PROJECT REPORT

CASH MANAGEMENT
AT
-ICICI BANK, HYDERABAD
MASTER OF BUSINESS ADMINISTRATION

Submitted by

(Student Name)

HT NO: 21WJ1E****

Under the Guidance of

Mr. K. SANDEEP REDDY

ASSISTANT PROFESSOR

School of Management studies

GURUNANAK INSTITUTIONS TECHNICAL CAMPUS

(Autonomous)
 PAGE
CHAPTER CONTENTS
NO.
INTRODUCTION
 Objectives of the study

CHAPTER - I  Need for the study

 Scope of the study

 Research Methodology

CHAPTER - II REVIEW OF LITERATURE

CHAPTER -
COMPANY PROFILE
III
CHAPTER -
THEORETICAL FRAMEWORK
IV
DATA ANALYSIS &
CHAPTER - V
INTERPRETATION
 Findings
CHAPTER -
 Suggestion
VI
 Conclusion
Annexure / Questionnaire
INDEX
 ABSTRACT

Cash Management is the corporate process of collecting and managing cash, as well as using it
for (short term) investing. It is a key component of insuring a company’s financial stability and
solvency. In business anything done financially affect eventually, cash is the crucial for ever
business, every company has to have cash on hand or at least access to cash in order to be able to
pay for the goods and services it uses and consequently, to stay in the business as on simple it
can be said that the company has to viable of managing its day to day operation. Cash movement
in a business is two-way traffic. Its keep on moving in and out of business. The inflow or outflow
of cash never coincides, the cash management is one of the effective tools to maintain and
manage the cash which is the king of business. Cash management can be effectively done using
various cash management techniques which is in practice. working of various cash management
techniques like cash flow synchronization, speeding up collection controlling payments, cash
flow forecasting and etc. important aspect which is unique to cash management is time
dimension associated with the movement of cash the primary aim of cash management is to
ensure that there should be enough cash availability when the needs arises, not to much but never
to little.

Keywords: Cash Synchronization, Controlling Payments, Financial Stability And Solvency

 CHAPTER-I
INTRODUCTION
 INTRODUCTION

Cash management in the banking sector refers to the process of efficiently managing and
controlling a bank's cash flow and liquidity to optimize its financial position and ensure smooth
operations. Effective cash management is crucial for banks to meet their obligations, maintain
regulatory compliance, minimize costs, and maximize profits. Here are some key aspects of cash
management in the banking sector:

1. Liquidity Management: Banks need to maintain an optimal level of liquidity to meet

withdrawal requests, settle transactions, and fulfill other financial obligations. Balancing
liquidity helps prevent liquidity shortages while avoiding excessive holding of idle cash, which
could otherwise be invested for better returns.
2. Cash Forecasting: Accurate cash forecasting involves predicting future cash inflows and
outflows. This enables banks to plan their cash needs and allocate resources accordingly.
Advanced data analysis and forecasting techniques help in estimating the timing and amount of
cash movements.
3. Cash Concentration and Disbursement: Banks often have multiple branches or locations with
varying cash needs. Cash concentration involves moving excess cash from low-activity branches
to central accounts, optimizing overall liquidity. Disbursement ensures that cash is efficiently
allocated to branches where customer demand is higher.
4. Cash Vault Management: Banks must securely manage their cash vaults, where physical
currency and coins are stored. Proper controls, security measures, and regular audits are essential
to prevent theft, fraud, or mismanagement of cash holdings.
5. Float Management: Float refers to the time between when a check is deposited and when it
clears. Efficient management of float helps banks reduce processing costs and maximize interest
earnings. Electronic funds transfer (EFT) and check truncation systems have significantly
reduced float times.
6. Technology and Automation: Banking technology plays a vital role in cash management.
Automated clearing systems, real-time payment processing, and digital channels facilitate
efficient cash movement, reducing manual processing time and errors.
7. Interest Rate Management: Banks need to manage interest rates on loans and deposits to
ensure a competitive edge in the market. Proper cash management helps banks adjust interest
rates to balance customer attraction and bank profitability.
8. Regulatory Compliance: Banks must adhere to regulatory requirements related to cash reserves,
liquidity ratios, and other financial stability measures. Non-compliance can lead to penalties or
restrictions on banking operations.
9. Cash Flow Analysis: Banks analyze their cash flows to understand the sources and uses of cash
over time. This analysis helps identify trends, optimize cash utilization, and make informed
financial decisions.
10. Risk Management: Effective cash management includes identifying and mitigating risks
associated with cash handling, such as fraud, counterfeiting, operational errors, and cyber threats.

Types of Cash Management

1: Cash flows from operating activities
That is one of several important kinds of cash management. Here, an company that is ongoing
income declaration are discussed. The supply and utilizes of cash from continuous business that
is regular become explained. This is done for any period that is specific is financial. This reflects
any alterations in the city that is main is working the business enterprise. This will be certainly
furthermore where you can test your company’ financial health. You may also look for lenders
with low interest and apply for cash flow loans to keep up along with other expenses if you’re a
bit low on cash to cover operations being day-to-day.

2: completely Free cashflow to money

This is how much money a company yields in cash administration. This amount is distributed to
shareholders in the event of a performance that is good of business. This might be very essential
in deciding the career that is financial of companies. This amount take to computed if you stop
the bucks against business surgery reduced capital expenditures because of the business. Your
company should always have increased cash streams to help keep they above liquid.
3: totally Free cashflow to your companyTotally Free cashflowTotally Free cashflow to
the(FCFF that is firm signifies the number of cashflow from procedures available for
circulation after decrease expenses, taxes, working-capital, and investment are accounted for and
compensated. FCFF is really a measurement of team’s profits in the end that is ultimate and
reinvestments. Its one of the numerous benchmarks utilized to look at and assess a firm’s
wellness that is monetary. It is through this assessment that the ongoing business can determine
the amounts settled to traders.

4: the alteration that is funds being net

The change that is net earnings may be the amount in which a company’s cash stability boost or
reduction within an accounting period. It is important to monitor the internet improvement in
earnings in order to make certain it does not head out when you get or see buying stock in just a
group. Furthermore crucial that this cash is understood by you administration type. Its through it
that the effectiveness of your revenue-generating procedures could be determined. They shall
therefore let you modify precisely.

The objectives of money administration incorporate functioning that is requirement that is

satisfying handling of unorganized outlay, preparing capital investing, proper utilization of
resources, preparing of investment expenditure, initiating investments

Different Types of Cash Management Methods:

Following are the different types as given below:

 instruments that are short-term as funds Market instruments and shared funds,
Treasury expense, certificates of deposit (CD), etc.
 bank account
 Savings account
 term that is cost that is long device
OBJECTIVES OF THE STUDY

 To review and comprehend the essential ideas of money management at ICICI

Bank Limited.
 To analysis the exchangeability place into the providers.
 Identify and analyze the methods which are various of the organization.
 To analysis the performance of money maneuvering of the firm.
 To tip that is making on the choosing with the study.
NEED FOR THE STUDY
 The study that is scholarly in fact done to learn the maxims of money
management of ICICI Bank Limited.
 Evaluate the performance that is general of finances management.
 The extensive research that is scholarly involves the contrast of investment show
of cash management.
 To focus on income prediction of ICICI BANK set.
 To pay attention to outflow that is inflow that is effective of ICICI Bank Limited.
SCOPE OF THE STUDY

 The research addresses improvements, lending options, payables, receivables, income,

and money control system of ICICI Bank Limited and aspect that is overall of movement.
 The research covers earnings size, components of cash balance, control of earnings
moves, running cash flow and profits statement of ICICI Bank Limited.
LIMITATIONS OF THE STUDY

 The time period for the project is only 45 days.

 The data which is used for earlier 5 years which will be a data that are limited.
 It is based on the historic and data which can be secondary.
 The step-by-step research might never be done on ever the subject.
 The knowledge that is comprehensive not given by the ongoing company because of
privacy.
 CHAPTER II
(REVIEW OF LITERATURE)
REVIEW OF LITERATURE
Waltson and Head (2017) Demonstrated profit control once the concept that is thinking about
enhancing the number of money easily available, maximizing the interest made by additional
funds not required straight away and losings which can be reducing by delays into the
transmission of resources.

