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UNDER THE GUIDANCE OF: Ms./ Mr./ Dr./ Prof. Shalini Rathore__________ Assistant Professor/ Associate Professor/ Professor, RDIAS SUBMITTED BY: Name of the Student Enrollment No.02815901711____ BBA, Semester ___2___ Batch 2011__ - 2014__
RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES An ISO 9001:2008 Certified Institute (Approved by AICTE, HRD Ministry, Govt. of India) Affiliated to Guru Gobind Singh Indraprastha University, Delhi 2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085
Table of Contents Student declaration Certificate of the guide Acknowledgment Executive summary List of table of content List of graphs List of charts List of Abbreviations i ii iii iv v vi vii viii
Page no. Chapter I Plan of the Study 1.1 Introduction to topic . 1.2 Objective of the study... 1.3 Literature review And/or Theoretical Background Chapter II Company Profile / Industry profile or details. Chapter III Research Methodology 3.1 Purpose of the study..... 3.2 Research Objectives of the study.. 3.3 Research Methodology of the study. 3. 3.1 Research Design ...... 3.3.2 Data Collection Techniques
3.3.3 Sample design... 3.3.3.1 Population.. 3.3.3.2 Sample size 3.3.3.3 Sampling method... 3.3.4 Method of data collection.. 3.3.4.1 Instrument for data collection 3.3.4.2 Drafting of a questionnaire. 3.3.5 Limitations
Chapter IV Data Analysis and Interpretation (This chapter will cover the analysis on the basis of questionnaire or whatever is applicable. The analysis will be done and shown in a tabulated form and graphical representation with pie-charts, bar-diagrams, graphs, etc will also be done. Below the graphs, diagrams and charts, inferences have to be made. )
BIBLIOGRAPHY
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Chapter 1 Introduction
Cash is the important current asset for the operations of the business. Cash is
the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep s u f f i c i e n t c a s h , n e i t h e r m o r e n o r l e s s . C a s h s h o r t a g e w i l l d i s r u p t t h e f i r m s m a n u f a c t u r i n g operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. Thus, a major function of the financial manager is to maintain a sound cash position. Cash is the money which a firm can disburse immediately without any restriction. The term cash i n c l u d e s c o i n s , c u r r e n c y a n d c h e q u e s h e l d b y t h e f i r m , a n d balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash. Generally, when a firm has excess cash, it invests it in marketable securities. This kind of investment contributes some profit to the firm
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 cash is received w h e n t h e p a y m e n t h a s t o be made. But cash receipts and payments are not
p e r f e c t l y synchronized. For those periods, when cash payments exceed cash receipts, the firm should maintain some cash balance to be able to make required payments. For transactions purpose, a firm may invest its cash in marketable
securities. 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 i s t h e n e e d t o h o l d c a s h t o m e e t c o n t i n g e n c i e s i n the future. It provides a cushion or buffer to withstand some
u n e x p e c t e d e m e r g e n c y. T h e p r e c a u t i o n a r y amount of cash depends upon the predictability of cash flows. If cash flow can be predicted with accuracy, less cash will be maintained for an emergency. The amount of precautionary cash is also influenced by the firms ability to borrow at short notice when the need arises. Stronger the ability of the firm to borrow at short notice, less the need for
p r e c a u t i o n a r y b a l a n c e . T h e precautionary balance may be kept in cash and marketable securities. Marketable securities play an important role here. The amount of cash set aside for precautionary reasons is not expected to e a r n a n yt h i n g ; t h e r e f o r e , t h e f i r m a t t e m p t t o e a r n s o m e p r o f i t o n i t . S u c h f u n d s s h o u l d b e invested in high-liquid and low-risk marketable securities. Precautionary balance should, thus, held more in marketable securities and relatively less in cash.
Speculative Motive
The speculative motive r e l a t e s t o t h e h o l d i n g o f c a s h f o r i n v e s t i n g i n p r o f i t - m a k i n g opportunities as and when they arise. The opportunity to make profit may arise when the security prices change. The firm will hold cash, when it is expected that the interest rates will rise an d security prices will fall. Securities can be purchased when the interest rate is expected to fall; the firm will benefit by the subsequent fall in interest rates and increase in security prices. The firm may also speculate on materials prices. If it is expected that materials prices will fall, the firm can postpone materials purchasing and make purchases in future when price actually falls. Some firms may hold cash for speculative purposes. By and large, business firms do not engage in speculations. Thus, the primary motives to hold cash and marketable s e c u r i t i e s a r e : t h e transactions and the precautionary motives.
