This document provides an overview of liquidity concepts, instruments, and theories of liquidity management for commercial banks. It defines liquidity as the ability to meet cash needs and discusses how banks estimate liquidity needs based on past loan and deposit fluctuations. The main types of liquidity risk are funding risk, asset liquidity risk, and interest rate risk. The document then outlines various instruments banks use to manage liquidity, including liquid assets like cash reserves and securities, as well as liquid liabilities like certificates of deposits and interbank borrowing. Finally, it discusses several theories of liquidity management that have developed over time, such as the commercial loan theory, shiftability theory, and anticipated income theory.
For Videos use the links below
0 Course Introduction:: https://www.youtube.com/watch?v=9km4aXTus5c
1 Financial system and Environment : https://www.youtube.com/watch?v=BC2bAftm43c
2 Participants in a Financial System: https://www.youtube.com/watch?v=IEv_y7_aR7o
3 Functions of a Financial System: https://www.youtube.com/watch?v=T73-Dd8RM4I
4 Financial System and its components: https://www.youtube.com/watch?v=ovkAjEO8YAw
5 Efficiency of a financial system: https://www.youtube.com/watch?v=8xEUtvKYvPc
A Presentation on Financial Derivatives. this covers it's definition, features, types, benefits, challenges and applications.
Derivative is defined as the future contract between two parties. It means there must be a contract-binding on the underlying parties and the same to be fulfilled in future.
Normally, the derivative instruments have the value which is derived from the values of other underlying assets, such as agricultural commodities, metals, financial assets, intangible assets.
For Videos use the links below
0 Course Introduction:: https://www.youtube.com/watch?v=9km4aXTus5c
1 Financial system and Environment : https://www.youtube.com/watch?v=BC2bAftm43c
2 Participants in a Financial System: https://www.youtube.com/watch?v=IEv_y7_aR7o
3 Functions of a Financial System: https://www.youtube.com/watch?v=T73-Dd8RM4I
4 Financial System and its components: https://www.youtube.com/watch?v=ovkAjEO8YAw
5 Efficiency of a financial system: https://www.youtube.com/watch?v=8xEUtvKYvPc
A Presentation on Financial Derivatives. this covers it's definition, features, types, benefits, challenges and applications.
Derivative is defined as the future contract between two parties. It means there must be a contract-binding on the underlying parties and the same to be fulfilled in future.
Normally, the derivative instruments have the value which is derived from the values of other underlying assets, such as agricultural commodities, metals, financial assets, intangible assets.
RISK & RETURN UNDER SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT IS DESCRIBED, ALL THE DETAILED EXPLANATION OF TOPIC IS GIVEN UNDER THIS DOCUMENT.
CAN ALSO REFERRED FOR FINANCIAL MANAGEMENT, INSURANCE.
central bank is the father of all banks, main regulatory body of the nation which control and regulate all the banks of the country. central bank is the financial advisor to the government.
Financial system and markets:
objectives of financial system-
Concepts of financial system-
Financial concepts-
Development of financial systems in India-
Weakness of Indian financial system
RISK & RETURN UNDER SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT IS DESCRIBED, ALL THE DETAILED EXPLANATION OF TOPIC IS GIVEN UNDER THIS DOCUMENT.
CAN ALSO REFERRED FOR FINANCIAL MANAGEMENT, INSURANCE.
central bank is the father of all banks, main regulatory body of the nation which control and regulate all the banks of the country. central bank is the financial advisor to the government.
Financial system and markets:
objectives of financial system-
Concepts of financial system-
Financial concepts-
Development of financial systems in India-
Weakness of Indian financial system
The FinanceSuite Cash & Liquidity Management provides visibility, control and optimisation related to cash management and efficient liquidity planning.
The user-friendly design brings powerful functionalities to automate the daily cash management processes. The integration in SAP allows organisations to seamlessly extract all relevant data from the various SAP modules while performing its cash management functions independently of the financial accounting.