Associated with Zimmerer et al (215) profit administration may be the process of forecasting,
obtaining, disbursing, trading, and money that is planning team that is ongoing to operate
efficiently. They further added that money administration is just a task that is vital it's an
essential yet investment that is least that is effective a home business keeps. An organization
must have funds being adequate meet its requirements or it's declared capitalrupt that is bajaj.
Lenders, workers and loan providers expect you'll be distributed on some time that is right might
be the required medium of trade.

Zimmerer etal, 2018 but, some firm keep a quantity that is excessive of to fulfill any
circumstances that are unanticipated might occur. These money that is dormant an income-
earning prospective that owners is disregarding and this also limits a growth that is firm’s lowers
its success

Jeffrey P. Davidson etal, 2019 :Cash administration is quite required for brand-new and
companies being expanding. shown within their book that money movement can be a issue
even when a business that is customers that are little many delivers a superior goods to the
readers, and loves a character that is sterling the industry.

Westerfield etal, 2020Noted that it is imperative that you separate between genuine revenue
management and a more subject that is general of control. The distinction is just a real way to
obtain confusion since the definition of funds is employed in application in 2 ways that are
different.

Mwila Mulenga 2016 Studies from the comparative potential of bookkeeping suggestions seeks
in examining the power of accounting facts to anticipate future earnings and earnings, utilizing
the assertion written by Investment Accounting requirement Board (FASB) which says that the
earnings and a unique parts possess better electricity that is predictive income itself (FASB,1978
para 44).

Anton Stigo etal., (2018) funds control additionally thought about management of cashflow
whereas the goal is to soon get inflows as as possible and also to hesitate outflows as long as
feasible without offending expenses that are extra. Without money, people may possibly not be
in a situation to handle disbursements that are present which often creates a higher threat of
non-payment. Hence, at a really core of the companies that are effective the capacity to control
cash moves within an means that is efficient.

Filbeck G. etal. (2018) examined the info of 26 companies if you take the data of 970
businesses during 1996 to 1999. They revealed that organizations have the potential to lessen
funding cost and/or increase the funds obtainable for developing by reduce the amount of funds
attached with the assets which can be present.

Sayaduzzaman MD. (2019) assessed that the management of British American smoke is highly
affordable as a result of the earnings being positive, designed strategy in operating the main
components of working-capital by assessing five years information from 1999-2000 to 2002-
2003. Ganesan (2007) used an example of 349 telecommunication machines enterprises within
the cycle 2001-2007. The separate variables put happened to be ratio that is existing day’s
receivable, day’s inventory, day’s payable, day’s working-capital and profit conversion results.

Lazaridis and Tryfonidis (2018) reports payable have positive relationship. No dispute in the
middle of your writers leverage that is obligations which can be regarding with unfavorable
connection. Fundamentally, the cash that is procedure that is varying was utilized by only one
author (Ganesan, 2007) and presents no connection after all with earnings. Raheman and Nasr
(2007) picked an illustration of 94 companies which are detailed are pakistani various areas of
economic climate with a period of 8 years, from 1999-2004. The separate variables utilized had
been ratio that is current day’s receivable, day’s inventory, age payable and cash transformation
period. Teruel and Martinez–Solano (2007) furthermore given the relationship that is empirical
both the variables. They chose the little and medium sized businesses that are spanish an effort
of about 8872 tiny to mid-sized organizations for 1996 to 2002.

In Christopher and Kamalavalli (2016) study, they examined a test of 14 corporate hospitals
in Asia panel that is comparison that is utilising the cycle 96/97 to 2005/06. The independent
facets used had been ratio that is current ratio that is quick inventory return ratio, functioning
money turnover proportion, and debtor’s return percentage, percentage of current house to total
benefit, proportion of investment that is latest to functioning earnings, detailed exchangeability
index, web fluid balance proportions, leverage and progress.
 CHAPTER – III
COMPANY PROFILE:

ICICI Bank is a leading private sector bank in India. The Bank’s consolidated total assets stood
at Rs. 14.76 trillion at September 30, 2020. ICICI Bank currently has a network of 5,288
branches and 15,158 ATMs across India.

History
ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing to Indian businesses.
Until the late 1980s, ICICI primarily focused its activities on project finance, providing long-
term funds to a variety of industrial projects. With the liberalization of the financial sector in
India in the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services provider that, along with its
subsidiaries and other group companies, offered a wide variety of products and services. As
India’s economy became more market-oriented and integrated with the world economy, ICICI
capitalized on the new opportunities to provide a wider range of financial products and services
to a broader spectrum of clients. ICICI Bank was incorporated in 1994 as a part of the ICICI
group. In 1999, ICICI became the first Indian company and the first bank or financial institution
from non-Japan Asia to be listed on the New York Stock Exchange.

The issue of universal banking, which in the Indian context meant conversion of long-term
lending institutions such as ICICI into commercial banks, had been discussed at length in the late
1990s. Conversion into a bank offered ICICI the ability to accept low-cost demand deposits and
offer a wider range of products and services, and greater opportunities for earning non-fund
based income in the form of banking fees and commissions. After consideration of various
corporate structuring alternatives in the context of the emerging competitive scenario in the
Indian banking industry, and the move towards universal banking, the managements of ICICI
and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal
strategic alternative for both entities, and would create the optimal legal structure for ICICI
group's universal banking strategy. The merger would enhance value for ICICI shareholders
 through the merged entity's access to low-cost deposits, greater opportunities for earning fee-
based income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through a large
capital base and scale of operations, seamless access to ICICI's strong corporate relationships
built up over five decades, entry into new business segments, higher market share in various
business segments, particularly fee-based services, and access to the vast talent pool of ICICI and
its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI
and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services
Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by
shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at
Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve
Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking
operations, both wholesale and retail, were integrated in a single entity.