CASH MANAGEMENT
Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. It encompasses a companys level of liquidity, its management of cash balance, and its short-term investment strategies. In some ways, managing cash flow is the most important job of business managers.For some time now, technology has been the key driving force behind every successful bank. In such an environment, the ability to recognize and capture market share depends entirely on the banks competence to evolve technically and offer the customer a seamless process flow. The objective of a cash management system is to improve revenue, maximize profits, minimize costs and establish efficient management systems to assist and accelerate growth.
indeed helped the development of financial infrastructure in terms of clearing and settlement. Other innovations that have supported in streamlining the process are: 1. Introduction of the Centralized Funds Management Service to facilitate better management of fund flows. 2. Structured Financial Messaging Solution, a communication protocol for intra-bank and interbank messages. Today, treasurers need to ensure that they are equipped to make the best decisions. For this, it is imperative that the information they require to monitor risk and exposure is accurate, reliable and fast. A strong cash management solution can give corporates a business advantage and it is very important in executing the financial strategy of a company. The requirement of an efficient cash management solution in India is to execute payments, collect receivables and managing liquidity.
builds up. At other times, cash inflow will be more than cash p a ym e n t s because there may be large cash sales and debtors may be realized in l a r g e s u m s promptly. Further, cash management is significant because cash constitutes the smallest portion of the total current assets, yet managements considerable time is devoted in managing it. In r e c e n t p a s t , a n u m b e r o f i n n o v a t i o n s h a v e b e e n d o n e i n c a s h m a n a g e m e n t t e c h n i q u e s . A n obvious aim of the firm these days is to manage its cash affairs in such a way as t o keep cash balance at a minimum level and to invest the surplus cash in profitable investment opportunities. I n order to resolve the uncertainty about cash flow prediction and lack of s yn c h r o n i z a t i o n between cash receipts and payments, the firm should dev elop appropriate strategies for cash management. The firm should evolve strategies regarding the following four facets of cash management:
Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business r e g a r d i n g expected cash problems, which it may encounter, thus assisting it to regulate further cash flow movements. Lack of cash planning results in spasmodic cash flows.
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.
surplus
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 firms 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.
cost & the transaction cost. As such firm attempts to minimize the sum of the holding cash & the cost of converting marketable securities to cash. There are certain assumptions that are made in the model. They are as follows: 1. The firm is able to forecast its cash requirements with certainty and receive a specific amount at regular intervals. 2. The firms cash payments occur uniformly over a period of time i.e. a steady rate of cash outflows. 3. The opportunity cost of holding cash is known and does not change over time. Cash holdings incur an opportunity cost in the form of opportunity foregone.
4. The firm will incur the same transaction cost whenever it converts securities to cash. Each transaction incurs a fixed and variable cost. For example, let us assume that the firm sells securities and starts with a cash balance of C rupees. When the firm spends cash, its cash balance starts decreasing and reaches zero. The firm again gets back its money by selling marketable securities. As the cash balance decreases gradually, the average cash balance will be: C/2. This can be shown in following figure:
The firm incurs a cost known as holding cost for maintaining the cash balance. It is known as opportunity cost, the return inevitable on the marketable securities. If the opportunity cost is k, then the firms holding cost for maintaining an average cash balance is as follows: Holding cost = k (C/2) Whenever the firm converts its marketable securities to cash, it incurs a cost known as transaction cost. Total number of transactions in a particular year will be total funds required (T), divided by the cash balance (C) i.e. T/C. The assumption here is that the cost per transaction is constant. If the cost per transaction is c, then the total transaction cost will be:
Transaction cost = c (T/C) The total annual cost of the demand for cash will be: Total cost = k (C/2) + c (T/C) Optimum level of cash balance As the demand for cash, C increases, the holding cost will also increase and the transaction cost will reduce because of a decline in the number of transactions. Hence, it can be said that there is a relationship between the holding cost and the transaction cost. The optimum cash balance, C* is obtained when the total cost is minimum. Optimum Where, T is C* the cash is total balance the cash (C*) optimum needed during = cash the 2cT/k balance. year.
k is the opportunity cost of holding cash balances. With the increase in the cost per transaction and total funds required, the optimum cash balance will increase. However, with an increase in the opportunity cost, it will decrease.
Limitations of the Baumol model: 1. 2. It does Overdraft not allow is cash flows not to fluctuate. considered.
The maximum cash balance is the spread plus the minimum cash balance, which is assumed to be known. The "return point" is defined as the minimum cash balance plus spread/3. Whenever the cash balance hits (or exceeds) the maximum, the firm should invest the difference between the amount available and the return point; if the minimum is reached, sufficient securities should be sold to bring it up to the return point.
