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Treasury Management & Forex: Liquidity Planning Funding & Regulatory Aspects
Treasury Management & Forex: Liquidity Planning Funding & Regulatory Aspects
Forex
Liquidity Planning
Funding & Regulatory Aspects
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VENUGOPL RAJAMANURI
Introduction
RBI is the note issuing authority, It controls the currency in
circulation
This money in circulation is indicated by
i. Broad Money (M3) : This includes currency in
circulation, demand & time deposits with banks & post
office savings deposits
ii. Narrow money (M1) This includes currency in
circulation, demand with banks & post office savings
deposits
.The monetary policy of RBI is aimed at controlling the rate
of inflation and at ensuring stability of financial markets
.In order to achieve these objectives RBI exercises full
control over M3
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Reserve Assets
The Reserve assets refer to the cash deposited by
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CRR Computation
Calculated on the basis of DTL, with a lag of one
fortnight
The DTL at the end of the previous fortnight will
form the basis for CRR calculation
Banks to maintain cash balances not falling below
70% of the amount required for CRR
No interest paid on CRR deposited with RBI
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SLR Computation
As on last Friday of the second preceeding
fortnight
SLR to be maintained in the form of the following
assets
i.
Cash balances (excluding balances
maintained for CRR)
ii. Gold
iii. Approved securities
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through Repos
RBI also accepts deposits from banks under reverse
repos
RBI then provides liquidity to the bank
It conducts Repo / Reverse repo auctions daily for
overnight funds
Currently the Repo / Reverse repo rates are 8.25 %
and 7.25 % respectively [with effect from 16.09.2011]
Banks can borrow and lend overnight upto a
maximum of 100 % and 25% of their capital funds
respectively
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RTGS
Fully activated by RBI from October 2004
Paperless clearing system
Settlements are on gross basis
All
inter
bank
payments
and
customer
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NDS-OM
An anonymous order matching system introduced
in August 2005
Improvement over NDS
The identity of counter party is not disclosed till
the offer is accepted
System is purely order driven with orders being
matched on price / time priority
NDS-OM co exists with telephone based trading
mechanism on NDS
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