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
savings bank account services by karnataka bankAprameya joshi
the document starts with introduction to financial services then goes with comercial banks and then speaks about the profile of karnataka bank and savings bank account services of karnataka bank
liquidity decision, an introduction of liquidity decision, the importance of the liquidity decision, estimating the liquidity needs, instruments of liquidity, theories of liquidity decision, liquidity procedure in the banking system
17 Commercial Bank OperationsCHAPTER OBJECTIVESThe specific ob.docxaulasnilda
17 Commercial Bank Operations
CHAPTER OBJECTIVES
The specific objectives of this chapter are to:
· ▪ describe the market structure of commercial banks,
· ▪ describe the most common sources of funds for commercial banks,
· ▪ explain the most common uses of funds for commercial banks, and
· ▪ describe typical off-balance sheet activities for commercial banks.
Measured by total assets, commercial banks are the most important type of financial intermediary. Like other financial intermediaries, they perform the critical function of facilitating the flow of funds from surplus units to deficit units.
17-1 BACKGROUND ON COMMERCIAL BANKS
Up to this point, the text has focused on the role and functions of financial markets. From this point forward, the emphasis is on the role and functions of financial institutions. Recall from Chapter 1 that financial institutions commonly facilitate the flow of funds between surplus units and deficit units. Commercial banks represent a key financial intermediary because they serve all types of surplus and deficit units. They offer deposit accounts with the size and maturity characteristics desired by surplus units. They repackage the funds received from deposits to provide loans of the size and maturity desired by deficit units. They have the ability to assess the creditworthiness of deficit units that apply for loans, so they can limit their exposure to credit (default) risk on the loans they provide.
17-1a Bank Market Structure
In 1985, more than 14,000 banks were located in the United States. Since then, the market structure has changed dramatically. Banks have been consolidating for several reasons. One reason is that interstate banking regulations were changed in 1994 to allow banks more freedom to acquire other banks across state lines. Consequently, banks in a particular region are now subject to competition not only from other local banks but also from any bank that may penetrate that market. This has prompted banks to become more efficient in order to survive. They have pursued growth also as a means of capitalizing on economies of scale (lower average costs for larger scales of operations) and enhanced efficiency. Acquisitions have been a convenient way to grow quickly.
As a result of this trend, there are less than half as many banks today as there were in 1985, and consolidation is still occurring. Exhibit 17.1 shows how the number of banks has declined over time, thereby increasing concentration in the banking industry. The largest 100 banks now account for about 75 percent of all bank assets versus about 50 percent in 1985. The largest five banks now account for more than 50 percent of bank assets, versus 30 percent in 2001. JPMorgan Chase & Company is the largest bank in the United States with about $2.3 trillion in assets, while Bank of America Corporation has about $2.2 trillion in assets and Citigroup Inc. has about $1.9 trillion in assets.
Large banks have expanded over time by acquiring othe ...
General Principles of Lending:
When a request for a loan is received, it is important to ensure that the borrower has the legal capacity to borrow. The other matters upon which the information should be obtained are: the purpose of advance, the amount involved, the duration of the advance, the sources of repayment, the profitability of transaction, and, where applicable, the security offered. The most fundamental principle of all is that the bank should have confidence in the integrity, competence and continuing credit worthiness of the borrower.
• Know Your Customer:
While entertaining a proposal for advance, the branch has to first ensure compliance with the KYC norms.
• Pre- Sanction Stage:
Obtain/compile the following:
• Bio-data/declaration of assets owned by the borrower and guarantor along with latest income tax/wealth tax assessment copies and compilation of opinion reports.
• Particulars of immediate family members/legal heirs along with their father’s name and age.
• Audited balance sheets for the previous 3 years, estimated balance sheet for the current year and projected balance sheet for the next year.
• Particulars of existing borrowing arrangements and credit reports/no objection letters from existing banks if any.
• It should be followed by independent verification by the branch incumbent.
• Details of associate/group concerns, their borrowing arrangements and their latest balance sheets.
• No objection letter from term loan lender(s) if already financed by them and their permission/willingness to cede pari passu/ second charge on their security.
• The position of term working capital liabilities with various banks/FIs and details thereof viz., Limit, DP, Out standings, Irregularities (if any).
• Conduct a search/obtain a search report from Registrar of Companies to ascertain position of charges created already.
•
• Due Diligence:
• Branch Manager should do adequate Due Diligence before bringing an asset to the Bank’s books. This will avoid NPA.