Graph Explanation:
i. When cash balance reaches point A', the upper limit, company will invest the surplus to bring down the cash balance to return point. ii. When cash balance touches down point `B', the lower limit, the company would liquidate some of its securities to increase the balance back to return point. iii. iv. Upper and lower limits are determined as explained above. These limits depend upon variance of cash flow, transaction cost and interest rate.
v.
If variability of cash flow is high and transaction cost is high too, then the limits will be wide apart, otherwise narrow would suffice.
vi. vii.
If interest rates are high then the narrow limits would be set To keep interest cost as low as possible, the return point is set 1/3 of the spread between the lower and upper limit.
collections. One way vendors can do this is to offer discount terms for timely payment for goods sold.
1. Cash is crucial for every business. Every company has to have cash on hand or at least access to cash in order to be able to pay for the goods and services it uses, and consequently, to stay in business. By ensuring the company with the necessary funds for supporting its everyday operations, cash management becomes a vital function for the company. Cash flows have an impact on the companys liquidity. Liquidity is the ability of the company to pay its obligations when they come due. It is comprised of: cash on hand, assets readily convertible into cash, as well as ready access to cash from external sources, such as bank loans (Coyle, 2000, p. 3). If cash flows and liquid funds are not effectively and successfully planned and managed, a company may not be able to pay its suppliers and employees in a timely manner. It may be profitable according to its financial statements, but in fact, this company will not be able to pay its obligations when they come due. Moreover, lack of liquidity will incur increased costs in the form of interest charges on loans, late payment penalties and losing supplier discounts for paying obligations on time. Proper cash management can avoid the costs of additional funding and can provide the opportunity for more favorable terms of payment (Dropkin& Hayden, 2001, p. 3). In the worst case scenario, if the liquidity shortage continues for the longer term, the company might face no access to external resources, ending into insolvency (Coyle, 2000, p. 3). Therefore, once again, it follows that cash management has a critical importance for the life of every company.5 another benefit of cash management to the company is that it makes the company financially flexible. Ready access to cash enables the company to undertake expenditure decisions if and whenever it wishes, without the trouble and constraint of finding new financial support (Coyle, 2000, p. 3). The ultimate goal of every company is maximizing shareholder value, i.e. maximizing the net present value of future cash flows. Cash management contributes to attaining that goal as well. If a firm keeps high levels of cash, it increases its net working capital and the costs of holding cash, both of which decrease the value of the firm. Cash management influences the value of the firm by limiting cash levels so that an optimal balance between the costs of holding cash and the costs of inadequate cash is achieved. In addition, cash management influences firm value, because its cash investment levels entail the rise of alternative costs, which are affected by net working capital levels.
Both the rise and fall of net working capital levels require the balancing of future free cash flows, and in turn, result in firm valuation changes (Michalski, 2006, p. 180).
LITERATURE REVIEW
Davidson (1992) defined cash management as a term which refers to the collection concentration and disbursement of cash. It encompasses a companys level of liquidity, management of cash balance and short term strategies. Weak cash flow makes it difficult to hire and retain good employees (Beranek, 2000). Ross (2000) says that, it is only natural that major business expenses are incurred in the production of goods or the provision of services. In most cases, a business incurs such expenses before the corresponding payment is received from customers. In addition, employee salaries and other expenses drain considerable funds from most business. These make effective cash management an essential part of the business financial planning. Vanhorne (2001) says that, a common cash management tool found in companies is a cash budget. Most companies prepare budgets on the departmental level and roll these individual budgets into one master budget. Creating several smaller budgets, can help managers determine which operations use more cash and struggle to stay on the projected budget amounts. This discovery gives managers an idea of when improvements needed to correct the companys cash flow problems. Therefore, cash budgeting is another aid to an effective cash management. Pindado (2004) also defines cash management as part of working capital that makes up the optimal level needed by a company. Bort (2004) noted that, cash management is of importance for both new and growing businesses. Companies may suffer from cash flow problems because of lack of margin of safety in case of anticipated expenses such that they experience problems in finding the funds for innovation or expansion According to Bort (2004) cash is the lifeblood of the business. The key to successful cash management lies in tabulating realistic projections, monitoring collections and disbursements, establishing effective billing and collection measures, and adhering to budgetary parameters because cash flow can be a problem to the business organization. According to Moffet (2004), postponing capital expenditure is one method that can ease cash shortage hence, suggests efficient cash management. Kirkman (2006) states that, some capital expenditures are more important and urgent than others hence, it might be imprudent to postpone expenditure on fixed assets which are needed for the development and growth of business. On the other hand, some expenses are routine and might be postponable without serious consequences. When a lot of cash is used to pay for fixed assets, the company may come up against a cash crunch that prevents it from paying suppliers, buying materials and
even paying salaries. Its a good idea, to maintain a level of working capital that allows making through those crunch times and continuing to operate the business.
