IntroductionThe treasury department in a bank is a critical function responsible for managing liquidity, investments, funding, and financial risk. To ensure effective execution and control, treasury operations are typically structured into three key components: the front office, middle office, and back office. This tripartite structure ensures that transactions are executed efficiently, risks are properly monitored,…
IntroductionIn the banking sector, treasury functions have traditionally been classified as cost centers, primarily focused on managing cash flow, maintaining liquidity, and minimizing financial risks and operational costs. However, in recent years, there has been a notable shift towards positioning treasury as a profit center—a unit that actively contributes to revenue generation through trading, investment,…
IntroductionTreasury management refers to the strategic administration of an organization’s financial resources, with the objective of optimizing the use of surplus funds, maintaining liquidity, minimizing the cost of funds, and mitigating both operational and financial risks. In the context of banks, treasury operations are essential for ensuring financial stability, managing risks, and supporting overall strategic…
IntroductionIntegrated Treasury Management refers to the consolidation of a bank’s domestic and foreign exchange treasury operations into a unified framework. Traditionally, banks maintained separate departments for managing domestic treasury functions—primarily focused on statutory reserve management and fund deployment—and foreign exchange treasury operations—focused on currency risk management and forex-related transactions. The evolution of treasury functions and…
(This post elucidates various terminologies used by banks in their dealing rooms for limit fixed to them in their day to day operations by their management) The Treasury operations in the forex (foreign exchange) market are between the banks. The inter-bank foreign currency operations are taking place for two purposes namely (i). Buying and selling…
In India, over 90% of Treasury operations, in the forex (foreign exchange) market are between the banks. The inter-bank foreign currency operations are taking place for two purposes namely (i). Buying and selling foreign currency on behalf of their customers as an intermediary. (ii). Proprietary trading (buying and selling currencies on its own account) with…
The treasury management (or treasury operations) can be explained as the management of the best possible use of surplus funds, maintain liquidity, reduce the overall cost of funds, and mitigate operational and financial risk. Traditionally, banks used to have two separate departments for treasury operations of a bank namely the domestic treasury/investment operations of a…
Buyers’ credit finance means finance for payment of imports in India arranged by the importer (buyer) from a bank or financial institution outside India. The suppliers’ credit means credits extended for imports directly by the overseas supplier instead of a bank or financial institution. Although both buyers’ credit and supplier credit are credit facilities to…
The salient features of the framework for Rupee denominated bonds overseas under External Commercial Borrowing policy are as follows. Eligibility to borrow: All corporate or corporate body, Real Estate Investment Trust (REIT) and Infrastructure Investment Trusts (REITs) are eligible to borrow under ECB policy. Investors in bonds: Any investor from a Financial Action Task Force…
The Net Stable Funding Ratio (NSFR) is a key component of the Basel III liquidity risk management framework, designed to promote long-term funding stability in banks. It complements the Liquidity Coverage Ratio (LCR) by addressing structural liquidity risk over a one-year horizon, thereby reducing banks’ reliance on volatile short-term funding. Purpose of the NSFR The…