• Thorough inquiry about the prospective borrower (with other banks, Financial Institutions, etc.) market intelligence, his past track record of performance and repayment of obligations, credit worthiness (Net Worth) must be done.
• Personal visit to his office/place of business will give an idea of his business.
• Processing of Applications:
While processing the applications, the following should be looked into and commented upon in the proposal:
• Due diligence on promoters’ background, their track record of repayment by checking with their existing bankers (NPA status) (any rephasements, any compromise entered into), credit worthiness, market reputation etc.
• Latest RBI defaulters’ list and willful defaulters' list —Company and their Directors.
• Bank’s loan policy.
• Contractual capacity of the borrower regarding borrowing powers/any restrictions on borrowings and names of persons authorized to borrow by verifications of:
• Partnership deed
The first step in undertaking effective and fit-for-purpose liquidity risk management is to understand precisely what it is. At all times a bank must be able to service its obligations as they arise, on both sides of the balance sheet. This means having the ability to be
able to fund assets throughout their life, and being able to meet demand for withdrawals of liabilities as and when they arise.
Ethnobotany and Ethnopharmacology:
Ethnobotany in herbal drug evaluation,
Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
Role of Ethnopharmacology in drug evaluation,
Reverse Pharmacology.
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
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We all have good and bad thoughts from time to time and situation to situation. We are bombarded daily with spiraling thoughts(both negative and positive) creating all-consuming feel , making us difficult to manage with associated suffering. Good thoughts are like our Mob Signal (Positive thought) amidst noise(negative thought) in the atmosphere. Negative thoughts like noise outweigh positive thoughts. These thoughts often create unwanted confusion, trouble, stress and frustration in our mind as well as chaos in our physical world. Negative thoughts are also known as “distorted thinking”.
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
2. LIQUIDITY
Ability to meet anticipated and contingent
cash needs.
Cash needs may arise from withdrawal of
deposits, liability maturities' and loan
disbursals.
A minimum criterion of liquidity is the ability
both to meet commitments when due and to
undertake new transactions when desirable.
3. ESTIMATING LIQUIDITY NEEDS
Banks strive to maintain adequate liquidity- too
much liquidity needlessly limits bank earnings, and
too little liquidity exposes a bank to the possibility
of costly emergency measures to secure needed
funds.
Liquidity should be sufficient to cover probable
fluctuations in loans and deposits, with a small
margin of excess liquidity as a safety measure.
4. Cont’d…
While liquidity needs cannot be predicted with
certainty, they can be closely determined by
reviewing past fluctuations in loans and deposits and
by keeping a careful watch on the current business
situation.
If a bank has carefully evaluated and planned for its
liquidity needs, it should hold a maximum liquidity
when deposits are up and loan demand is down.
5. LIQUIDITY RISK
There are three types of liquidity risks:1) Funding Risk
2) Asset Liquidity Risk
3) Interest Rate Risk
6. FUNDING RISK
It depends on the perception of the market of the
credit standing of the bank.
A bank approaching the market with unexpected and
frequent needs for funds would have adverse affect
on the willingness of the market to lend and raises
the cost of funds which is the prime driver of
profitability.
7. ASSET LIQUIDITY RISK
It arises when assets are not readily tradable. The
rationale of liquidity ratio is to make banks hold
more short-term assets than short-term liabilities.
Liquidity risk arises when maturities of assets
exceed those of liabilities.
8. INTEREST RATE RISK
Liquidity risk is closely related to interest rate risk.
If a bank desires to have more interest sensitive liabilities than
assets it reduces the liquidity position of banks.
When a bank structure its portfolio in order to achieve a
positive duration gap (assets>liabilities), the liquidity of the
assets is reduced.
If interest rates increases the value of long-duration assets will
decline more than short-duration assets and assets sales would
involve losses.
9. MANAGEMENT OF LIQUIDITY
In the context of increased competition and decreased profit
margins, the need to improve efficiency of operation through
competent liquidity management has become imperative.
Liquidity management consists of estimating the requirements
for funds and meeting them.
Funds requirement depends upon deposit inflows and
outflows and loan commitments.
A bank should devise a liquidity plan or strategy that balance
risks and returns.
10. CONT’D…
Liquidity need arising from deposits withdrawals and loan
demands can be estimated by preparing a sources and uses
of funds statements.