Chapter 2
Company Profile
branches/ offices (including five representative offices) and 3 Subsidiaries and 1 joint venture abroad. The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008. . Total number of shareholders as on 30/09/2009 is 2, 15,790. While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalized banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio.
The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29 branches (including five representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo, Hong-Kong and Singapore. The international business accounts for around 17.82% of Bank's total business. The Bank has a strong position in financing foreign trade. Over 270 branches provide export credit. The expertise in this area has enabled the Bank to achieve a leading position in providing export credit in certain areas like diamond export. The Bank has identified specialized target groups to develop core advantage for future growth. The Bank has specialized branches comprising of Corporate Banking Branches to undertake very large credit business, Overseas Branches specializing in Foreign Exchange Business, NRI Branches which specially cater to the requirements of Non-Resident Indians, Capital Market Branches which undertake all activities relating to capital market such as collection of applications, processing of refund orders, Merchant Banking etc. Commercial &Personal Banking Branches cater to the requirements of high net worth customers. Apart from this, the
Bank also has specialized Branches for Asset Recovery, Small Scale Industries, Hi-tech Agriculture Finance, Lease Finance and Treasury. To effectively meet the ever-growing challenges and competition, the Bank has made a good headway in bringing about technological up gradation. MIS and critical functions of controlling offices have been computerized. At present, the operations at about 2618 branches are totally computerized. 26 branches operate in partially computerized mode besides these 1019 branches and 31 extension counters are migrated to Core Banking Solution. New facilities such as, Telebanking, ATM & Signature Retrieval Systems have been introduced in a progressing manner to add value to services. Telebanking facilities with Fax on Demand facility, Remote Access Terminals for Corporate Customers are now available at many branches. The Bank has installed ATMs in Mumbai and other centers in the country. The Bank is a member of the RBI's VSAT Network and has installed 39 VSATs linking strategic branches/offices. The Bank is making a paradigm shift from branch automation to bank automation and is in the process of implementing a Multi-Branch Banking Project that facilitates City-wise Connectivity of Computerized Branches. The Bank is in the process of installing BOINET, a Wide Area Network for providing an inter- and intra-city connectivity, as a part of enhancing its decision support system. The Bank's corporate personality and philosophy are fully reflected in the emblem, which is a five-pronged Star -- a harmonious blend of traditional and the functional. The elongated prong pointingupwards conveys the Bank's drive to achieve ascending goals. The Star is a beacon and guide to those in need of direction.
In order to facilitate quick decision-making and to suit the changing requirements, the organizational structure has been revamped. More specialized branches like Personal Banking Branches, Corporate Branches, Small Scale Industries Branches, Hi-tech Agricultural Finance Branches, Housing Finance Branches, Capital Market Branches, Overseas and NRI Branches have been opened at important centers. in all business operations at all stages. Customers will be educated about the various products and facilities available. A uniform strategy will always be adopted to eliminate any possibility of discrimination on caste, creed and religion or economic status of the clients. Secrecy norms will be simultaneously observed to protect the interests of our customers. Surveys by outside agencies
All steps will be taken by bank to improve Customer Service and enhance customer satisfaction. Towards this end, bank services will be got evaluated through outside reputed marketing agencies with a view to assessing the quality of services extended at the branches and to ensure that bank customer service match the expectations of banks variousclientele.
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: 1. Account Reconcilement Services: Balancing a checkbook can be a difficult process for a v e r y l a r g e b u s i n e s s , s i n c e i t i s s u e s s o m a n y checks it can take a lot of human monitoring to
understand which checks have not cleared and therefore w h a t t h e companys 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 aspositive pay 2. Advanced Web Services: M o s t b a n k s h a v e a n I n t e r n e t - b a s e d s ys t e m which is more advanced than the one available to consumers. T h i s e n a b l e s m a n a g e r s t o c r e a t e a n d authorize special internal logon credentials, allowing employees to send wires and access other cash management features normally not found on the consumer web site. 3. 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. 4. Automated Clearing House: s e r v i c e s a r e u s u a l l y o f f e r e d b y t h e c a s h management division of a bank. The Automated Clearing House i s a n e l e c t r o n i c s y s t e m u s e d t o 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 c u s t o m e r s ( t h i s i s g e n e r a l l y h o w a u t o m a t i c p a ym e n t p l a n s w o r k ) . T h i s s ys t e m i s criticized by some consumer advocacy groups; because under this system banks assume that the company initiating the debit is correct until proven otherwise. 5. Balance Reporting Services: Corporate clients who actively manage their cash balances u s u a l l y s u b s c r i b e t o s e c u r e w e b - b a s e d r e p o r t i n g o f t h e i r a c c o u n t a n d t r a n s a c t i o n information at their lead bank. These sophisticated compilations of banking activity may i n c l u d e 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.
