treasury management in Indian bank

Topics: Bank, Central bank, Finance Pages: 12 (3370 words) Published: March 18, 2014

K J Somaiya Institute Of Management Studies and Research
Mumbai

“TREASURY MANAGEMENT IN BANKS”

By
Gaurav Jakhotia
Roll no.:024, PGDM-FS

Under the guidance of

Dr. Pankaj Trivedi
Dept. Head,
Finance,
SIMSR.

K J Somaiya Institute of Management Studies & Research
September, 2013
Overview of Indian Banking System:

The Indian Banking sector is rapidly globalizing, making it important for Indian banks to ensure their practices match those of the best banks in the world. Several Indian banks are pursuing global strategies, as Indian companies globalize and people of Indian origin increase their investments in India. It s observed that n surface level all Indian banks have same profitability but there are dramatic differences in underlying economics. Indian banks have historically had access to superior talent relative to other global banks leading to superior organizational performance on average. The Asset Liability management survey shows that treasury is significant contributor to bank earnings in India. The treasury divisions at Indian banks are integrated profit centers that manage capital market businesses and credit and market risk. It is encouraging to see that several attackers have leapfrogged on this front and are using sophisticated risk management techniques on par with those implemented by global banks. However, risk management practices in public sector banks are at a nascent stage and simply conform to regulatory and compliance measures. McKinsey’s survey on banking shows that Indian leading banks have done remarkably good in increasing shareholder’s value, allocating capital effectively, and contributing to GDP growth. However, in comparison to international peers, Indian banks could do more to foster financial inclusion and manage intermediation costs.

Measuring Asset Liability Management Performance:
The Asset Liability Management performance can be evaluated using six key parameters. Following figure shows these parameters.

Future of Indian Banking System:

The optimism about Indian economic growth portends well for Indian banks. There are, however, challenges in retaining profitability and growth in the next decade. The industry has to live up to high expectations from several quarters. This report highlights ten major trends that will shape Indian banking over next decade. It identifies two critical and complex challenges thrown at the industry for which solution has to be found with urgency. The report outlines potential solutions and articulates key imperatives for government and regulation. The ten major trends to watch out for are: 1.Retail banking will be immensely benefited from the Indian demographic dividend. Mortgages to grow fast and will cross Rs 40 trillion by 2020. 2.Rapid accumulation of wealth in rich households will drive wealth management to 10X size. 3.“The Next Billion” consumer segment will emerge as the largest in numbers and will accentuate the demand for low cost banking solutions. 4.Branches and ATMs will need to grow 2X and 5X respectively to serve the huge addition to bankable population. Low cost branch network with smaller sized branches will be adopted. 5.Mobile banking will come of age with widespread access to internet on mobile. 6.Banks will adopt CRM and data warehousing in a major way to reduce customer acquisition costs and improve risk management. 7.Margins will see downward pressure both on retail and corporate banking spurring banks to generate more fees and improve operating efficiency. 8.Banks will discover the importance of the SME segment for profitability and growth and new models to serve SME segment profitably will be found. 9. Investment banking will grow 10X, driven by demand from corporate for transaction support and capital market access. 10.Infrastructure debt will surpass Rs 45 trillion — half of which...
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