Awards - 2020

 ICICI Bank has been recognised as 'India's Most Sustainable Company' by BW Business World
magazine in the Banking, Financial Services and Insurance (BFSI) sector. The Bank ranked 12th
in the overall list of 194 companies. ICICI Bank is the only bank to have received an A+ rating
for its sustainable practices and robust environment, social and governance framework.
 ICICI Bank was declared as 'House of the Year, India' at Asia Risk Awards 2020. Risk, a
London-based magazine, organises these prestigious awards annually for firms and individuals
involved in Asia's derivatives market and risk management.
 ICICI Bank emerged as the winner in the 'Best HR Technology Implementation' category at the
Asian Banker Financial Technology Innovation Awards 2020.
 ICICI Bank was recognised as the winner in the ‘Best Innovation Programme’ category at the
Retail Banker International Asia Trailblazer Awards 2020. These awards are organised by Retail
 Banker International, an online publication that provides news on banking and finance from
across the globe.
 ICICI Bank has bagged five awards at the ‘Infosys Finacle Client Innovation Awards 2020’. The
Bank was declared winner in the following categories: ‘Corporate Banking Digitisation’,
‘Process Innovation’, ‘Modern Technologies led Innovation’ and ‘Customer Journey
Innovation’. The Bank was also declared runner-up in the ‘Channel Innovation’ category.
 ICICI Bank has been awarded the 'Best Sub-Custodian Bank in India' for the year 2020 by
Global Finance, a financial publication headquartered in New York. The Bank won the award for
providing facilities like custodian and safe keeping of securities, clearing of institutional
investors' trades, physical custody and other related services.
 ICICI Bank has won a total of four awards at the Asian Banking & Finance Awards, 2020. The
Bank was declared a winner in the categories of 'Corporate & Investment Bank of the Year–
India'; 'Corporate Client Initiative of the Year–India’; 'Rural/Cooperative Bank of the Year–
India' and 'Mobile Banking & Payment Initiative of the Year–India’.
 ICICI Bank has won five awards at the National Award for Excellence in Energy Management,
2020 organised by the Confederation of Indian Industry (CII). The Bank was recognised for its
innovative practices in the energy efficiency sector that facilitates sustainable growth.
 ICICI Bank has won four awards at The Asian Banker Excellence in Retail Financial Services
International Awards, 2020. This includes the overall award for the 'Best Retail Bank' in India.
This is the seventh year in a row that the Bank has won this award. The other awards won by the
Bank include 'Best Savings Account Product’, ‘Best Chatbot or Voice Banking Service’ and
‘Best Business Model'. The Bank was declared winner in these categories among all Asian
Banks. This year, ICICI Bank has been ranked 5 th in the Asia Pacific (APAC), the Middle East
and Africa (MEA) regions.
 ICICI Bank has been recognised as the ‘Best SME Bank’ in India in the Asiamoney Best Bank
Awards 2020 programme. The awards are organised by Asiamoney, a financial publication
headquartered in United Kingdom. The Bank was recognised for the various products and
services that it offers to SME clients.
 ICICI Bank has emerged as the most trusted brand among private sector banks, according to a
survey by the Economic Times Brand Equity. This is the fifth time in a trot that the Bank has
topped ET's list of the most trusted brands among private sector banks.
 ICICI Bank has been adjudged the 'Best Company to Work For' by Business Today magazine in
the Banking, Financial Services and Insurance (BFSI) sector. This is the fourth year in a row that
the Bank has received this accolade. The Bank stood at the fourth position in the overall list of
top 25 companies.
 ICICI Bank has been adjudged as the ‘Best Bank in Innovation’ at the recently concluded
Business Today-Money Today Financial Awards 2020. The Bank was recognised as the winner
for InstaBIZ, an industry-first initiative which is a comprehensive digital platform curated
specifically for MSME and self-employed customers.
 ICICI Bank was awarded by the National Bank for Agricultural and Rural Development
(NABARD) at the Gujarat State Focus Paper 2020-2021 event. The Bank won the award in the
'Best Bank Under SHG Bank Linkage Best Bank Category'. The Bank won the award for its
work done to support women beneficiaries through its programme for Self Help Groups and also
for facilitating credit linkages for relevant groups.
 ICICI Bank has won six awards at ‘The Asset Triple A Digital Awards 2020’. This is the highest
number of awards among all Banks in India. The Bank was declared winner in the following
categories for the India region-‘Digital Bank of the Year’, ‘Best Retail Mobile Banking
Experience’, ‘Best Digital Wealth Management Experience’, ‘Best ATM Project’, ‘Best Data
Analytics Project’ and ‘Best Digital Upgrade’.
 ICICI Bank won three awards at the IBA Banking Technology Awards 2020. The Bank was
declared winner in two categories namely 'Best Use of Data & Analytics for Business Outcome'
and 'Most Innovative Product Using Technology' while it was adjudged runner up in the 'Best
Payment Initiatives' category.
 ICICI Bank won the Bronze Medal in the ‘CSR & Not-for-Profit (beyond metro)’ category at
The India PR & Corporate Communications Awards 2019. The Bank won this award for the
skilling initiatives undertaken through ICICI Foundation for Inclusive Growth that help the less-
privileged youth in rural and urban areas by enabling them to earn sustainable livelihoods.

Corporate Social Responsibility

The Bank has a long-standing commitment to corporate social responsibility (CSR). The Bank’s
contribution to socio-economic development includes several pioneering interventions with a
focus on meeting specific goals. The activities are largely implemented directly or through the
ICICI Foundation for Inclusive Growth (ICICI Foundation).

Composition of the CSR Committee:

Director Directorship CSR Committee

Independent
Mr. Radhakrishnan Nair Chairman
Director

Independent
Ms. Rama Bijapurkar Member
Director

Independent
Mr. Uday Chitale Member
Director

Mr. Anup Bagchi Executive Director Member

CSR Policy

The CSR Policy of the Bank sets the framework guiding the Bank’s CSR activities. It outlines
the governance structure, operating framework, monitoring mechanism, and CSR activities that
would be undertaken. The CSR Committee is the governing body that articulates the scope of
CSR activities and ensures compliance with the CSR policy. The Bank’s CSR activities are
largely focused in the areas of education, health, skill development and financial inclusion and
other activities like disaster relief or as the CSR Committee may choose to select in fulfilling the
CSR objectives.

The CSR policy was approved by the Committee in July 2014, and subsequently was put up on
the Bank’s website. Web-link to the Bank’s CSR policy: https://www.icicibank.com/managed-
assets/docs/about-us/ICICI-Bank-CSR-Policy.pdf

Projects approved under the CSR Plan for fiscal year 2020-21
Focus Areas Project/Programme

Contribution to PM CARES Fund and other Covid-19 relief

COVID-19 relief activities
efforts undertaken directly and along with ICICI Foundation

Skill development, Rural

livelihood, and Social & Activities of ICICI Foundation for Inclusive Growth
Environmental projects

Rural development and Promoting financial inclusion and digitisation of activities in

related activities rural areas

Disaster relief, promoting healthcare, education, or other

Donations and grants
activities under Schedule VII of Companies Act, 2013

Support activities in areas like disaster relief, environmental

and social awareness, promoting healthcare and sanitation,
Others
making available drinking water, empowering women,
supporting economically backward groups
INDUSTRY PROFILE:

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level five in the Faster Payments
Innovation Index (FPII). *

Market Size
The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign
banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks
in addition to cooperative credit institutions. As of September 2020, the total number of ATMs in
India increased to 210,049 and is further expected to increase to 407,000 by 2021.

Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.
During FY16-FY20, bank credit grew at a CAGR of 3.57%. As of FY20, total credit extended
surged to US$ 1,698.97 billion.

During FY16-FY20, deposits grew at a CAGR of 13.93% and reached US$ 1.93 trillion by
FY20. Credit to non-food industries stood at Rs. 103.46 trillion (US$ 1.40 trillion) as of
November 20, 2020.

Investments/Developments
Key investments and developments in India’s banking industry include:
o On November 6, 2020, WhatsApp started UPI payments service in India on receiving the
National Payments Corporation of India (NPCI) approval to ‘Go Live’ on UPI in a graded
manner.
o In October 2020, HDFC Bank and Apollo Hospitals partnered to launch the ‘HealthyLife
Programme’, a holistic healthcare solution that makes healthy living accessible and
affordable on Apollo’s digital platform.
o In 2019, banking and financial services witnessed 32 M&A (merger and acquisition)
activities worth US$ 1.72 billion.
o In March 2020, State Bank of India (SBI), India’s largest lender, raised US$ 100 million in
green bonds through private placement.
o In February 2020, the Cabinet Committee on Economic Affairs gave its approval for
continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing
minimum regulatory capital to RRBs for another year beyond 2019-20 - till 2020-21 to those
RRBs which are unable to maintain minimum Capital to Risk weighted Assets Ratio (CRAR)
of 9% as per the regulatory norms prescribed by RBI.
o In October 2019, Department of Post launched the mobile banking facility for all post office
savings account holders of CBS (core banking solutions) post office.
o Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) stood at Rs. 1.06 lakh crore (US$
15.17 billion.
o In October 2019, Government e-Marketplace (GeM) signed a memorandum of understanding
(MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment
system for an array of services.
o In August 2019, the Government announced major mergers of public sector banks, which
included United Bank of India and Oriental Bank of Commerce to be merged with Punjab
National Bank, Allahabad Bank to be amalgamated with Indian Bank and Andhra Bank and
Corporation Bank to be consolidated with Union Bank of India.
o The NPAs (Non-Performing Assets) of commercial banks recorded a recovery of Rs.
400,000 crore (US$ 57.23 billion) in the last four years including record recovery of Rs.
156,746 crore (US$ 22.42 billion) in FY19.
o Allahabad Bank’s board approved the merger with Indian bank for the consolidation of 10
state-run banks into the large-scale lenders.
 o The total equity funding of microfinance sector grew at 42 y-o-y to Rs. 14,206 crore (US$
2.03 billion) in 2018-19.