6. 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 l o c a l b a n k s i n t h e a r e a . T o p r e v e n t f u n d s i n t h e s e a c c o u n t s f r o m b e i n g i d l e a n d n o t earning sufficient interest, many of these companies have an agreement set with their p r i m a r y b a n k , w h e r e b y t h e i r p r i m a r y b a n k u s e s t h e Automated Clearing Houseto electronically "pull" the money from these banks into a single interest bearing bank account. 7. 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. 8. Positive Pay: Positive pay is a service whereby the compa ny
electronically shares its c h e c k r e g i s t e r o f a l l w r i t t e n c h e c k s w i t h t h e b a n k . T h e b a n k t h e r e f o r e w i l l o n l y p a y checks 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. 9. Sweep Accounts: a r e t yp i c a l l y o f f e r e d b y t h e c a s h m a n a g e m e n t d i v i s i o n o f a b a n k . U n d e r t h i s s ys t e m , e x c e s s f u n d s f r o m 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. 10. Zero Balance Accounting: can be thought of as somewhat of h ack. Companies with large numbers of stores or locations can very oft en 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 c o m p a n y t o l o o k a t i n d i v i d u a l s t a t e m e n t s f o r e a c h s t o r e . U . S . b a n k s a r e a l m o s t a l l 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. 11. 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 ex pedient 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.
12.Controlled
Disbursement: T h i s i s a n o t h e r p r o d u c t o f f e r e d b y
b a n k s u n d e r C a s h Management Services. The bank provides a daily report, typically early in the day, that provides the amount of disbursements that will be charged to the customer's account. T h i s early knowledge of daily funds requirement allows the customer t o i n v e s t a n y surplus in intraday investment opportunities, typically money market investments. This is d i f f e r e n t f r o m d e l a ye d d i s b u r s e m e n t s , w h e r e p a ym e n t s a r e i s s u e d t h r o u g h a r e m o t e branch of a bank and customer is able to delay the payment due to increased float time. In the past, other services have been offered the usefulness of which has diminished with the rise of the Internet. For example, companies could have daily faxes of their most recent transactions or be sendof images of their cashed checks.
2. Bank has pioneered a Mega Project for Integrated Development of 129 villages in 78Districts and 17 States covering 60,000 households, identified for holistic development and showcased as Model Villages. The Bank has so far extended financial assistance over Rs.150 crores to the rural households in the identified villages. An evaluation study conductedin select villages has revealed that there is 20-25% improvement in the household income after the implementation of the scheme.
MISSION AND VISION OF BANK OF INDIA MISSION To provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, VISION To become the bank of choice for corporates, medium businesses and upmarket retail customers and to provide cost effective developmental banking for small business, mass market and rural markets. meet the requirements of our stakeholders.
Chapter 3
Research Methodology
RESEARCH DESIGN:
For this research descriptive research design is used.
POPULATION:
All the employees who are directly or indirectly related to the Bank of India, New Delhi.
SAMPLE UNIT:
All the employees who are directly or indirectly related to the Bank of India, New Delhi.
SOURCE OF DATA:
Primary Data: - Structured direct Interviews with the concerned persons of Finance & Stores Department Secondary Data: - Annual Report, Store Records & various books.
Chapter 4
Data Collection & Analysis
BANK OF INDIA
Collection of cheques
1- Local Cheques & Upcountry cheques at places where Banks branches exist. 2- Upcountry cheques at places where Banks branches do not exist. 3- Instant credit as per arrangement on any day before realization. 4- Customized MIS,including outstanding entries at any time. 5- Pooling is possible ,including multiple pooling. 6- Single point reference for any detail/data. 7- Courier Pick-Up from Customers Collections.
Payments
1- Centralized or Remote printing of payments of (Cheques/Pay Cheques on Orders/DDs/IWs/DWs/Ros-withfacsimile continuous stationery. 2- Interface with RTGS/NEFT/ECS.(Linkage to e-modes) signatures)Printing
Correspondent Banking
1- Issue of DDs by branches*of Correspondent Bank. 2- Funding before issue/upon payment. 3- Auto Reconciliation.(* On places where Banks CBS branches situate or even places where Banks branches not suitable-thro similar correspondent /courier arrangement)
General:
1- Customized MIS of data in whichever way desired. 2- Interface between Finacle and CMS Software.
