Domestic and Mid-Office operations of the Treasury Department of Union bank of India

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Domestic and Mid-Office operations of the

Treasury Department

UNIVERSITY OF MUMBAI

A PROJECT ON:

Domestic and Mid-Office operations of the Treasury Department of Union bank of India

SUBMITTED BY:

       Mr. BHAVIN. SHETHIA

     PROJECT GUIDE:

  Mr. VIVEK MHATRE

MASTER OF MANAGEMENT STUDIES

                                YEAR 2008 - 2010

Vivekanand Education Society’s

Institute of Management Studies & Research,

Chembur, Mumbai


DECLARATION

I,                                                                                                         Student of MMS

                                                                                                                            , hereby declare

that I have completed the Project on                                                                                              

                                                                                     in the academic year                        

The information submitted is true and original to the best of my knowledge.

Signature of the Student


ACKNOWLEDGEMENTS

I express my sincere thanks to our project guide Shri. Vivek Mhatre of Treasury Department of Union Bank of India for giving me the opportunity to work in his department. I am grateful for the technical guidance, help, motivation, suggestion, resources & facilities provided to me for successful completion of my project work in time.        

I am thankful to Shri. Hemant Joshi, Director of Vivekanand Education Societies Institute of Management Studies and Research for providing me with valuable guidance with regards to project.        

I am grateful to my parents, without whose support this would not have been possible. I owe special thanks to Mr. Telang for helping me.I would also like to thank

Mr S.S. Dixit

Mr. A.G Surti

Mr Ashutosh

Mr. Ajit Hirlekar

Mr Omprakash

Mr Sandip

Mrs Mahrukh Nariman

Mr Chandrakumar

For the help, guidance and suggestions that helped me to complete my project.


ABBREVIATIONS

HTM: Held To Maturity

AFS: Available For Sale

HFT: Held For Trading

MTM: Mark to Market

SGL: Subsidiary General Ledger

RSA: RTGS Settlement Account

CBLO: Collateralised Borrowing and Lending Obligation

TB: Treasury Bills

VaR: Value at Risk

CCIL: Clearing Corporation of India Limited

RTGS: Real Time Gross Settlement

UBI: Union Bank of India

OMO: Open Market Operations

NDS: Negotiated Dealing System

SGL: Subsidiary General Ledger


ABSTRACT

Treasury is a platform for generating bulk of banks non-interest income by way of dealing in different financial instruments. Besides this treasury plays a significant role in complying with various regulatory and statutory requirements.

Hence treasury plays an important role in the Banks operation.

The project begins with an introduction about the treasury department, its various sub- departments and functioning. This is followed by domestic operations of the treasury departments, its various instruments and categorization of the securities. The project also covers the mid-office of treasury and its operations.

The report is a study project on the treasury operations based on the manuals, reports and interaction with the staff of the department.


Table of Contents        

        


Overview of the Banking Sector in India and Union Bank

Banking Sector in India

The Indian banking scenario witnessed a significant development in the recent years with the entry of private banks and their focus on retail banking and convergence of services. The business models of the leading players are adapting to this impending change as banks widen the spectrum of savings and loan products they offer. Private banks are the best positioned to acquire market share in the emerging scenario. A change is expected to make mergers between banks and Foreign Institutional Investors (FIIs) possible, which will benefit large private bank group(s). Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. During the Mogul period, the indigenous bankers played a crucial role in lending money and financing foreign trade and commerce. During the days of the East India Company, it was the turn of the agency houses to carry on the banking business. The General Bank of India was the first Joint Stock Bank to be established in 1786. The others, which followed the suit, were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906, while the other two failed in the meantime. In the first half of the 19th century, the East India Company established three banks: the Bank of Bengal in 1809, the Bank of Bombay in 1840, and the Bank of Madras in 1843.

The Bank of Bengal, the Bank of Bombay, and the Bank of Madras, also known as Presidency Banks, were independent units and functioned well. These three banks were amalgamated in 1920 and a new bank, i.e., the Imperial Bank of India was established on January 27, 1921. With the passing of the State Bank of India Act in 1955, the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. The Reserve Bank, which is the Central Bank, was created in 1935 by passing the Reserve Bank of India Act, 1934. In the wake of the Swadeshi Movement, a number of banks with Indian management were established in the country, namely, Punjab National Bank Ltd., Bank of India Ltd., Canara Bank Ltd., Indian Bank Ltd., the Bank of Baroda Ltd., and the Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and on April 15, 1980, six more commercial private sector banks were also taken over by the government. The banks operating in the present commercial banking system in India may be distinguished into Public sector banks, Private sector banks, Foreign Banks, Co-operative banking sector, and Development banks.

