Treasury : New Profit Centre Of Banks

Later the inroads to different kinds of other profit making businesses opened for banks with RBI intervention and liberalization of the Indian economy. Slowly but steadily banks started venturing into new markets and dealing in different instruments like capital market, money market, foreign exchange market, bond market and derivatives market instruments to garner profit.

- Nilotpal Banerjee

Backdrop:

We know that main business of any bank is accepting deposit from its customers and lend it at a higher rate to generate income. But in last 20 years or so banking business has crossed many boundaries and ventured into many different kind of business to make profit. For executing so many different activities, banks have recruited huge manpower and they work in different departments across different offices.

However, amongst the various departments present in banks, treasury is one among the most important department and at the same time the least understood one. In most of the banks, treasury is attached to their corporate offices and people with highly specialized knowledge and skills work in it. In this article, we will provide a brief overview of these treasury operations and also learn how this department has evolved as a profit making machine for most of these banks in our country.

Bank Treasury in Initial Days:

Traditionally, the role of the Treasury in Indian banks was limited to ensuring the maintenance of the RBI stipulated norms for Cash Reserve Ratio (CRR) which mandates that a minimum proportion of defined demand and time liabilities be kept as deposit with the central bank without any return and Statutory Liquidity Ratio (SLR) which obliges banks to invest a specified percentage of their liabilities in notified securities issued by the Government of India and State Governments with some returns attached to it.