Corporation Bank
Banks has been always aiming to create values for its customers. Looking beyond traditional banking, the Bank introduced an array of other products and services to different customer segments. Cash Management Services is one such solution offered by the Bank to the Corporate customers. Every organization has receivables to collect from its dealers/ depots/ customers. Every revenue collected by the organization gets paid in one form or the other. Collection And Payment Services (CAPS) provides customized solutions to corporates' needs in liquidity management.
Corp Instant Services - Next Day (* for cheques drawn on locations where Corp Bank has branches)
such as dispatch of payout instrument to beneficiary is also made available. All these are available at a very competitive price exclusively for corporates.
PDC Hub
Considering the huge market available and market demand for collection of PDC cheques, PDC Hub was setup exclusively for handling bulk PDC cheques received from Finance Companies, Banks etc. towards repayments loans extended by them.
Speed Remittance :
Under this arrangement, the NRIs can send remittances through exchange houses across globe. The exchange houses send the details to our Nodal branch (PPC Branch) at Bangalore who in turn credit the same to the beneficiaries accounts maintained in any of our branches. In case the beneficiary account is not held in our Bank, a pay order can be issued at the destination, which can be collected by the beneficiary.
Payment Gateway :
The Division, with futuristic view in mind where web trade is taking shape gradually in India especially amongst urban population, has decided to offer payment gateway solutions to corporate having its own trading sites on Internet. The product envisages providing buyers having account with our Bank an opportunity to pay for the purchases made on the net. Through this product our corporate customer will get wider base for selling their products
Local Cheque Collections 1- One of the largest network spanning over 488 locations. 2- Courier pick-up can be provided. 3- Process flow can be structured to suit the companys requirements.
Upcountry Cheque Collections 1- Coverage of over 3919 locations with tie-ups with correspondent banks 2- Capability to process cheques drawn on any location in India. 3- Assured credit given with funds pooled at any ICICI Bank location. Instrument level tracking of instruments to ensure faster realization.
Cash Collections
1- Cash Collection from dealers and business associates on behalf of companies. 2- Cash pick-up facility in 28 locations. 3- Customized MIS for cash collection.
Payment Products
Anywhere Banking 1- Cheques issued payable at par at various ICICI Bank locations . 2- Single account to be operated at any ICICI Bank branch for this facility. 3- Ideal for small value, large volume payments.
Fund Transfers
1- Online transfer of funds between accounts maintained with any branch of ICICI Bank.
Cheque Writing
1- Cheques can be issued on behalf of companies 2- Capability of processing large volumes of cheques in a short turnaround time 3- Capability of printing facsimile signatures 4- Capability to print beneficiary advice and dispatch 5- Ideal for bulk payments such as pension payments, gratuity payments.
At Par Payments
1- Services can be availed for the at par payment of dividend warrants /interest warrants/ refund order/redemption payments/brokerage payments 2- Simplified and streamlined procedures ensuring smooth process flow Online validation of instruments before payment ? Regular reconciliation statements provided by the bank 3- Covering over 100 major locations through own network (90%of the payments) Arrangement with correspondent banks thereby covering over 200 locations through instruments based payments 4- ECS credit facility at all available locations
Pay Quick
1- This product caters to the customers requirement of large volume of Demand Drafts/Pay orders at over 1617 HDFC Bank and correspondent bank locations. 2- It provides the Option to forward data in soft copy form (floppy) in a secure environment. 3- It gives Easy data transferability from the Corporate office to HDFC Bank. 4- Multiple payment instructions through one file. 5- Upload option for bulk issuance resulting in quick and error free delivery. 6- Payment instrument to include payment details. 7- Facility to mail to beneficiary directly. Also the committed courier turn around time enables you to make payments as close as possible to the payment date - resulting in additional cost savings. 8- Various value added MIS 9- One Stop dedicated Service Desk at our Centralized Cash Management Operations Unit for prompt attention to your queries 10- Extensive coverage - over 500 locations. 11- Status of DD - paid / unpaid - can be provided on HDFC Bank location on a case-tocase basis.
Collection services
HDFC Banks Collection services are aimed at ensuring quick realization of local and outstation cheques and providing the funds in a central collection account. This enables the corporate to manage their funds flow position most effectively from a central location. This service can be availed with/without a current account with HDFC Bank.
Clean Collections
1- Cheques drawn on any locations, which are not covered, by HDFC Bank or their correspondent bank are also collected at any of their locations and proceeds credited to Customers account as soon as credit is received by HDFC Bank. HDFC Bank's comprehensive MIS includes: 2- Daily report of deposits made at various locations. 3- Location wise report 4- Credit Forecast report 5- Monthly cumulative report - date wise / location wise. 6- Monthly charging statement. 7- Monthly cheques return statement. 8- Customized reports as per mutual agreement.
