Chapter 10 To 12 2019

Chapter no 10 TO 12– IN BRIEF
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Treasury Market
• It is the banks interface with Markets
• responsible for compliance of statutory requirements &
Operating arm of forex market
• Plays important role in ALM which is critical for long term
profit generation & sustainability
• ALM is responsible for pricing of liability & assets
• Treasury Management is the process of administering the
financial assets & holding of a business
• Benefits: i. Time efficiency, ii. Reduction in cost iii)
Reduction in arrears iv) Full & accurate Audit Control
• Importance: Borrowing for Short and long term in
domestic & forex done by treasury
• Goal is to optimize their liquidity, sound financial
investments for future with excess cash, hedge any risk
Treasury Market
• Structure: Front Office: doing all deals in the market & manage
funds, Back Office: Execute the deal done by Front office and
Mid Office: ALM support, compliance of statutory requirement,
watch dog
• Various Operations of Treasury:
• Liquidity Management
• Investment of surplus
• Trading in Securities
• Dealing in Forex
• Comply with Regulatory guidelines
• Managing sensitivity of Assets & liabilities to changes in interest
rate
• Treasury Operations:
• Dealing & Settlement: two parties transaction, date, rate and
amount.
Treasury Market
• Fixed Date,
• Tom
• Spot
• Forwards
• Finding counter party to buy or sell and agreeing to terms is
called as dealing
• Front Office do buy or sell, square of the position at the end.
• Liquidity Management in Banks:
• Liquidity means ability to meet deposit withdrawals and fund
loans
• Asset Liability Management:
• Act of planning, acquiring & Directing the flow of funds in an
organization. ALM is to match assets and liability and minimize
liquidity risk , market risk
• At Macro level, ALM influences business policy, allocation of
capital. At micro level, ALM concerned with price matching
Treasury Market
• Liquidity & interest rate, risk management
• Market Risk:
• Change in market. Value falls.
• Currency/Exchange risk,
• interest rate risk, credit risk,
• When market yield increases, price falls.
• Management of Risk: Banks have developed system for
measuring & managing various risk
• Money Market:
• Market for short term debt
• Maturity less than 1 year
• Financial instruments with high liquidity & very short maturities
are traded
• Banks, Ins Company, MF & others players
• Instruments: Call money, Repo/reverse repo, Treasury bills, CP,CD
Treasury Market
• Benefits:
• Safety of capital, higher return
• Tax benefits are higher when compared to deposit, real estate,
gold etc
• Lower cost, high liquidity
• Inter Bank Call Money Market:
• Overnight lending/Borrowing:
• To manage liquidity, no security. Only with trust
• Repo/Reverse Repo: Secured lending.
• Agreement for repurchase. Repo is a secured borrowing like sale
of security with repurchase obligation at future date with pre
determined rate.
• Repo could be overnight, open, lasts for 1 day. No maximum
period for repo. On an average it last for a week
Treasury Market
• :Commercial Paper: Debt security issued by Corporate for short term
• Issued at discount. Another corporate can also invest.
• Corporate with min NW Rs40mio can issue
• Minimum 7 days max 1 year. Issue price Rs5 lac
• Credit Rating P2
• Stamp duty payable. Dematerialized form
• No Banks can issue
• Certificate of deposit:
• Bank issues Certificate of Deposit in respect of large volume of
deposit for short period. Rate negotiated with depositor. Period 7
days to 1 year.
• Minimum Rs1 lac No Maximum
• Issued a discount
• No stamp duty if dematerialized.
• It is negotiable and can be transferred
Treasury Market
• Bill of Exchange:
• Accepted by Bank
• Are liquid and desirable Money Market
• Drawn under LC
• Accepted for future payment
• Treasury Bills:
• Short Term Government Borrowing
• Issued at discount to Face value
• RBI auctions T Bills on behalf of Central Government as per calendar
announced in advance
• Government security carries no risk of default
• Period 91 days, 182 days and 364 days
• Interest is difference between issue price and redemption price
Treasury Market
• RBI through Repo reverse repo auctions. Influences Money Market
• Inter Bank Money Market rate is in bands between Repo and Reverse
repo.
• This reduces Call Money market Volatility
• RBI intervention restricted
• To mop up RBI floats Treasury Bills, Bonds
• Restricts Banks Borrowings under Call Money
Cash Management System
Funds Management:
Delayed receipt of Cash from debtors makes the entity to
move for more working capital funds which costs by way of
interest.
CMS is for effective management of funds
Customized & efficient collection & Payment services to entity
Helps:
Efficient Fund Management
Reduced Cost & increased profit
Customized product
Entity relieved of monotonous monitoring
Timely & availability of accurate Data & Fund
Local Cheque Clearing:
Pick up , Lock/Collection Box Service
Provide details of deposit/Depositor
Providing credit earlier than clearing dead line
Upcountry Cheque Collection:
Pick up from payees premises & present in clearing
Provide funds at other branch accounts
Collection through Correspondent Banks
MIS details of depositors , cheque collected, returned unpaid
in electronic form
Power Speed: Local Cheque Collection. Coordinated pick up
and clearing through banks correspondent bank if no branch
of ours
Power Reach: Upcountry cheque
Post Date Cheque Collection:
Maintain PDC, Inventory, present, credit, represent bounced cheques,
Stop payment handling etc .
Bulk Collection:
Utility bills or PDC , Manual pick up, ECS Service, Manage inventory of
cheques, presented, well supported MIS
Payment Services:
Corporates makes payment for supplies, Shareholders, Bond holders,
agents for Order provided, Staff, Applicant for IPO refunds.
Banks Value adds, printing of cheques, Printing covering letter, courier,
provide reconciliation etc.
Charges : Service Charges + interest
Pay pro: All payment through single file upload
Power Pay: Clearing platform Outsource cheque collection
Types of Bill payments in Axis Bank
Biller Payment:The billing company presents bills registered
by the customer for payment, before they can pay them. This
is most useful when the payment is on a regular basis, in
which case, the customer would like to see an electronic
version of their bill before making payment.
Payee Payment: In case of payee payments, the biller does not
present the bills to customer. They can make a payment to any
of the listed biller as and when they like. The amount and time
is completely under customer control.
Personal Payee Payments: The customer may also use Bill Pay
to pay regular or one-time personal payees including
landlords, friends, and children. In this case the Beneficiary,
person to whom payment is made, must also have an account
with Axis Bank.
END

Chapter 10 To 12 2019

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Chapter no 10 TO 12– IN BRIEF

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