The sources and uses approach can be used to evaluate
the effects of deposit inflows and outflows and changing
loan demands on bank liquidity.
The structure of deposits method consisting of a list of
different types of deposit and the probability is another
way to estimate liquidity needs.
11. INSTRUMENTS OF LIQUIDITY
Banks traditionally have planned for liquidity through
their asset portfolios, constructing them so that some
assets can and will be liquidated as funds are needed.
More recently bankers have found that they can also
secure needed liquidity by increasing their liabilities.
Thus, bankers have 2 sources of managing liquidity:
1) Liquid assets
2) Liquid liabilities
12. Liquid Assets are:
1) Cash in hand- This includes the cash balance maintained
by a bank with itself.
The quantum of such cash balance depends upon the
experience and circumstances of each individual bank and no
hard and fast rules can be laid down.
2) Statutory Liquidity Ratio Statutory Liquidity Ratio refers to the amount that the
commercial banks require to maintain in the form of cash,
or gold or govt. approved securities before providing
credit to the customers. It is determined as percentage of
total demand and percentage of time liabilities.
13. Cont’d…
3) Balances with other banks- The cash balances maintained
by banks either with themselves or in current accounts with the
RBI are the most liquid assets and therefore, they can rightly be
termed as the first line of defense in times of trouble.
4) Money at call and short notice- These loans represents
mainly the loans given by one bank to another for a short period.
5) Investments- The banks also invest a significant portion of
their funds in stock exchange securities. These constitutes the
third line of defense in times of emergencies. These securities
mainly include:
14. Cont’d…
Government securities- They may be of 3 types
a) Stocks
b) Bearer bonds
c) Promissory notes
Semi-government securitiesThese includes debentures or bonds issued by quasigovernment organizations like improvement Trusts, Municipal
Corporations.
Shares and Debentures of joint companiesIt is done by commercial banks on a very marginal scale
because of uncertainty both regarding return as well as value.
15. Liquid Liabilities are:
1) Time Certificates of DepositsThey are negotiable and can be sold by the holder in the
market. These certificates bear different maturities ranging
from ninety days to one year and are offers with the interest
rates competitive with treasury bills and other similar money
market instruments.
2) Borrowing from other commercial banksThe second way in which the individual commercial bank may
create additional liabilities in order to acquire reserves is by
borrowing from other banks.
16. Cont’d…
Such loans are given on a one-day, unsecured basis. Rate on
bank loans is very sensitive to changing trends of supply and
demand in the money market.
3) Borrowing from Central BankCentral bank facilities are available generally in the form of
discounting or advances to meet day-to-day and seasonal
liquidity needs of commercial banks registered with the
central bank.
Normally such loans are relatively costlier and are available at
restrictive terms.
17. Cont’d…
4) Raising of Capital FundsCommercial banks can acquire reserves by issue of
shares carrying different features to suit varying
notions of investors.
Availability of funds through this source would
depend on public response to bank shares which in
its turn is essential conditioned by current dividend
rate and growth prospect associated with it.
18. THEORIES OF LIQUIDITY
MANAGEMENT
1) Commercial-Loan Theory
Originated in England during the 18th century;
A Commercial Bank must provide short term liquidating
loans to meet working capital requirements.
The bank should refrain from long term loans. Commercial
bank deposits are near demand liabilities and should have
short term self liquidating obligations.
The bank holds a Principle that when money is lent against
self liquidating papers, it is known as Real Bills Doctrine.
19. Cont’d…
The doctrine had some criticisms. They were A new loan was not granted unless the previous loan was repaid.
Banks should provide loans before the maturity of the previous bills
Due to Economic Condition the liquidity character of the
self liquidating loans are affected.
During Economic depression : goods do not move speedily into the normal channels of trade
Prices fall
Losses to sellers
No guarantee , even the transaction for which loan provided is genuine
and whether debtor will be able to repay the debt.
20. Cont’d…
Another criticism was that
It failed to take cognizance of the fact that the bank
can ensure liquidity of its assets only when they are
readily convertible into cash without any loss
Thus the Commercial loan theory was ignored
because of the criticisms of the DOCTRINE.
21. THE SHIFTABLITY THEORY
Originated in USA in 1918 by H.G. Moulton.