 Government Initiatives
o As per Union Budget 2019-20, the Government proposed fully automated GST refund
module and an electronic invoice system that will eliminate the need for a separate e-way
bill.
o Under the Budget 2019-20, Government proposed Rs. 70,000 crore (US$ 10.2 billion) to the
public sector banks.
o Government smoothly carried out consolidation, reducing the number of Public Sector Banks
by eight.
o As of September 2018, the Government of India made Pradhan Mantri Jan Dhan Yojana
(PMJDY) scheme an open-ended scheme and added more incentives.
o The Government of India planned to inject Rs. 42,000 crore (US$ 5.99 billion) in public
sector banks by March.
 Achievements
 Following are the achievements of the Government:
o In November 2020, Unified Payments Interface (UPI) recorded 2.21 billion transactions
worth Rs. 3.90 lakh crore (US$ 53.06 billion).
o According to the RBI, India’s foreign exchange reserve reached US$ 574.82 billion as of
November 27, 2020.
o To improve infrastructure in villages, 204,000 point of sale (PoS) terminals have been
sanctioned from the Financial Inclusion Fund by National Bank for Agriculture & Rural
Development (NABARD).

Road Ahead
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth in the banking sector. All these factors
suggest that India’s banking sector is poised for a robust growth as rapidly growing businesses
will turn to banks for their credit needs.
Also, the advancement in technology has brought mobile and internet banking services to the
fore. The banking sector is laying greater emphasis on providing improved services to their
clients and upgrading their technology infrastructure to enhance customer’s overall experience as
well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion
by FY23 driven by the five-fold increase in the digital disbursements.

The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44 foreign
banks, 56 regional rural banks, 1,485 urban cooperative banks and 96,000 rural cooperative
banks in addition to cooperative credit institutions. As of August 2020, total number of ATMs in
India increased to 209,110 and is expected to reach 407,000 by 2021.

According to Reserve Bank of India (RBI), India’s foreign exchange reserve reached US$
560.53 billion as on October 23, 2020. According to the Reserve Bank of India (RBI), bank
credit and deposits stood at Rs. 103.43 lakh crore (US$ 1.39 trillion) and Rs. 143.02 lakh crore
(US$ 1.92 trillion), respectively, in the fortnight ending October 9, 2020.

Credit to non-food industries stood at Rs. 102.80 lakh crore (US$ 1.38 trillion) as of October 9,
2020.
Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.
Total assets across the banking sector (including public, private sector and foreign banks)
increased to US$ 2.52 trillion in FY20.

Indian banks are increasingly focusing on adopting integrated approach to risk management. The
NPAs (Non-Performing Assets) of commercial banks has recorded a recovery of Rs. 400,000
crore (US$ 57.23 billion) in FY19, which is highest in the last four years.
As per Union Budget 2019-20, investment-driven growth required access to low cost capital, and
this would require investment of Rs. 20 lakh crore (US$ 286.16 billion) every year.

RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit
information, accessible to all stakeholders. The Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2017 Bill has been passed and is expected to strengthen the banking sector. Total
equity funding of microfinance sector grew 42% y-o-y to Rs. 14,206 crore (US$ 2.03 billion) in
2018-19.

Bank accounts opened under the Government’s flagship financial inclusion drive Pradhan Mantri
Jan Dhan Yojana (PMJDY) reached 40.05 crore and deposits in Jan Dhan bank accounts stood at
more than Rs. 1.30 lakh crore (US$ 18.44 billion).
Rising income is expected to enhance the need for banking services in rural areas, and therefore,
drive the growth of the sector.

The digital payments revolution will trigger massive changes in the way credit is disbursed in
India. Debit cards have radically replaced credit cards as the preferred payment mode in India
after demonetisation. Payments on Unified Payments Interface (UPI) hit an all-time high of 1.49
billion in terms of volume with transactions worth nearly Rs. 2.90 lakh crore (US$ 41.22 billion)
in July 2020.
 CHAPTER-IV
THEROTICL FRAMEWORK
 (a) CASH MANAGEMENT

One of the most important factors for the failure of business firm is the financial distress,
which is especially more among small firms. An efficient management of these current assets
will not only reduce the risk of financial distress but can also make passive contribution to the
profit of the firm. These current assets involve investment of scarce and costly resources at the
firm and therefore it is appropriate to make careful analysis of investment in current assets. The
present study concentrates on the matters relating to management of cash and marketable.

“Money is like much, not good except it be spread”

FRANCE BACON.

Cash is the important source for the operations of the business. Cash is the basic input
needed to keep the business moving. A major function of the financial manager is to maintain
sound cash position. Cash management refers to management of cash balance and bank balance
and also includes the short-term deposits. Cash is most liquid and can be used to make
immediate payments with out any restriction. The term cash includes coins, currency and
cheques held by the firm and in its bank balance.

Cash management is concerned with the managing of

(i) Cash flows in to and out of the firm

(ii) Cash flows within the firm and.
(iii) Cash balances held by the firm at a point of firm by financing deficit or investing
surplus cash.
It can represented by a cash

COLLECTION

INFORMATION BOORROWER
CONTROL INVESTMENT

PAYMENTS

Figure 2.1 Cash management cycle

Management cycle as shown in figure2.1 ales generate cash, which has to disbursed out.
The surplus has to invest while deficit has to be borrowed. Cash management seeks to
accomplish this cycle at a minimum cost. At the same, it also seeks to achieve liquidity and
control. Cash management assumes more importance than other current assets because; cash is
the most significant and the least productive asset that a firm holds. It is significant because it is
used to pay the firms obligations. However cash is unproductive unlike fined asset are
inventories, it does not produce goods for sale. There fore the aim maintain adequate control
over cash position to keep the firm sufficiently liquid and to use excess cash in some profitable
way.

The management of cash is also important because it is difficult to predict cash flows
accurately particularly the inflows and that there is no perfect coincidence between the inflows
and out flows at cash during some periods cash out flows will exceed cash inflows because
payment for taxes dividends or seasonal inventory build up. At other firms cash inflow will be
more than cash payments cease there may be large cash sales and debtors may be realized in
large sums promptly. Cash management is also important because cash constitutes the smallest
portion of the total current assets yet management’s been done in cash management techniques.
An obvious aim at the firm now days is manage its cash in such a way as to keep cash balance at
a minimum level and to invest the surplus cash funds in profitable opportunities.
In order to resolve the uncertainty about cash flows predication and lack of synchronization
between cash receipts and payments. The firm should evolve strategies regarding the following
four faceless of cash management.

i. Cash planning
Cash inflow and out flows should be planned to project cash surplus or deficit for each period
of the planning period. Cash budget should be prepaid for this purpose.

ii. Managing the cash flow: -

The flow of cash should be properly managed. The cash inflow should be accelerated
while as for as possible decelerating the cash out flows.

iii. Optimum cash level: -

The firm should decide about the appropriate level at cash balances. The cost of excess cash
and danger of cash deficiency should be matched to determine the optimum level of cash
balance.

iv. Investing the surplus cash: -

The surpluses cash balance should be invented for profits.

The ideal of cash management system will depend on the firm’s products organization structure
competition culture and available.

v. FUNCTIONS OF CASH MANAGEMENT

The management of cash is particularly important because it brings into sharp focus the trade-
off between risk and returns faced by a financial manager. If cash is not available to meet bills
as they fall due, the ultimate risk is faced the risk of bankruptcy. Economic theory has now
established that business firms or individuals have four primary motives for holding cash- the
transaction motive, the precautionary motive the speculative motive and the compensation
motive.
 vi. Transaction motive: -
Business firms as well as individuals keep cash because they require it for meeting demand
for cash arising out of day to day transactions. In order to meet the obligation for cash flows
arising out of course of business, every firm has adequate cash balance. A firm requires for
making payment for purchase of goods and services supplier of goods and all other operational
expenses are paid in cash. Interest on borrowings taxes to government and dividends to share
holders are also payable in cash.

These cash flows are met out at cash inflows arising out of cash sales or recovery from the
debtors. However, the inflows pay not always is equal to cash out flows when the necessity of
keeping minimum cash balance to meet payment obligations arising out of expected transaction
is known as transaction motive for holding cash. In a normal situation both the inflows and out
flows and hence also the net difference tend to increase or decrease in direct proportion to the
level of sales.

vii. Precautionary motive: -

The precautionary motive for holding cash is based on the need to maintain sufficient cash to
act as a cushion or butter against unexpected events. In spite of making best efforts, the future
cash flows can not be ascertained with 100% accuracy. One never knows about the happening of
natural calamities or sudden increase in the cost of raw materials or other facts. Such events may
seriously interrupt even the best planned financial plan and thus may temporarily make the cash
budget ineffective and non-assistant therefore a firm should maintain larger cash balance than
required for day to day transactions in order to avoid any unforeseen situation arising because of
insufficient cash.