Standard Chartered
Standard Chartered is highly recognized as a leading cash management supplier across the emerging markets. Their Cash Management Services cover local and cross border Payments, Collections, Information Management, Account Services and Liquidity Management for both corporate and institutional customers. With Standard Chartered's Cash Management services, the corporate will always know their exact financial position. The corporates have the flexibility to manage their company's complete financial position directly from the computer workstation. The corporates will also be able to take advantage of the banks outstanding range of Payments, Collections, Liquidity and Investment Services and receive comprehensive reports detailing their transactions. With Standard Chartered, the corporates have everything it takes to manage their cash flow more accurately. 1- Payments Services 2- Collections Services 3- Liquidity Management
subsequent reconciliation process can jeopardize the whole process. With Straight2Bank Channels the customer can now track the exact status of each payment through timely reports that can be uploaded seamlessly into their companys system.
Domestic payments
1- Local Bank Cheques/ Drafts/ Cashiers Order 2- Corporate Cheque 3- Direct Credits - ACH/GIRO/Credit vouchers 4- Local Bank Transfers (RTGS) 5- Book Transfers (Account transfer between Standard Chartered branches) 6- Payroll
1- Receivables Management - ensuring receivables are collected in an efficient and timely manner to optimize utilization of funds. 2- Risk Management - ensuring effective management of debtors to eliminate risk of returns and losses caused by defaulters and delayed payments. 3- Inventory Management - ensuring efficient and quick turnaround of inventory to maximize returns. 4- Cost Management - reducing interest costs through optimal utilization of funds.
Solution:
The Standard Chartered Collections Solution leverages the Bank's extensive regional knowledge and widespread branch network across their key markets to specially tailor solutions for the customers regional and local collection needs. This Collections Solution, delivered through a standardized international platform, has the flexibility to cater to the customers local needs, thus enabling them to meet their objectives of reducing costs and increasing efficiency and profitability through better receivables and risk management. The key components of the banks solution include the following:
1- Extensive Clearing Network 2- Guaranteed Credit 3- Comprehensive MIS 4- System Integration 5- Outsourcing of Collection
Guaranteed Credit
To help the corporate manage their cash inflow from their accounts receivable more efficiently, Standard Chartered can arrange for guaranteed (subject to prior agreement) credit to their account for cheque collections. The customers local and foreign currency cheques will be credited to their account on a fixed date even if the Bank is not in receipt of the funds from the clearing house or correspondent bank.
Comprehensive MIS
The Bank understand the importance of timely and accurate information regarding accounts receivable to help the corporate effectively manage their receivables and debtors, and minimize losses caused by delayed receipts and defaults. The Corporate can also better manage their buyers' requirements and improve their inventory management. Based on the customers choice of Straight2Bank channels, multiple, detailed reports are delivered to them via email, fax, Straight2Bannk Access (Host-To-Host channel) or Straight2Bank Web (Internet Banking Channel). These reports are tailored to the customers needs and provide details such as invoice number, drawer name, customer reference number, debtor code, special narration, remarks and any other information the customer have requested for. Here are some of the comprehensive reports the Standard Chartered solution provides the customer with: 1- Activity Reports e.g. information on collections activity for the period 2- Deposit Rconciliation Reports e.g. deposit confirmation 3- Return and Reversals Report e.g. information on cheques returned 4- Drawer Summary Report e.g. information on drawers
The Standard Chartered collection platform can be integrated with the corporates accounts receivable system to enable auto reconciliation for their accounts receivable. They also get fully reconciled receivables files with invoice details and amounts matched against receipts. In addition, Straight2Bank Web (Internet Banking Channel) can also be used as an electronic channel to transmit collection information such as DDI (direct debit initiation) files or invoice number (Account Receivable) details to the Bank. We also provide the option of transmission of files and MIS through Straight2Bannk Access (Host-To-Host channel).
Outsourcing of Collections
Standard Chartered supports the corporates complete collection cycle. These services cover: 1- Courier pick-up service, which is available for cheques from the Corporates office, dealers' and distributors' offices, from PO Boxes etc. 2- Clearing of instruments whether local or foreign currency through the clearing houses, directly by Standard Chartered or through their correspondent bank network. 3- Electronic collection services through the ACH. 4- Data capture of information. 5- Reconciliation activities.