According to this theory, the problem of liquidity is not a
problem but shifting of assets without any material loss.
Moulton specified, ‘ to attain minimum reserves, relying on
maturing bills is not needed but maintaining quantity of assets
which can be shifted to other banks whenever necessary.
It must fulfill the attributes of immediate transferability to
others without loss.
In case of general liquidity crisis, bank should maintain
liquidity by possessing assets which can be shifted to the
Central Bank.
22. Cont’d…
Thus, as development took place the Commercial
Loan theory lost ground in favor of Shiftability
Theory
Blue chip securities which possess high degree
of shiftability, the commercial banks were ready
to buy them as a collateral security for lending
purposes.
23. Criticism During depression, the whole industry would be in crisis. The
shares and debentures of well reputed companies would fail to
attract buyers and cost of shifting of assets would be high.
Blue chip Securities will also lose their shiftability character.
Thus, both Commercial loan as well as Shiftability theory
failed to distinguish liquidity of an individual bank as well as
the banking industry.
24. THE ANTICIPATED INCOME
THEORY
Developed in 1948 by Herbert V . Prochnow.
Most striking Developments of commercial banks
that took place was in participation of term lending.
The banker plans the liquidation of the term loans
from anticipated earnings of the borrower.
Loan repayment schedules have to be adapted to
anticipated income.
Estimation of future earnings should be made.
25. Cont’d…
Banks must be able to anticipate the income from
the avenues where it is going to deploy its funds.
Must invest in term-lending, working capital
securities, but must also be secure about the
deployment and repayment of funds.
Bank must assess the potential of that person to
repay back (whether he has regular/high source of
income/not).
Applicable till now.
26. LIABILITY MANAGEMENT
THEORY
It emerged in the year 1960.
This is one of the important liquidity management theory.
The liability management theory holds that banks can
meet their liquidity requirements by bidding in the market
for additional funds to meet loan demand and deposit
withdrawal.
There
is
no
need
to
follow
old liquidity norms like maintaining liquid assets , liquid
investments etc.
27. Cont’d…
1)
2)
3)
4)
According to the liabilities management view, an
individual bank may acquire reserves from different
sources by creating additional liabilities against itself.
These sources include a number of items, some of
which are listed below:Issuance of time certificate of deposits;
Borrowing from other commercial banks;
Borrowings from the Central Bank;
Raising capital funds by issuing shares and by means
of retained earnings.
28. LIQUIDITY PROCEDURE
Effective liquidity management requires 3 steps:Identifying liquidity
Managing liquidity
Optimizing liquidity
These steps are interdependent , each requiring the
successful implementation of the other two to
optimally manage liquidity.
29. Cont’d…
1) Identifying liquidity It is the foundation on which the entire liquidity management
process depends. It involves understanding the balances and
positions of the institution on an enterprise-wide level.
Identifying liquidity is primarily a function of data gathering,
and does not include the actual movement or usage of funds.
2) Managing liquidity It involves using the identified liquidity to support the bank’s
revenue generating activities.
This may include consolidating funds , managing the release
of funds to maximize their use.
30. Cont’d…
3) Optimizing liquidity It is an ongoing process with a focus on maximizing
the value of the institution’s fund.
It requires strong and detail understanding of bank’s
liquidity position across all currencies, accounts,
business lines and counter parties.
The biggest challenge in the liquidity management
process is the limited and resources available to it.
31. Highlights of the RBI’s Third Quarter
Review of Monetary Policy for 2013-14
Short-term lending rate or repo rate reduced
by 0.25 per cent to 7.75 per cent, first time in
nine months.
Reverse repo rate stands adjusted to 6.75
per cent.
Cash reserve ratio (CRR) cut by 0.25 per
cent to 4 per cent.
Bank rate stands adjusted to 8.75 per cent.
SLR rate is 23 %.
32. Current rates on 26/Oct/2013
Bank rate
9%
Repo Rate
7.50%
Reverse Repo Rate
6.50%
Marginal Standing Facility Rate
6%
CRR
4%
SLR
23%
Base Rate
9.80%--10.25%
Savings Deposits Rate
4%
Term Deposit Rate
8.00%--9.00%
91-day T-bill
8.7712%
182-day T-bill
8.6832%
364-day T-bill
8.7077%