The necessity of keeping cash balance to meet any emergency situation. The amount of cash
a firm must hold for transaction and precautionary depends upon.
(i) Degree of predictability of its cash flows.
(ii) Its willingness and capacity to take risk of running short cash only.
(iii) Available immediate borrowing powers.
 viii. Speculative motive: -
Cash may be held for speculative purposes in order to take advantage of potential profit
making situations. A firm may come across an unexpected opportunity to make profit, which is
not usually available in normal business routine. The firm’s desires to keep some cash balance
to capitalize on opportunity of making an unexpected profit is known as speculative motive. The
speculative motive provides a firm which sufficient liquidity to take advantage of unexpected
profitable opportunities that may suddenly appear (and just as suddenly disappear if not
capitalized immediately).
Compensation motive: -
Commercial banks require that in every current account there should always be a minimum
cash balance. Presently, this minimum cash balance various from Rs 3000 to Rs 5000. This
amount remains as a permanent balance with bank so long as the current account is operative. It
is become a sort of investment by the firm at bank in order to avail the convenience of Current
Account, the minimum cash balance must be maintained by the firm and this provides the
compensation motive for holding cash.

Out of different motives the transaction motive is the most oblivious one and is formed in
every firm. Even the precautionary motive is common and a firm maintains cash balance both
for the transaction motive and the precautionary motive.
OBJECTIVES OF CASH MANAGEMT
There are two objectives of cash management.

(i) To meet the cash disbursement needs as per the payment schedule.
(ii) To minimize the amount locked up as cash balances.

As a matter of fact both the objectives are mutually contradictory and there fore. It is a
challenging task for the finance manager to reside then and to have the best in this process.

ix.

x. PROBLEMS OF CASH MANAGEMENT

Impact of Inflation on Cash flow

 Problems
Of cash Timing of Cash Flow
Management

Environment

Managerial decisions

xi.
Figure 2.2 Problems Of cash Management

xii.

xiii. Impact of Inflation on Cash Flow:

xiv. Inflation is growth in value terms and, therefore, in periods of rapid inflation,
a firm should expect to find itself in a very unfavorable cash flow position, like that of the firm
which is growing very fast. In the words of W.C.F. Hartley, “In advance terms, it comes
dangerously close to compounding a felony.”

Timing of Cash Flow:

When business is of a seasonal nature, cash inflows may vary from one period to
another. Fig.2.2 indicates the variations during the different periods of three different firms with
identical cash balances at the beginning and at the end of the year, but with vast differences of
cash flow.
Most amounts are two-dimensional, viz., a quantity multiplied by a price. Cash flow
amounts possess the perverse third dimension of time; and indeed, it is the time dimension,
which is at the root of the various problems created by accounting concepts. Therefore, in the
long-term, profits are aimed at; but in the short-term, the cash flow is much more important.

Environment:
There are environmental constraints, which create cash flow problems for a firm. Such
problems may be created by the very nature of its operation, such as the location or seasonality
of the market place. Every firm should, therefore, examine its own position in respect of its
environment, which will affect its short-term flow.
Managerial Decisions:
A cash flow does not flow of its own accord. It is a direct consequence of management
decision. The management procedures employed for maximizing the use of cash through the
control of payables and related payments are:
(i) Timing payment to vendors so that bills are paid only as they fall due.
(ii) Establishing procedures, which will prevent or minimize the loss of discounts.
(iii) Centralizing payable and disbursement procedures.
(iv) Reducing “compensating balance: on deposit with banks.
(v) Improving control over inter-Bank transfer
(vi) Utilizing facilities very efficiently

b. CASH PLANNING

Cash flows are inseparable parts of the business operations of all firms. The firm needs cash
to invest in inventories receivable and fined assets and to make payment for operating expenses
in order to maintain growth in sales and earnings. It is possible that a firm may be making
adequate profits, but may suffer from the shortage of cash as its growing needs may be
consuming cash very fast. The “cash poor” position at the firm can be corrected if its cash needs
are planned in advance. At times a firm can have excess cash with it if its cash inflow exceed
cash out flows such excess cash may remain idle. Again such excess cash flows can be
anticipated and properly invested if cash planning is resorted to. Thus, cash planning can help to
anticipate future cash flows and needs of the firm and reduces the possibility of idle cash
balances and cash deficits.
Cash planning is a technique to plan and control the use of cash:
It protects the financial condition of the firm by developing a projected cash statement
from a forecast of expected cash inflows and out flows for a given period. Therefore costs may
be based on the present operations or the anticipated future operations cash plans are very crucial
in developing the overall operation plans of the firm.
 Cash planning may be done on daily, weekly or monthly basis. The period and frequency of
cash planning generally depends upon the size of the firm and philosophy of management. Large
firms prepare daily and weekly forecast, medium size firm usually prepare weekly and monthly
forecasts. Small firms may not prepare formal cash forecasts because at the non-availability of
information and small-scale operations. But if the small firms prepare cash projections, it is
done on monthly basis. As a firm grows and business operations become complete cash
planning becomes inevitable for its continuing success.

c. CASH FORECAST

Full utilization of money under corporate management focuses attention on their most
economical use, their control and safekeeping on an assurance of adequate supply, and on the
temporary investment of excess funds. In order to achieve the first objective the economical use
of available cash it is necessary to devise a plan to measure the funds required to run a
corporation. Such a plan is known as ‘cash forecast’.

Types of Cash Forecasts: There are two types of cash forecasts:

Types of cash Forecasts
Short-term Cash Forecast:
The short-term cash forecast if carefully designed and regularly revised, can be highly
accurate and have many applications. Of the several use which the managers report of this type
of forecast, the most important are: (a) determining operating cash requirements; (b) anticipating
short-term financing on and (c) managing money market investments.

Receipts and Disbursements Method:

This method is essentially as projection of the cash records wherein the forecast includes
detailed listing of the sources of cash receipts and the nature of cash disbursements. This method
is used by companies, which exercise a close control over cash because it traces the movements
of cash through each item of income and expenditure. Receipts and disbursements forecasts are
often short-range forecasts. The preparation if reliable cash flow forecast under this method
depends on proper budgeting of sales, manufacturing and financial expenses.

Adjusted Income Method:

This method consists of a forecast of net income and the correction of this figure by any
other transactions that are necessary in order to adjust it to a cash basis. In most concerns, which
use this method, the profit and loss budget constitutes the primary basis for the forecast; the data,
however, are supplemented by forecasts of balance sheet items. The adjusted income method is
based on differences between income and expenditure rather than on aggregate transactions.

Working Capital Differentials Method:

This method is based on a pre-determination of the working capital, which is available at
various future dates, and the adjustment of these dates on a cash basis. In this case, the basic
forecast covers the information appearing in the balance sheet and the supplementary data are
taken from the profit and loss statement and other sources. This method is not common in actual
use. The initial object of preparing a short-term cash forecast is to reveal the forecast of cash and
bank balances at the end of cash short-term control period, which may be a month throughout the
planning period.
 Long-term Cash Forecast: Unlike the short-term cash forecast, which is highly detailed, the
long-term cash forecast attempts only to give a rough sketch of a Bank ’s distant financing
requirements. This forecast has many uses. It pinpoints a Bank ’s future money needs, especially
in working capital requirements. If a firm experiences a serious cash drain, the forecast will give
it some idea of how rapidly this is happening and why. Another use of the ling-term cash forecast
is that it enables a firm to appraise its proposed capital projects. It shows not only how much
cash a corporation would generate to support these projects; it also indicates how much finance,
if any, would be required to complete them. The extended cash outlook thus enables senior
executives to determine which proposals bearing on a Bank’s expansion should be approved,
deferred or abandoned. There are two methods for designing an appropriate framework for
analysis.

The Cash Book Method of Analysis: It is designed to measure the cash flow on the basis of
the classified entries, which appear in the cashbook. When a firm receives or pays out cash or
cheques in the course of the daily conduct of its business affairs, each receipt or payment if
recorded in the cashbooks.

