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Treasury Management in Banking
April 2025 Examination
Q1. Traditionally, only Central
Banks or major Commercial Banks like SBI etc. had the strength of providing
Treasury products & services. Now even smaller banks duly authorized by RBI
& large Corporates are providing Forex, MM and Derivative products to various
market participants. Enumerate and describe the purposes for which a
Banks/Corporate Treasury exists and allows online business thru CCIL’s FX
Retail platform. (10 Marks)
Ans 1.
Introduction
Treasury
management is a vital function in banking and corporate finance, designed to
optimize financial resources, maintain liquidity, mitigate risks, and maximize
profitability. Traditionally, Central Banks and major commercial banks like the
State Bank of India (SBI) were the primary providers of treasury products and
services, including Forex, Money Market (MM), and Derivative products. These
institutions had the financial strength, regulatory support, and infrastructure
required for complex treasury operations. However, technical advances,
financial market liberalisation, and RBI regulatory changes have enabled
smaller banks and major
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Q2. Explain with example, how the
Clearing Corporation of India Ltd (CCIL) provides the platform for Trading and
settlement of various Forex, MM & Derivative Products with the Trading
members and RBI. (10 Marks)
Ans 2.
Introduction
The
Clearing Corporation of India Ltd (CCIL) is a pivotal institution in the Indian
financial market, providing a secure and transparent platform for trading and
settlement of Forex, Money Market (MM), and Derivative products. Established in
2001 under the guidance of the Reserve Bank of India (RBI), CCIL plays a
critical role in ensuring financial stability, minimizing counterparty risk,
and enhancing market efficiency. CCIL ensures transaction settlement as a
central counterparty (CCP) for all trades, boosting financial system trust and
liquidity. It facilitates RBI regulation and assists banks, financial
institutions, and corporations. Real-time trading and settlement solutions on
CCIL's FX-CLEAR and FX-Retail systems enable smooth participation in Forex, MM,
and Derivative markets. Understanding CCIL's trading and settlement
Q3. “A prudent liquidity/Cash
management ensures bank’s solvency, profitability and overall stability/growth
in an economy”
a. Discuss The impact on liquidity
and inflation when CRR increases and reduces respectively. (5 Marks)
Ans 3a.
Introduction
Cash
Reserve Ratio (CRR) is a regulatory tool used by the Reserve Bank of India
(RBI) to control liquidity and inflation in the economy. It is the percentage
of a bank's total deposits that must be maintained as reserves with the RBI. By
adjusting the CRR, the central bank influences the amount of money available
for lending, thereby affecting liquidity, credit growth, and inflation.
Understanding the impact of changes in CRR on liquidity and inflation is
crucial for
b. Highlight the differences between
Cash Reserve Ratio and
Statutory Liquidity Ratio & its impact on banks profitability. (5 Marks)
Ans 3b.
Introduction
The
RBI requires CRR and SLR to regulate liquidity and sustain financial stability.
Both control money supply and inflation, but their goal, calculation, and
influence on bank profitability vary. SLR is the proportion of a bank's deposits
held in liquid assets like government securities,
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