The process of globalization and liberalization has also influenced the Indian banking industry. In the post-liberalization period, there has been an ardent need to bring about structural changes in the Indian banking system so as to make it economically viable and competitively strong. In the changed environment, a series of reformative steps has been undertaken by the Government of India and the Reserve Bank of India on the basis of the recommendations of the Narasimham Committee to improve the working of banks in line with the international banking practices. The changes that have come about are greater degree of operational autonomy, deregulation of interest rate system and free pricing of products, consolidation and restructuring of weak public sector banks, freedom to open new branches, improved credit delivery mechanism, legal reforms to expedite recovery of bank dues, etc. The emergence of new private sector banks as well as the entry of new foreign banks in this era has thrown tremendous challenges in the form of tough competition among the Indian banks. As a result, cost consciousness, credit management, efficient utilization of all resources, profitability and overall efficiency have got paramount importance for the survival and growth of the banking business. The spirit of competition and the emphasis on profitability are also forcing the public sector banks towards greater profit orientation in a departure from the socialistic approach followed for decades

The process of globalization and liberalization has exerted huge influence on the Indian banking sector. The ongoing reforms in the banking sector, with their thrust on transparency, efficiency and profitability, have forced the Indian banking sector to adopt suitable strategies with focus on productivity, profitability, competitiveness and sustainability


Union Bank of India

The Union Bank of India was built up in twentieth century and inaugurated by the Father of the Nation, Mahatma Gandhi. The bank with its efficient value-added services, sustained growth, consistent profitability and development of new technologies    has ensured complete customer delight, living up to its image of, “GOOD PEOPLE TO BANK WITH”.

Union Bank of India is a Public Sector Undertaking consisting of 55.43% Share Capital held by the Government of India. Institutions, Individuals and Others presently hold the rest 44.57% of Share Capital. Union Bank of India (UBI) is one of India's largest state-run banks and is also listed on the Forbes 2000.

UBI has been ranked at 5th position among the nationalized banks in India.

Overview on banks deposits and advances:

Business offered by Union Bank of India

Business of Union Bank of India is principally divided into three main areas:

  • Corporate financial services,
  • Retail financial services and
  • Agricultural financial services, along with other allied services.

In addition bank also provides fee-based services including distribution of third party products.

Union Bank of India’s banking operations for corporate and commercial customers include a range of products and services for large corporate customers as well as for small and medium-sized businesses. Loan products include term loans for project

Funding, including the creation or improvement of assets, as well as short-term loans, cash credit, export credit and other working capital financing and industry and trade related products. Bank also provides credit substitutes such as letters of credit and guarantees. In addition, bank provides fee-based products and services such as cash management services.

As part of corporate banking business, bank provides financial services to Small and Medium Enterprises (SMEs) and Small Scale Industries (SSIs). Products for these sectors are intended to facilitate the establishment, expansion and modernization of businesses, including the acquisition of fixed assets, plant and machinery and meeting working capital needs. Bank generally stipulates flexible security requirements to SME and SSI borrowers to help make credit more accessible to them.

Bank’s retail banking business provides financial products and services to retail customers. It provides to its customers housing, retail trade, automobile, consumer, education and other personal loans and deposit services, such as demand, savings and fixed deposits. In addition, distribute products such as global debit cards and global credit cards. It provides utility services such as bill payment; distribute third-party products, including mutual fund products and general and life insurance policies.

It maintained its focus on addressing the needs of agricultural customers and offer specialized products and services to the agricultural sector. Union Bank of India offer direct financing to farmers for production and investment, as well as indirect financing for infrastructure development and credit to suppliers of agricultural inputs.

Corporate Vision:

“To become the bank of first choice in our chosen area by building beneficial and lasting relationship with customers through a process of continuous improvement.”

Corporate Mission:

  1. A logical extension of the Vision Statement is the Mission of the Bank, which is to gain market recognition in the chosen areas.
  2. To build a sizeable market shares in each of the chosen areas of business through effective strategies in terms of pricing, product packaging and promoting the product in the market.
  3. To facilitate a process of restructuring of branches to support a greater efficiency in the retail banking field.
  4. To sustain the mission objective through harnessing technology driven banking and delivery channels.
  5. To promote confidence and commitment among the staff members, to address the expectations of the customers efficiently and handle technology banking with ease.

Access to UBI

The Union Bank of India has 2558 branches, which are under CBS. Presently 1790 ATMs spread out across India both Onsite and Offsite. All the ATMs are inter-connected through the Bank’s ATM Switch, thus facilitating on-line operations in case of CBS customers. The Bank is a member of Cash Tree consortium and also has bilateral arrangement with State Bank of India, enabling the Bank’s ATM cardholder access to over 20000 ATMs across the country. UBI Net connects 65 Offices and 984 branches located in 323 centers, facilitating speedier transmission of MIS data (Network Map). The network also facilitates the implementation of Core Banking Solution, apart from DEMAT services, Cash Management services, fund transfers, messaging system, etc.


Introduction to Treasury Department

Treasury management refers to fund and revenue at the disposal of the bank and day-to-day management of the same. The treasury acts as the custodian of cash and other liquid assets. The art of management within the acceptable level of risk, the consolidated funds of bank optimally and profitably.

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Treasury is a platform for generating bulk of banks non-interest income by way of dealing in different financial instruments. Besides this treasury plays a significant role in complying with various regulatory and statutory requirements, managing the liquidity, deploying the resources in different time horizons, maximizing the yields and realigning its assets structure in accordance with its ALM requirements.

The treasury operates in a fast changing and innovative market scenario, with frequent emergence of complex financial products and services. New products and services are generally followed by changes in the regulatory requirements.

Treasury operates in an integrated environment with simultaneous access ...

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