Cash Tank Method of Analysis: It is designed to measure the cash flow not by an accounts
classification but by the areas of management responsibility. These areas determine cash flows in
the first place. Cash is considered to be a vital content of the tank, which must not be allowed to
run dry. It may be compared with any tank containing a valuable liquid, which must not be
allowed to run dry. A rank is fitted with both inlet and outlet pipes, each provided with a control
valve.

d. CASH BUDGET
A cash budget is also referred to as a cash flow forecast. It is a method of predicting the
amount of funds and the time when they would be required by an organization. In simple words,
its basic idea is to predict when and in what quantity the receipts of cash would come into the
firm and when and in what quantity the payments in cash would be made. A cash budget is a
forecast of anticipated cash receipts and disbursements. The cash budget is one of the most
important tools in the budgetary kit.
Section I.02 Advantages of Cash Budget
1. The management can avoid the hazards of insolvency.
2. It is possible for a firm to predict future needs for a future period.
3. It helps a firm to attune itself to the changing conditions.
4. It is possible to develop important methods, both for the preparation of forecasts and for
their interpretation. It provides a better basis for anybody to form his judgments about the
financial health of a Bank .
Difficulties in the Preparation of Cash Budget:

(i) It is extremely difficult to get comprehensive and detailed planning data,

which are essential for the preparation of a cash budget. A large part of the
data covers operational areas, which are beyond the scope of the financial
manager. The top management’s support is absolutely indispensable for
ensuing the flow of the information, which may be required in the process of a
cash budget formulation.
(ii) No forecast can ever be expected to prove exactly right. The reason is that in a
large number of situations; a business has to operate in an atmosphere of
change. Cash budgets are easily vulnerable to such changes.
(iii) Some margin of error is always inherent in any cash forecast.

Reducing Uncertainty in Cash Budget:

1. If a firm prepares several budgets based on optimistic, pessimistic and the most likely
forecasts, an evaluation of such cash flows allows it to determine the amount of financing
necessary to cover and adverse situation.
2. If it simulates the occurrence of sales and other uncertain events, a probability
distribution of the firm’s cash month can be developed.

(a) MANAGING THE CASH FLOWS

 Once the cash budget has been prepared and appropriate net cash flow established, the
financial manager should ensure that there does not exist a significant deviation between
projected cash flows and actual cash flows. To achieve this cash management efficiency will
have to be improved through a proper control of cash collection and disbursement. The twin
objectives in managing the cash flows should be to accelerate cash collection as much as
possible and to decelerate or delay cash disbursements as much as possible.

Decentralized Collections:
A large firm operating over geographical areas can speed up its collections by following a
decentralized collection procedure. A decentralized collection procedure, called concentration
Banking in the USA is a system of operating through a member of collection centers instead of a
single collection center centralized at the firm’s head office. The basic purpose of the firm
collections is to minimize the long between the mailing time from customers to the firm can
make the use at funds under the decentralized collections, the firm will have a large number of
bank accounts operate in the areas where the firm has its branches. All branches may not have
the collection centers. The selection of the collection center will depend upon the volume of
billing. The collection center will be required to collect cheques from customers and deposit in
their local bank Accounts.

Lock-box System:
Another technique of speeding up the process thing and collection times which is quite
popular in the USA and European countries is Lock-box system some foreign banks in India
have started providing this service to firms in India. In case of the concentration banking cheques
are received by a collection center and after processing are deposited in the bank. There are two
main advantages at the look-box systems these are first the bank handles remittances prior to
deposit at a lower cost. Second the cheques are deposited immediately upon receipt of remittance
and their collection process starts sooner than of the firm would have processed them for internal
accounting purposes prior to their deposit.
Instrument used for collection:
The main instruments of collation used in India are.

(i) Cheques

(ii) Drafts

(iii) Documentary bills

(iv) Trade bills and

(v) Letter of credit

Controlling Disbursements:

The effective control of disbursement can also help the firm in conserving cash and
reducing the financial requirements disbursement arise due to trade credit which in a sources
funds, the firm should make payments using credit terms to the fullest enters. There is ra
advantage in paying sooner than agreed by delaying payments as much as possible the firm
makes maximum use of trade credit as a sources of funds a source, which is interest free.

DETERMING THE OPTIMUM CASH BALANCE

One at the primary responsibilities of the financial manage is to maintain a sound liquidity
position of the firm so that dues may be settled in time. The firm needs cash not only purchase
row material and pay wages but also payments of dividends interest tans and countless other
purpose. The test of liquidly is rally the availability of cash to meet the firm’s obligations when
they be come due.

The Operating cash balance is maintained for transaction purposes and on additional amount
may be maintained as a butter of safely locks. When firm runs out of cash it may have to sell.
 (i) INVENTORY MODELS FOR CASH MANAGEMENT

A business enter prices should not lose sight of maintaining sufficient liquidity while earning
profits. In other words, profits are necessary but the maintenance of optimal level of cash balance
should be cared for this optimality of cash can judged.

(i) Study of variations in cash balances.

(ii) Relation ship of cash with the sales volume.

(iii) Turnover of cash.

(iv) Current ratio test.

(v) Quick ratio test.

(vi) Cash in terry of number of days operational requirement.

(vii) Coverage current liabilities etc.

Various modes for the management of inventory have been applied to the management of
cash. The primary purpose its marketable . If available or borrow this in valves from section
costs. On other hand, If the firm maintains a high level of cash balance, It will have a sound
liquidity position but forgot the opportunities to earn interests. The potential interest lost on
holding large cash balance involves an opportunity cost to the firm. Thus the firm should
maintain on optimum cash balance neither too small nor to too large. To find out the optimum
cash balance the transaction costs and risk of too small a balance should be matched with the
opportunity costs of too large a balance figure shows this trade off graphically. If the firm
maintains larger cash balances, Its transactions costs would decline, but the opportunity costs
would increase point the sun of the two costs it minimum. This is point of optimum cash balance
which a firm should seek to achieve.
Section I.03

Total Cost

Minimum to Cost Opportunity Cost

Transaction cost

Optimum cash balance

1) Fug 2.4 Optimum Cash Balance

Of each model is to enable the management to maintain an optimum level of cash at all
times for this purpose sophisticate models have been developed by William J. Baumol,
Merton H, Daniel or James Tobin and stl.arches.

a) WILLIAM BAUMOL MODELS

One of the first inventory models for the management of cash is that William Boumal’s
model has assumed that a firm of an individual obtains cash either by borrowing it or by with
drawing from investments. Both alter natives carry particular interest rate cash is borrowed or
with drawn in a lot size of a certain amount spaced out throughout a period. For each borrowing
or with drawls there is a fixed cost, which is independent of the amount transferred. The purpose
the model is to deter mine the optimal borrowing of with drawls of a lot-size of the amount
Boumal’s model is given below.
 C= 2bt

i) Where

C = is the lot-size of optimal borrowing with drawls.

b = is fixed cost.
T = is the total transaction stream of volume transaction.
i = is the interest rate per rupee during the period

Figure 2.5 Baumol’s Model

MILLER-ORR MODEL:
 Also known as Stochastic Model. Miller Orr (1966) has expanded the Baumol’s model,
which is not applicable if the demand for cash is not steady. Where uncertainty over cash flows
is large, the inventory type model cannot be used. If balances fluctuate randomly, then a
stochastic, model cab be used to set control limits. The miller-Orr model argues that changes in
cash balance over a given period are random in size as well as in direction. The cash balance of
a firm may fluctuate irregularly over a period of time. The model assumes.

(i) Out of the two assets i.e., cash and marketable , the latter has a marginal yield, and.
(ii) Transfer of cash to marketable and vice-a-versa is possible without any delay but of
course of at some cost.

The model has specified two control limits for cash balance. An upper limit, H, beyond
which cash balance need not be allowed to go and a lower limit, L, below which the cash level is
not allowed to reduce. The cash balance should be allowed to move within these limits. If the
cash level reaches the upper control limit, H, then at this point, a part of the cash should be
invested in marketable in such a way that the cash balance comes down to a pre-determined
level called the return level, R. if the cash balance reaches the lower level, L then sufficient
marketable should be sold to realize cash so that the cash balance is restored to the return level,
R. no transaction between cash and marketable is undertaken so long as the cash balance is
between the two limits of H and L. The Miller-Orr model has been presented in Figure 21.4.

