Treasury & Risk Management

Post Graduate Diploma in Management (ePGDM)

(Fourth Semester)

Mumbai Education Trust

October 2017 to February 2018

11th November 2018
 TREASURY MARKET : CLASSIFICATION

TREASURY MARKET

DOMESTIC TREASURY INTERNATIONAL OR

FOREX TREASURY

Money Capital Govt. Commodities

Market Market Securities Market
Market

Banks Central Customers Brokers

Banks
 RESERVE RATIOS : CRR AND SLR

Statutory Liquidity Ratio (SLR) Cash Reserve Ratio (CRR)

Ratio of liquid assets to Net Minimum ratio of cash to
Description
Demand & Time Liabilities (NDTL) NDTL as stipulated by the RBI
Statutory Banking Regulation Act Reserve Bank of India Act
provision
Cash (in currency chest) or
What form? Cash, gold or approved securities
current account with the RBI
Maintained In cash or current account
With banks themselves
where? with the RBI
Results in influencing the banks’ Regulates the liquidity in the
Controls ability to increase / decrease economy and influences
lending demand
• For fiscal deficit financing
To maintain purchasing power
Intended • Regulate credit growth in the of money to curb inflation
economy
Ratio at present 19.5% 4%
 FIXED INCOME MONEY MARKET & DERIVATIVES ASSOCIATION OF INDIA
FIMMDA is a voluntary market body for the bond, money and derivatives markets
Members of FIMMDA :
1) Nationalized Banks
2) Private sector Banks
3) Financial institutions such as EXIM Bank, NABARD, NBFCs, Insurance Companies
4) Primary Dealers
Objectives of FIMMDA :
1) To function as the principal interface with the regulators on various issues that impact the
functioning of these markets
2) To undertake developmental activities, such as, introduction of benchmark rates and new
derivatives instruments, etc.
3) To provide training and development support to dealers and support personnel at member
institutions
4) To adopt/develop international standard practices & a code of conduct in the above fields of
activity
5) To devise standardized best market practices
6) To function as an arbitrator for disputes, if any, between member institutions
7) To develop standardized sets of documentation
8) To assume any other relevant role facilitating smooth & orderly functioning of the said markets
Other activities of FIMMDA include setting legal and accounting norms, documentation, valuation
methodologies, providing training and certification to members, setting up a dispute resolution
mechanism as well as creating new products and addressing the attendant details
 CLEARING CORPORATION OF INDIA LTD. (CCIL)

CCIL was set up in April, 2001 to provide guaranteed clearing and settlement functions for
transactions in Money, G-Secs, Foreign Exchange and Derivative markets.
Benefits of guaranteed clearing and settlement :
 significant improvement in the market efficiency and transparency
 Improvements in liquidity and risk management/measurement practices in these markets
 reduced settlement and operational risk
 savings on settlement costs, etc.
CCIL also provides non-guaranteed settlement for Rupee interest rate derivatives and cross
currency transactions through the CLS Bank
CCIL is recognized as a Qualified Central Counterparty (QCCP) by the RBI in 2014
CCIL has also set up a Trade Repository to enable FIs to report their deals in OTC derivatives
CCIL, through its fully owned subsidiary, Clearcorp Dealing Systems Ltd. (CDSL), has introduced
various platforms for electronic execution of deals in various market segment :
 NDS-OM - the RBI owned anonymous electronic trading system for dealing in G-Secs and also
for reporting of OTC deals
 NDS-CALL - platform for electronic dealing in the Call, Notice & Term Money market
 Triparty Repo (earlier known as CBLO)
 Clearcorp Repo Order Matching System (CROMS) for market repos in all kinds of G-Secs
 FX-CLEAR - Forex Dealing System for dealing in inter-bank Spot & swap deals in USD/INR pair
CCIL is the Calculation Agent for some of the important Benchmarks used by the market under
the aegis of the Benchmark Administrator, Financial Benchmarks India Limited (FBIL)
 MONEY MARKET

Money market is a market for short-term financial assets that are close substitutes of
money.
Features of Money Market
1) Short-term : Upto 01 year
2) Liquid : Close substitute of money (i.e., can be easily converted into cash)
3) Cost : Low cost
4) Volume : Highest turnover volume
5) Instruments : T-Bills, CPs, CDs, Repo, Bill of Exchange

Major Functions of Money Market

Money market is generally expected to perform following three broad functions:
(i) To provide an equilibrating mechanism to even out demand for and supply of short
term funds
(ii) To provide a focal point for Central Bank intervention for influencing liquidity and
general level of interest rates in the economy
(iii) To provide reasonable access to providers and users of short-term funds to fulfill
their borrowing and investment requirements at an efficient market clearing price
 CALL / NOTICE / TERM MONEY MARKET
 Interbank Money market transactions are categorized as follows:
(i) Call Money : Borrowing/Lending for 1 day
(ii) Notice Money : Borrowing/Lending for 2-14 days
(iii) Term Money : Borrowing/Lending for more than 14 days to 1 year
 Call/notice/term money market facilitates lending and borrowing of funds between Scheduled
Commercial Banks (excluding RRBs), Co-operative Banks (other than Land Development Banks)
and Primary Dealers (PDs)
 Lending and borrowing takes place on an uncollateralized basis
 Interest rates depend on the surplus funds available with lenders and the demand for the same
 Market is governed by the RBI which issues guidelines for the participants in this market
 Permitted entities may decide on an entity-wise exposure limit depending on their own internal
assessment
 Trading hours : 9 am to 5 pm on Monday to Friday & 9 am to 2 pm on 1st, 3rd and 5th Saturdays
 Trades are conducted both on telephone as well as on the NDS Call system, which is an electronic
screen based system set up by the RBI for negotiating money market deals between entities
permitted to operate in the money market
 Settlement of money market deals is by electronic funds transfer on the New Generation - Real
Time Gross Settlement (NG-RTGS) system operated by the RBI
 Repayment of the borrowed money also takes place through the NG-RTGS system on the due date
of repayment
 CALL / NOTICE / TERM MONEY MARKET

Prudential Limits for Transactions in Call/Notice Money Market

Participant Borrowing
Scheduled On a fortnightly average basis, borrowing
Commercial outstanding should not exceed 100% of
Banks capital funds (i.e., sum of Tier I and Tier II
capital) of latest audited balance sheet.
However, banks are allowed to borrow a
maximum of 125% of their capital funds
on any day, during a fortnight.
Cooperative Outstanding borrowings of State
Banks Cooperative Banks/District Central
Cooperative Banks/ Urban Cooperative
Banks in call/notice money market, on a
daily basis should not exceed 2% of their
aggregate deposits as at end March of the
previous financial year.
Primary PDs are allowed to borrow, on average in
Dealers a reporting fortnight, up to 225% of their
net owned funds (NOF) as at end-March
of the previous financial year.
Lending
On a fortnightly average basis, lending
outstanding should not exceed 25% of
their capital funds. However, banks are
allowed to lend a maximum of 50% of
their capital funds on any day, during a
fortnight.
No limit
PDs are allowed to lend in call/notice
money market, on average in a
reporting fortnight, up to 25% of their
NOF.
 KNOWLEDGE ENHANCEMENT

https://www.ccilindia.com/FAQ/Pages/TREPS.aspx
https://www.fbil.org.in/
http://www.fimmda.org/modules/content/?p=1015