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Course: Treasury Management in Banking

Internal Assignment Applicable for September 2023 Examination

 

Question. 1. XYZ a Transnational bank is operating in over 50 countries and has assets worth USD 100 Billion. Due to high growth in the emerging markets in the last two decades, the bank has been facing challenges due to high growth in volumes and increasing product complexity. The major treasury operations of the bank include Trading and settlement, cash management, back-office management back office function, trade matching, reconciliation etc. Considering the mentioned challenges and growth of the bank, suggest whether integrating treasury operations would prove beneficial for XYZ Transnational Bank or not? Highlight the benefits of integrating the treasury operations. (10 Marks)

Answer: Integrating treasury operations can indeed prove to be beneficial for XYZ Transnational Bank, especially given its global presence, high growth in emerging markets, increasing product complexity, and challenges associated with volume growth. Here are some of the benefits of integrating treasury operations for the bank:

1. Enhanced Efficiency: Integrating treasury operations streamlines processes and eliminates redundancies across various functions such as trading and settlement, cash management, back-office management, trade matching, and reconciliation. This efficiency gain can lead to faster execution of transactions, reduced operational errors, and improved overall performance.

 

 

Question. 2. How Trade Finance, Forex, Liquidity Management and Treasury Management is a used by Banks, Corporates, Mutual Funds and Financial Institutions in India and worldwide as part of Integrated Treasury Management. Explain Integrated Treasury Management with an example. (10 Marks)

Answer: Integrated Treasury Management involves the comprehensive management of various financial functions within an organization, such as trade finance, forex (foreign exchange), liquidity management, and treasury management. These functions are interconnected and collectively managed to optimize resources, mitigate risks, and enhance overall financial performance. Here's how each of these components is used by

 

 

Question. 3. “A prudent Interest Rate management ensures bank’s profitability and overall inflation stability in an economy”

a.       Discuss the impact on Bank’s profitability and inflation when Repo increases and reduces respectively. (5 Marks)

Answer: The impact on a bank's profitability and inflation when the repo rate increases and reduces.

Repo Rate Increase:

The repo rate is the rate at which the central bank lends money to commercial banks in the short term. An increase in the repo rate typically has the following effects:

Impact on Bank's Profitability:

1.       Higher Borrowing Costs: When the central bank increases the repo rate, borrowing costs for commercial banks also increase. Banks need to pay more interest when borrowing from the central bank, which can squeeze

 

 

b.      Highlight the differences between Repo Rate and Reverse Repo Rate. (5 Marks)

Answer:  Repo Rate and Reverse Repo Rate are both key policy rates set by a country's central bank to influence the economy's monetary conditions. They play a crucial role in managing inflation, liquidity, and economic growth. Here are the differences between Repo Rate and Reverse Repo Rate:

1.       Definition and Purpose:

 

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