Miller- Orr Model

The Mille-Orr model has superiority over the Baumol’s model. The latter assumes
constant need and constant rate of use of funds, the Miller-Orr model, on the other hand, is more
realistic and maintains that the actual cash balance may fluctuate between the higher and the
lower limits. The model may be defined a

Z = [3TV/4i]

Where T = Transaction cost of conversion

 V = Variance of daily cash flows and

i = Daily % interest rate on investments,

Section I.04

Section I.05 ADANTAGES OF CASH MANAGEMET

(i) The availability of cash may be a matter of life or death. A sufficiency of cash can
deep an unsuccessful firm going despite losses. Conversely, this insufficiency can
bring failure in the case of actual or prospective earning.
(ii) An efficient cash management through a relevant and timely cash budget may enable
a firm to obtain optimum working capital and ease the strains of cash shortage,
facilitating temporary investment of cash and providing funds for normal growth.
(iii) Cash may be said to be like the blood stream in a living body; for it is very much the
life-blood of business. It must be kept circulating around the arteries of the business
because if the circulation gets clogged, sickness and death may occur, as they do
when a clot forms in an artery.
(iv) The first priority of any business is survival, and this cannot be assured, even in the
short run, unless a Bank remains both liquid and solvent, that is, unless it is able to
pay its debts as and when they fall due, both immediately and in the foreseeable
future.
(v) Cash management involves balance sheet changes and other cash flows that do not
appear in the profit and loss account such as capital expenditure.
(vi) It gives an inventory of the financial reserves which are available in the event of a
recession.
(vii) It yields a plan as an integral part of the procedure.
(viii) It views problems in a dynamic context over a period of time.
 (ix) It yields a number of additional insights into the crucial task of framing a sound debt
policy. The focus is on the solvency of the firm in adverse circumstances rather than
on the effects of leverage in normal circumstances.
(x) While a regularization of cash flows enables a management to achieve a more
effective planning, sophistication in handling cash enables a firm to cut down on the
amount that it mist deep in order to sustain any given level of operations.

DISADVANTAGES OF CASH MANAGEMET

(i) It may offer a solution of compensation, which is no justified on the basis of a

concrete notion, particularly when the business economy operates in an uncertain
world.
(ii) It considers economic recession as the main source of uncertainty but ignores
technological developments, shifts in consumer preferences, political changes etc.
Moreover, recessions are not the only source of economic unhappiness.
(iii) The cost of holding cash is the profit that could have been earned had the funds been
put to another use.
 CHAPTER-V
(DATA ANALYSIS & INTERPRETATION)
 DATA ANALYSIS & INTERPRETATION
The learn that is present the following aspects of funds management.
1. SIZE OF CASH
EARNINGS SIZE IN CURRENT ASSETS
FORMULA:
SIZE OFCASH: CURRENT ASSETS / UTTER ANNUAL CASH*100
TABLE:
Current assets 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Amount % Amount % Amount % Amount % Amount %
Inventories 4650000 23.77 4285841 23.69 2396737 20.18 2715535 19.1 2423567 18.96
Sundry creditors 8193631 41.89 6831412 37.8 5125948 42.75 8425023 59.13 6582462 51.52
Cash ICICI 5274479 26.97 5713231 31.58 1736122 19.62 1887500 13.25 1813566 14.2
Bank
Loans 1437163 7.35 1256961 6.95 2665231 22.45 1221129 8.56 1958125 15.32
&advances
Total 19555273 18136940 11874038 14249137 12777720

i. SOURCE: From the annual report.

Graph:
9000000
8000000
7000000
6000000
Inventories
5000000
Sundry creditors
4000000 Cash ICICI Bank
3000000 Loans &advances
2000000
1000000
0
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
During the season 2020-2021the money balance in 26.97% of full property that is latest this is
second to debtors. 2nd 2019-20profit balances in near to debtors that are sundry is 31.58% of
general assets which are current year. The money balance during 2020-2021 and 2019-20 trend
that is confirmed is declining.
2. Components of cash balance

FORMULA:
COMPONENTS OF CASH BALANCE: CURRENT ASSETS /TOTAL ANNUAL
CASH*100

Cash and ICICI 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

BANK balances
Amount % Amount % Amount % Amount % Amount %
Cash in hand 32424 0.61 62277 1.09 91498 5.12 112311 6.33 135624 7.48
Cash at scheduled 5242005 99.39 5650954 98.91 1694624 94.88 1775189 93.67 1677942 92.52
ICICI Bank
Total 5274479 5713231 1786122 1887500 1813566

SOURCE: - From Annual Reports.

Graph:

6000000

5000000

4000000

3000000 Cash in hand

Cash at scheduled ICICI Bank
2000000

1000000

0
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation; -

Inside the funds which can be cash that is complete have been 0.61% and funds at ICICI BANK
were 99.39percent during the times that are changing the year 2018-2019. In the season that is
growing, 2020-2021, 2021-2022 and 2022-2023 there was escalation in money stability that is
available. The amount that will be total of at hand during the 2022-2023 was 7.48%. The cash at
ICICI BANK balances the of study got more than 92 year.
The dual goals of cash administration are to keep up liquidity and also at the time that is
minimize that is exact same bucks molding. This implies that one should improve revenue
holdings without imparting the liquidity that is overall of the worry. This objective could be
accomplished by perhaps performing a control that is tight of streams. Teenager yes as to how
far the buck handles work better during the said ICICI BANK the ratios being following
determined.
A. Cash to total current Assets ratio: -
FORMULA:

Cash to total current assets = cash& Cash equivalents / total current assets * 100

YEAR CASH CURRENT ASSETS RATIO

2018-2019 52,74,479 1,95,55,273 26.97

2019-2020 57,13,231 1,80,86,940 31.59

2020-2021 17,86,122 1,18,74,039 15.04

2021-2022 18,87,500 1,42,49,137 13.25

2022-2023 18,13,566 1,56,47,173 11.59

Source: From the annual report.

Graph:

RATIO
35
30
25
20
RATIO
15
10
5
0
1,95,55,273 1,80,86,940 1,18,74,039 1,42,49,137 1,56,47,173
52,74,479 57,13,231 17,86,122 18,87,500 18,13,566
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
The bucks to present property of ICICI BANK Ltd. is useful within the seasons 2019-2020 in
comparison to leftover four age from the graph that is above.
B. Cash to Sales Ratio:-
FORMULA:

Cash to sales = cash& cash equivalents / net sales * 100

YEAR CASH SALES RATIO

2018-2019 52,74,479 3,40,79,578 15.476

2019-2020 57,13,231 2,55,36,847 22.372

2020-2021 17,86,122 2,32,16,172 7.48

2021-2022 18,87,500 3,64,28,502 5.18

2022-2023 18,13,566 3,56,45,503 5.09

(b) Source: From annual Reports.