Types of Collections
The Bank provides collection services for: 1- Local currency cheques 2- Foreign currency cheques 3- Lock box services Retail and Wholesale 4- Direct Debits 5- Credit Card Collections 6- Inward Telegraphic Transfers
With a comprehensive cash management solution, companies are able to compete with low operating and administrative costs, with more focus on better control of their cash flow and efficient use of working capital .The right solution can even enhance the relationships with customers and suppliers by helping them to be more efficient and reducing non-productive activities .It is therefore important to select a cash management bank that offers a complete and proven solution to deliver the results the customers expect to achieve.
Chapter 5
Findings & Conclusions
The above chart gives a clear explanation regarding the Cash Management infrastructure provided by all the three sectors. The network, technology and the corporate relationship services provided by all the three sectors are highly sophisticated and good but the scalability, marketing provided by the Public sector is low in terms of the Private and MNC sector. As well as the services provided by the public sector is not fairly good and up to the standard. As Cash management is constantly changing to meet the needs of the corporate treasurer. The challenge for both corporation and provider is to keep up with developments, technology, changing regulations and fitting these in with normal business. A changing regulatory environment, new technology and mergers that expand the scope of traditional banking are redefining the traditional treasury management paradigm for both banks and corporations. Electronic commerce is evolving far beyond simply ordering goods online or buyer-to supplier commerce. In a vast country like India Providing Cash Management Services do posses a challenge to the Cash Manager as well as the banks. Considering the present Indian scenario, where Cheques are the basic form of payment and cheque clearing takes a long time, cash management services need to devise innovative methods and means to expedite the clearing to benefit the corporate customer. As the Indian economy becoming an open market economy, residents may maintain accounts in other countries and non-residents may hold accounts in India. As a result, Indian treasurers may often find themselves managing cash across geographies and time zones. In India the transaction types run from the classic paper cheque to the latest Internet initiated electronic payment. Corporations initiate and receive paper-based transactions, as well as high value and low value electronic transactions on a daily basis. Expectations from new services may not eliminate or fully replace the older traditional services. Change will be gradual but, probably, it will be firm. Fee structures for cash management services in India vary from bank to bank and also from customer to customer. Many banks price the services based upon the overall relationship, especially for
multiple product solutions. As Indian banks become more consultative and total solution oriented rather than product-driven, pricing will become even more customized. Corporate treasurers will consider the amount they can save on banking fees and the level of efficiency in their departments as a sequel to the new cash management services. After they have negotiated the best possible price, treasurers then focus on the return on excess balances.
The above Chart gives the explanation of the SWOT analysis and the competition in the cash management services in the market. It tells about the products offered and the services it provides.
cost savings are presented by the banks. Multinational corporate with complex treasury operations admire their respective banks expertise and ability to offer creative solutions. There are some common requirements related to basic cash management systems. Flexibility, reliability, security and stability have been cited as vital parameters for any electronic banking system. The systems should be tailored to provide pertinent reports and the ability to upgrade easily in future. The technology should allow real-time cash management with strategic banking partners. It should integrate easily with legal framework in place. It should lower operating costs and resolve disputes quickly by providing secure and legally enforceable audit trails. It should be capable of reducing risk of fraud in electronic funds transfers and other treasury activities. It should also be able to use a low-cost public network infrastructure like Internet, which eliminates the need for dedicated leased lines. For instance, availability of requisite bandwidth for Internet connection is still a problem faced by various financial institutions. With a highly technology savvy there are several exciting new opportunities for both user and provider in the cash management arena. Cash management worldwide is constantly evolving to meet the needs of the corporate treasurer, take advantage of new technology and support customers as they move into new markets. The challenge for both company and service provider is to keep up with developments in technology and changing regulations and espouse them to their normal business. The key to success will be active partnerships between corporations and their providers as no one will be able to keep up with all developments on their own. Because of the mounting importance of fee-based financial services, all banks need to finetune their strategies, if they want to harness the potential in this area. They need to appreciate the dynamics of the new fee-based market, which is driven by the growth of the Internet and inter-connect applications. But it wont be easy for all banks to capture their share and profit of the swiftly expanding fee-based market. Taking advantage of the opportunities and avoiding the threats of unprofitable products, insufficient customer service, and diverse IT applications entails an understanding of the market place, the needs and expectations of the customer and of course the competition. It is an important point to note that offering fee-based services is no longer a choice today to the beleaguered banker. It is a desirable compulsion to thrive. Managing cash in the emerging milieu will require a new mind-set of banker and his client.
BIBLIOGRAPHY
Internet: Websites
1- www.google.com
2- www.wikipedia.org/
3- http://wiki.answers.com
4- http://www.slideshare.net
5- www.wikipedia.org/inventory
6- www.pdfsearchengine.com/cashmanagement
7- www.scribd.com
Books: