Page 75 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 4.2 Functions of Treasury Management

The various functions of domestic treasury are—
(a) Maintenance of CRR/SLR

(b) Deployment of surplus money in S.T. or L.T. instruments - Liquidity Management
(c) Drawls of refinance limits - Liquidity Management
(d) Maximizing returns through trading and retailing in securities -Investment Management

Maintenance of CRR

1. Section 42(1) of the RBI Act empowers the RBI to stipulate ratio to be maintained - presently
4.75% w.e.f. 02.08.2012.
2. Can be any ratio between 3 and 20%.
3. Ratio is required to be maintained on the Demand and Time liabilities of banks excluding
inter-bank dealings.
4. Balances with the RBI and also those in currency chests are eligible for computation but
not balances with other banks and liquid cash held by individual banks.

5. Required to be maintained on 14 days period on a fortnightly average basis.
6. 70% on daily average basis to be maintained throughout the fortnight.
7. Defaulting banks are not allowed access to refinance/rediscounting facilities.

Maintenance of SLR

1. RBI has authority to stipulate SLR up to 40% of NDTL of banks - presently 23% w.e.f.
02.08.2012.
2. Investments in approved liquid assets are eligible for computation.
3. Required to be maintained on daily basis but amount calculated on the basis of NDTL of
second preceding fortnight.
4. Cash held by banks in their safes, other banks and held by them with RBI in excess of CRR
requirements are eligible for SLR requirements.

4.3 Liquidity Management

1. Treasury branch/department works out the liquidity requirements on a day to day basis
taking into account the likely inflows and outflows which can be as under:
Inflows Outflows
(a) Refinance availed Refinance repaid

(b) Currency chest deposits Currency chest withdrawals
(c) Net Clearing receipts Net Clearing payments
(d) Food Credit repayment Food credit disbursal
(e) Remittance received in RBI A/cs Remittances made out of RBI A/cs
(f) Call lending's repaid Call borrowings repaid

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