Graph:

RATIO
25

20

15
RATIO
10

0
3,40,79,578 2,55,36,847 2,32,16,172 3,64,28,502 3,56,45,503
52,74,479 57,13,231 17,86,122 18,87,500 18,13,566
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
The cash to sale ratio of ICICI BANK Ltd. is good in the year 2019-2020 when compared with
staying four years through the graph that is above.
C. Cash to Debt Service Ratio
FORMULA:

Cash to Debt service=Annual cash flows before interest & tax / Interest

YEAR ANNUAL INTEREST RATIO

CASHFLOW

2018-2019 13,85,238 10,58,838 1.3

2019-2020 7,89,654 6,44,878 1.22

2020-2021 3,83,813 6,58,196 0.58

2021-2022 17,43,125 8,94,856 1.94

2022-2023 23,36,853 9,34,635(Rs 2.6

Source: from the annual report.
Graph:

RATIO
3
2.5
2
1.5 RATIO
1
0.5
0
10,58,838 6,44,878 6,58,196 8,94,856 9,34,635
13,85,238 7,89,654 3,83,813 17,43,125 23,36,853
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

(c) Interpretation; -
The money to debt solution proportion of ICICI BANK Ltd. is useful in the season 2022-2023
when compared with leftover four ages through the overhead graph.
D. Cash to Current Liability Ratio
FORMULA:

Cash to current liability = Cash& cash equivalents / Total current liabilities

YEAR CASH CURRENT LIABILITIES RATIO

2018-2019 52,74,489 75,04,216 0.70

2019-2020 57,13,231 48,41,553 1.18

2020-2021 17,86,122 55,76,428 0.31

2021-2022 18,87,500 65,03,122 0.29

2022-2023 18,13,566 68,45,287 0.26

Source: From the annual report

Graph:

RATIO
1.4
1.2
1
0.8
RATIO
0.6
0.4
0.2
0
75,04,216 48,41,553 55,76,428 65,03,122 68,45,287
52,74,489 57,13,231 17,86,122 18,87,500 18,13,566
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
The cash to recent obligations of ICICI BANK Ltd. is good in the year 2019-2020 when
weighed against remaining four decades through the graph that is above.
3. OPERATING CASH FLOW
A. The cash flow that is running, an exchangeability proportion, is a measure of how well a
business enterprise can spend their liabilities down that are current the bucks stream
generated from the key business procedures. These financial metric concerts how much a
commercial enterprise makes from its recreation that is working rupee of latest
obligations the subsequent rates were computed.
B. Interval assess proportion
C. funds return proportion
D. Cash no. of time years that are holding.

Quick or Liquid Assets

Interval measure= Average daily cash operating expenses
Average daily cash operating expenses=Total operating cash expenses for the year
No. of days in a year
Total operating expenses for the year=Cost of goods sold + Admin. Exp & office exp + Sell &
Dis exp
Cost of goods sold = purchases + opening stock – closing stock – man. Exp.

A.INTERVAL MEASURE RATIO

FORMULA:
Interval measure: liquid assets / Average daily cash operating expenses

YEAR LIQUID ASSETS A.D.C.O.E RATIO

Or (DAYS)
INTERVAL
MEASURE

2018-2019 1,34,68,110 88,799 152

2019-2020 1,25,44,138 68,196 184

2020-2021 68,12,120 64,261 111

2021-2022 1,03,12,523 76,713 134

2022-2023 1,43,56,746 86,457 166

SOURCE: from the annual report.
Section I.06 Graph:
100,000
90,000
80,000
70,000
60,000
50,000 A.D.C.O.E
40,000 RATIO
30,000
20,000
10,000
0
1,34,68,110 1,25,44,138 68,12,120 1,03,12,523 1,43,56,746
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
A.The measure that is period of Bajaj cash Ltd. is useful into the 2019-2020 when contrasted
utilizing the staying four age from the graph that is over 12 months.
CASH TURNOVER RATIO

FORMULA:
Cash Turnover: Revenue(sales) / cash & cash equivalents
YEAR SALES CASH RATIO

2018-2019 3,40,79,578 52,74,479 6.46

2019-2020 2,55,36,847 57,13,231 4.47

2020-2021 2,32,16,172 17,86,122 13.37

2021-2022 3,64,28,502 18,87,500 19.30

2022-2023 3,56,45,503 18,13,566 19.65

Source: from the annual report.

Graph:

RATIO
25

20

15
RATIO
10

0
52,74,479 57,13,231 17,86,122 18,87,500 18,13,566
3,40,79,578 2,55,36,847 2,32,16,172 3,64,28,502 3,56,45,503
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
The money return ratio of ICICI BANK Ltd. is good inside the 2022-2023 in contrast with
staying four years through the graph that is above year.

A. CASH NO OF DAY’S HOLDING PERIOD

FORMULA:
CASH NO. OF DAYS HOLDING PERIOD = 360 / CASH TURNOVER RATIO

YEAR CASH 360/C.T CASH NO OF

TERNOVER DAYS
HOLDINING

2018-2019 52,74,479 360/6.46 55.73

2019-2020 57,13,231 360/4.47 80.74

2020-2021 17,86,122 360/13.07 26.73

2021-2022 18,87,500 360/19.3 18.65

2022-2023 18,13,566 360/19.65 18.32

Source: From annual Reports.

Graph:

CASH NO OF DAYS HOLDINING

100
80
60
40 CASH NO OF DAYS
20 HOLDINING

0
360/6.46 360/4.47 360/13.07 360/19.3 360/19.65
52,74,479 57,13,231 17,86,122 18,87,500 18,13,566
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023

Interpretation: -
The Cash range period duration that is holding of investment Ltd from the overhead graph. Is
good inside the periods 2019-2020 when compared with staying four years.
 CHAPTER-VI
(FINDINGS, SUGGESTIONS &
CONCLUSIONS)

FINDINGS
1.That is 2nd to debtors during the year 2020-2021the cash balance in 26.97% of total present
possessions. 2nd 2019-20funds balances in close to debtors that are sundry its 31.58% of overall
assets that are present year. The cash balance during 2020-2021 and 2019-20 showed movement
that is declining.

2. within the finances that is cash that is total was 0.61 cash and% at ICICI BANK was
99.39percent from inside the 12 months 2018-2019. Inside the 2017-18, 2020-2021, 2021-2022
and 2022-2023 there had been upsurge in cash in hand balance year. The amount that is total of
at hand whenever you view the 2022-2023 is 7.48%. The bucks at ICICI BANK balance the
season of research was a lot that is complete lot more than 92%.

3.earnings to property that is current of cash Ltd. is advantageous inside the season 2019-2020
in contrast to continuing to be four years.

4.Cash to deal ratio of ICICI BANK Ltd. is excellent in the 2019-2020 in comparison with
staying four years year.

5. Cash to debt service ratio of ICICI BANK Ltd. is beneficial in the 2022-2023 when
compared with remaining four years.

6.Cash to current obligations of ICICI BANK Ltd. is right in the year 2019-2020 when put next
with staying four years.

7. measure that is interval of ICICI BANK Ltd. is right in the year 2019-2020 as compared
towards the remaining four ages.

8.Cashturnover ratio of ICICI BANK Ltd. is right for the 2022-2023 in comparison to staying
four decades 12 months.

9.The profit range that is wide of period that is keeping of funds Ltd. Year is right for the 2019-
2020 in comparison to remaining four years.
SUGGESTIONS
 Cash to Utter Assets Ratio for the years that are total within lessening pattern. Therefore,
it is perfect for business.
 Cash to debt provider ratio through the 2018-2023 is 5 year.
 Income Return Proportion for all of the decades is in increasing trend. So, it really is
great for your company.
 Cash to Currents Liabilities Proportion for all the years being full in lowering pattern.
Thus, it’s detrimental to the company.
 ICICI Bank should prepare cash flow feedback regularly since it is an essential computer
software that is analytical the possession of associated with monetary administration. It
assists the control into the handling that is most useful for the profit.
CONCLUSIONS

The ICICI BANK is regarded as Asia's most markets that are active are economic with branches
all over the banking. The foundation associated with providers is a professionals of authorities
that happen to be knowledgeable and technologically advanced. Inspire of the status that is
tough is financial ICICI BANK surely could surpass marketplace objectives in 2020–2021.
ICICI BANK Limited, which puts an emphasis that is innovation that is customer that is strong,
is continually creating up-to-date monetary answers to satisfy consumers' growing needs. The
funding industry was afflicted with the crisis that is global is economic but ICICI BANK shown
their expertise by undertaking far more than just income that is elevating. Furthermore, by
offering customer care that is unrestricted. Utilizing the aid of its consumers, ICICI BANK
clearly could keep its position that is top-tier in face of several competitors and offerings which
are hostile. This exemplifies the true way the functions and does its goals. Total improvements to
asset that is total that ICICI BANK’s progress and assets are well balanced, which makes it
financially stable to deal with unanticipated loss as a result of the option of adequate funds.
Therefore, there is very few chances of ICICI BANK supposed broke.
BIBLIOGRAPHY

Books:
 “Financial intelligence” by Karen Berman and Joe knight.

 “Guide to cash management” by John Tennent.

Websites:

 https://www.bajajcapital.com/careers
 www.bajajcapital.com
 www.investopedia.com
 www.google.com
 www.rbi.org.in
 https://www.alibris.com/search/books/subject/Cash-management