funds, prevailing
market condition and SLR requirement By using CBLO, banks can take arbitrage
opportunity as all security on CBLO are pledged with CCIL For NON-SLR option
bank invest mainly in Government securities Interbank exposure- not more than 5%
of deposits of previous FYPSU bonds IDBI, IFCI bonds Commercial Papers bank
invest more in government securities as compare to call money marketer CBLO
instrument because of risk purpose.
 Bank doesn‘t invest much in money market mutual fund instrument as it not offers
higher return as compared to government securities
71
6. CONCLUSION
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 Straight to bank does provide an answer to the problem
of the customers. The service provided by straight to bank 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 favorable 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
72
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
7.SUGGESTIONS
We suggest following measures, which Bank could take so as to take on heavy
competition from public sector as well as private sector:
• Try to reduce cost, so that benefits can be passed on to customers. Senior managers
at bank 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 can‘t
be reduced
because of costs involved, make the services customized, so that services are p
rovided 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.
73
• Bank should provide competitive prices as nowadays a banking sector also faced lot
of competition
• Bank should contact with their clients regularly for knowing the problems faced by
them. This will help bank in providing best services to customers. This will result in
additional customer base by getting further references from satisfied clients.
• Bank should focus on getting the business other business clients other than its
existing customers as it would help them to increase their business opportunities.
8. BIBLIOGRAPHY
Websites:
 http://www.businessdictionary.com
 www.slideshare.net
 http://tjsb.co.in/
 http://www.sbi.co.in/
 https://www.sc.com/
 http://www.hdfcbank.com/
 www.google.co.in
 www.wikipedia.com
 www.investopedia.com
 www.britishcouncil.org
 http://economictimes.indiatimes.com/
 https://www.moneycontrol.com/
 https://www.investopedia.com/
74
Paper and Journal:
 International Research Journal of Finance and Economics
ISSN 1450-2887 Issue 19(2008)
 Article of cash management and payments developments in India: Bank
offerings and new corporate Best Practices by Niraj Vedwa Etc.
 Financial Management (BAF ) Ainapure, Manan Prakashan
75
9. APPENDIX
Questionnaire
1. NAME OF THE RESPONDENT
2. NAME OF THE BANK
3. GENDER
 Male
 Female
 Other
4. AGE
 below 25
 25-45
 45-65
 above 65
5. MARRIED STATUS
 Married
 Unmarried
6. EDUCATION
 Below 10th
 10th
 12th
 Graduate
 post graduate
 other
7. POST IN BANK
 Manager
 Clerk
 BANK PO
 Other
76
8. HOW OFTEN DOES BANK UNDERGO RECONCILIATION OF ITS
TRANSACTION
 Daily
 Monthly
 Weekly
 Fortnightly
9. WHAT ARE THE STEP TAKEN BY THE BANK TO AVAID

FINANCIAL RISK
 Monietor the exchange rate
 Check accuracy in interest rate calculation
 monietor stock commodity price
 all of the above
10. FORCASTING THE CASH NEEDS FOR FOR MANAGING BUSINESS IS

ESSENTIAL CASH FLOWS
 Yes
 No
11. WHAT ARE THE PRINCIPLE OF CASH MANAGEMENT .

 Complete Visibility
 Reporting Modules
 Integrated service
 All of the above
12. WHAT IS THE RISK ASSOCIATED WITH IN CASH FLOW POSSITION OF

THE BANK.
 Low
 Moderate
 High
13. HOW MANY NUMBER OF PEOPLE TAKE THE ADVATAGE OF CASH

MANAGEMENT FACILITY.
 10%
 30%
 60%
 80%
77
14. IS THERE A PARAMETER TO CHECK CASH DEFICIT OR CASH
SURPLUS .
 Yes
 No
15. HOW DOES THE BANK MANAGE IDLE CASH .

 By Investing
 By Offering loan for interest
 Both
 None of the above
16. HOW MUCH OPTIMUM CASH BALANCE MAINTAINANCE

 Cash Forcast
 Cash Budget
 Using tools for cash Analysis
 All of the bank
17. WHAT FACTORS ARE CONSIDERED FOR FINAL SELECTION OF

REVEANUE FOR INVESTING CASH BALANCE .
 Return
 Risk
 Liquidity
 Legal Requirement
18. WHAT IS THE PURPOSE OF CASH MANAGEMENT .

 To eliminate idle cash balance
 To Deposit collection timely
 To Properly time disbursement
 all above
19. WHAT IS THE INSTRUMENTS FOR COLLECTING CASH .

 Cheque
 Demant Draft
 Documentory bills
 Trade Bills
 Letter of credit
78
79

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PROJECT REPORT ON

A STUDY OF CASH MANAGEMENT IN BANKING SECTOR

UNDER THE GUIDANCE OF

Ms sangeeta Vishwakarma of M.Com in Advance Accountancy, Semester (III) has

undertaken & completed the project work of title ‘A cash management of

of Prof vijay Gawde submitted on 20-1-2020 to this college in fulfillment of the

curriculum of M.Com.in advance accountancy , University of Mumbai.

the best of our knowledge and belief.

PROJECT COURSE EXTERNALOR

CO- ORDINATOR PRINCIPAL GUIDE EXAMINATION

Vidyalankar School of Information Technology

(Affiliated to University of Mumbai)

Vidyalankar Marg, Wadala (E),

Mumbai 400 037

I SANGEETA RAMSINGAR VISHWAKARMA, student of M COM-part-2(Advance

&Accounting) sem-III, Vidyalankar School of Information Technology, hereby declare that

I have completed the project ‗A STUDY OF CASH MANAGEMENT IN BANKING

SECTOR in academic year 2020-21

The information submitted is true and original to the best of my knowledge.

Signature of the Student

Ch 2 LITERATURE REVIEW 5-6

Ch3 INTRODUCTION TO TOPIC 6-56

Ch4 DATA ANALYSIS AND INTERPRETATIONS

4.1 Analysis of Q no. 1 58

4.2 Analysis of Q no. 2 59

4.3 Analysis of Q no. 3 60

4.4 Analysis of Q no. 4 61

4.5 Analysis of Q no. 5 62

4.6 Analysis of Q no. 6 63

4.7 Analysis of Q no. 7 64

4.8 Analysis of Q no. 8 65

4.9 Analysis of Q no. 9 66

4.10 Analysis of Q no. 10 67

4.11 Analysis of Q no. 11 68

4.12 Analysis of Q no. 12 69

1.1 INTRODUCTION TO TOPIC/RATIONALE

1.2 OBJECTIVES OF THE STUDY

There are certain objective of cash management of bank

 To know about cash management of banks

 To analyze the cash management process of banks

 To evaluate cash flow position of the banks

 To study on cash management techniques of the banks

 To find sources for financial during periods of cash deficits

 To arrange for repayment / investments during periods of cash surplus

 To minimize idle cash

 To effectively monitor the cash positions.

 To minimize cash balance

 To better utilized of fund of bank

 To know long term planning requirement

Scope of the Study:

 The project concentrates only on cash management in banks

 H0 (Null Hypothesis): Cash Management is not important for Banking

 H1 (Alternate Hypothesis): Cash Management is important for Banking

MEANING AND DEFINITION

History of Banking in India

 Early phase of Indian banks, from 1786 to 1969

 1959: Nationalization of SBI subsidiaries

 1969: Nationalization of 14 major banks

 1980: Nationalization of seven banks with deposits over Rs 200 crore

PURPOSE OF CASH MANAGEMENT

COMPONENTS IN CASH MANAGEMENT

Why Cash Management?