Treasury Management &

Forex
Liquidity Planning
Funding & Regulatory Aspects

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VENUGOPL RAJAMANURI

Introduction
RBI is the note issuing authority, It controls the currency in

circulation
This money in circulation is indicated by
i. Broad Money (M3) : This includes currency in
circulation, demand & time deposits with banks & post
office savings deposits
ii. Narrow money (M1) This includes currency in
circulation, demand with banks & post office savings
deposits
.The monetary policy of RBI is aimed at controlling the rate
of inflation and at ensuring stability of financial markets
.In order to achieve these objectives RBI exercises full
control over M3

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VENUGOPL RAJAMANURI

Reserve Assets
The Reserve assets refer to the cash deposited by

commercial banks with RBI to comply with CRR

and funds invested in government securities &
other approved securities to comply with SLR
requirements
By
increasing / decreasing SLR / CRR
requirements, RBI controls liquidity in the system

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VENUGOPL RAJAMANURI

Cash Reserve Ratio (CRR)

Minimum & Maximum levels were prescribed at

3% & 20% of DTL of the bank, under RBI Act,

1934.
The floor & Ceilings were removed with effect
from April 2007
Currently the CRR is 4% of DTL

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VENUGOPL RAJAMANURI

Statutory Liquidity Ratio (SLR)

Minimum & Maximum levels where prescribed at

25% & 40% of DTL respectively under Banking

Regulation Act, 1949.
Minimum requirement removed with effect from
January 2007.
Presently the SLR is 21.5% of DTL

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VENUGOPL RAJAMANURI

Demand & Time Liabilities (DTL)

DTLs main components are
i. Demand Deposits (SB, Current deposits;

margin money for LCs, overdue fixed deposits

etc)
ii. Time deposits
iii. Overseas borrowings
iv. Forward outward remittances in transit (FC
liabilities net of FC assets)
v. Other demand & time liabilities (accrued
interest, credit balance in suspense a/c etc)

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VENUGOPL RAJAMANURI

Exemptions from DTL Calculation

Net inter-bank borrowings / deposits with
maturity not exceeding 14 days
ii. Credit balances in ACU (US $) Accounts
iii. Transactions in Collateralized Borrowing &
Lending obligation (CBLO) with CCIL
iv. Demand & Time liabilities in respect of their
offshore Banking Units (OBUs)
i.

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VENUGOPL RAJAMANURI

Exclusions from the CRR Stipulation

i.
ii.
iii.
iv.
v.

Paid up capital, reserves, retained profits etc

Excess provision for income tax
Claims received from DICGC, ECGC etc
Liabilities arising on account of utilization of
limits under Bankers Acceptance Facility
Interbank deposits / term borrowing liabilities of
original maturity of 15 days and above and upto
1 year

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VENUGOPL RAJAMANURI

CRR Computation
Calculated on the basis of DTL, with a lag of one

fortnight
The DTL at the end of the previous fortnight will
form the basis for CRR calculation
Banks to maintain cash balances not falling below
70% of the amount required for CRR
No interest paid on CRR deposited with RBI

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VENUGOPL RAJAMANURI

SLR Computation
As on last Friday of the second preceeding

fortnight
SLR to be maintained in the form of the following
assets
i.
Cash balances (excluding balances
maintained for CRR)
ii. Gold
iii. Approved securities

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VENUGOPL RAJAMANURI

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Liquidity Adjustment Facility (LAF)

LAF refers to RBI lending funds to banking sector

through Repos
RBI also accepts deposits from banks under reverse
repos
RBI then provides liquidity to the bank
It conducts Repo / Reverse repo auctions daily for
overnight funds
Currently the Repo / Reverse repo rates are 8.25 %
and 7.25 % respectively [with effect from 16.09.2011]
Banks can borrow and lend overnight upto a
maximum of 100 % and 25% of their capital funds
respectively

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VENUGOPL RAJAMANURI

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Payment & Settlement Systems

Real Time Gross Settlement System (RTGS)
Negotiated Dealing System

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VENUGOPL RAJAMANURI

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RTGS
Fully activated by RBI from October 2004
Paperless clearing system
Settlements are on gross basis
All
inter
bank
payments
and
customer

remittances (currently minimum Rs 1 lac) are

settled instantly under RTGS

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VENUGOPL RAJAMANURI

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Negotiated Dealing System

An

electronic platform for facilitating dealing in

government securities and money market instruments
Introduced by RBI in February 2002
Used for
i. Automatic electronic reporting & settlement
ii. Auctions an electronic platform
iii. Trading platform for trading on a negotiated basis
iv. Trading by quote driven mechanism
.Membership is open to banks, primary dealers, MFs,
FIs and insurance companies which maintain SGL
accounts with RBI

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VENUGOPL RAJAMANURI

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NDS-OM
An anonymous order matching system introduced

in August 2005
Improvement over NDS
The identity of counter party is not disclosed till
the offer is accepted
System is purely order driven with orders being
matched on price / time priority
NDS-OM co exists with telephone based trading
mechanism on NDS

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VENUGOPL RAJAMANURI

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Other Payment & Settlement Systems

FX Clear : Forex dealing system developed by

CCIL for forex transactions

Depository Institutions (NSDL & CSDL)
NEFT (National Electronic Fund Transfer System)
Structured Financial Messaging System (SFMs)
similar to SWIFT

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