mba project report - liquidity management

COMPARATIVE ANALYSIS OF CASH MANAGEMENT SERVICES

OFFERED BY BANKS AND

IT’S EFFECTIVENESS TOWARDS CORPORATE BUSINESS

By

MOHAN V

Roll No. 1313MBA0110

Reg. No. 68613100065

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT SCIENCES

in partial fulfillment for the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

CENTRE FOR DISTANCE EDUCATION

ANNA UNIVERSITY

CHENNAI 600 025

March, 2015

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BONAFIDE CERTIFICATE

Certified that the Project report titled Comparative Analysis of Cash Management Services

Offered by Banks and its Effectiveness towards Corporate Business is the bonafide work of

Mr. V. Mohan who carried out the work under my supervision. Certified further that to the

best of my knowledge the work reported herein does not form part of any other project report

or dissertation on the basis of which a degree or award was conferred on an earlier occasion

on this or any other candidate.

Signature of Student Signature of Guide

V. MOHAN Dr. K. SAMPATH KUMAR

Roll No. 1313MBA0110 B.A. (Economics), BGL, M.Com, MPhil, Cert. A.I.I.B.,

Reg. No. 68613100065 MBA (Finance), MBA (HR & Marketing), ACS, FCMA, Ph. D.,

Professor, SSN School of Management

C/o. SSN College of Engineering

Rajiv Gandhi Salai (OMR)

KALAVAKKAM - 603110

Kanchipuram District, Tamil Nadu, India.

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ABSTRACT

Cash management services offered primarily to larger business customers. Cash

management is the stewardship or proper use of an entity’s cash resources. It serves as the means

to keep an organization functioning by making the best use of cash or liquid resources of the

organization. Plenty of services have been provided by commercial bank such as cash

concentration, zero balance accounting, and automated clearing house facilities. Sometimes,

private bank customers are also given cash management services for managing their cash.

Managing liquidity is the ability of a corporate to meet its cash needs effectively through

cash balance and to mitigate the risk of insolvency on business’s routine payments. For these

reasons, corporates use special techniques to keep cash in/out flows and cash reserves at the

optimal level to obtain the funding when it’s needed most.

This study details the list of cash management services provided by commercial banks to

its corporate customers and comparing the effectiveness of the services provided using consumer

perception and the market data available. The modern concepts of efficiency analysis of the

services offered to customers realized that measuring consumer needs or behavior was not

enough.´ CONSUMER PERCEPTION ´ should be the core and then the correct perception on

which cash management services on banks should be built. Banks must think of itself not as

producing products but as providing customer oriented services to match their business needs.

This study mainly deals with:

Comparative analysis of the selective banks about their customized products and services,

according to the customer needed.

To study the experience and expectations of the existing customers.

To study to improve the current standards of services.

To study the scope of introducing new types of services.

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ACKNOWLEDGEMENT

Perfect is the famous saying and when a person get practical experience under the

guidance of expert of the respective field, the knowledge gained is priceless.

With the sense of great pleasure and satisfaction, I present this project report entitled

“Comparative Analysis of Cash Management Services Offered by Banks and its

Effectiveness towards Corporate Business” completing a task successfully is never a man

efforts similarly completion of this report is the result of invaluable support and contribution

of number of the peoples in direct and indirect manner.

First of all, I would like to say my heartfelt thanks to My Guide Dr. K.SAMPATH

KUMAR for being a constant source of information and guidance throughout the project.

Without his able support the project I may not have been able to complete this research.

At this juncture, I would also like to thank the cash managers, treasurers and financial

officers for their support and their responses for the questionnaires related to cash

management services. Without their indispensable cooperation, the project won’t have been

completed within the stipulated time period.

Signature

V. MOHAN

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TABLE OF CONTENTS

CHAPTER 1..........................................................................................................................................2

1.1. INTRODUCTION.....................................................................................................................2

1.2. Cash Management Services generally offered...........................................................................2

1.2.1. Cash Concentration Services.................................................................................................2

1.2.2. Account Reconcilement Services...........................................................................................2

1.2.3. Advanced Web Services........................................................................................................3

1.2.4. Automated Clearing House....................................................................................................3

1.2.5. Balance Reporting Services...................................................................................................5

1.2.6. Lockbox services...................................................................................................................5

1.2.7. Sweep Accounts.....................................................................................................................5

1.2.8. Zero Balance Accounting......................................................................................................5

1.2.9. Wire Transfer.........................................................................................................................6

1.2.10. Controlled Disbursement (Intraday).......................................................................................6

1.2.11. Cash Forecasting....................................................................................................................7

1.2.12. Profitable Deployment of Surplus Funds...............................................................................7

1.2.13. Economical Borrowings.........................................................................................................7

1.3. PURPOSE OF CASH MANAGEMENT...................................................................................7

1.4. NOTIONAL POOLING............................................................................................................8

1.5. OBJECTIVES OF THE STUDY...............................................................................................8

1.5.1. Primary Objectives................................................................................................................8

1.5.2. Secondary Objectives............................................................................................................9

1.6. SCOPE OF THE STUDY..........................................................................................................9

CHAPTER 2........................................................................................................................................11

2.1. REVIEW OF LITERATURE..................................................................................................11

2.2. REVIEW OF PREVIOUS STUDIES......................................................................................11

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CHAPTER 3........................................................................................................................................14

3.1. RESEARCH DESIGN.............................................................................................................14

3.2. POPULATION:.......................................................................................................................14

3.3. SAMPLE SIZE:.......................................................................................................................14

3.4. SAMPLING TECHNIQUE.....................................................................................................14

3.5. DATA COLLECTION METHOD..........................................................................................15

3.5.1. Primary Data........................................................................................................................15

3.5.2. Secondary Data....................................................................................................................15

3.6. STATISTICAL TOOL............................................................................................................15

3.6.1. Percentage Analysis.............................................................................................................15

3.6.2. Two way Anova...................................................................................................................15

3.6.3. Weighted Average...............................................................................................................16

3.6.4. Bar Diagram:.......................................................................................................................16

3.7. LIMITATIONS.......................................................................................................................16

CHAPTER 4........................................................................................................................................18

4.1. DATA ANALYSIS AND INTERPRETATION......................................................................18

CHAPTER 5........................................................................................................................................49

5.1. FINDINGS OF THE STUDY..................................................................................................49

5.2. SUGGESSTION & RECOMMENDATIONS:........................................................................52

5.3. CONCLUSIONS:....................................................................................................................52

5.4. SCOPE FOR FUTURE RESEARCH......................................................................................53

APPENDIX 1 - QUESTIONARIE...................................................................................................54

*** MBA Final Project Survey ***..................................................................................................54

REFERENCES..................................................................................................................................59

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LIST OF TABLES

Table 4.1-1: Approximate Annual Turnover of the Business..................................................18

Table 4.1-2: Table Showing Bank chosen for ICM Services...................................................19

Table 4.1-3: Table showing Bank’s Cash Management Service Rating..................................20

Table 4.1-4: Table Showing Number of Banks Accounts maintained.....................................25

Table 4.1-5: Table showing intention to change the number of ICM providers......................26

Table 4.1-6: Table Showing Main Reason for Changing ICM Provider.................................27

Table 4.1-7: Table Showing Usage of a Common Electronic Bank Billing Format................28

Table 4.1-8: Table Showing Adequate Transparency and Accuracy.......................................29

Table 4.1-9: Table showing kind of ICM Services used to Manage Cash...............................30

Table 4.1-10: Table Showing Type of Investment made in Bank............................................31

Table 4.1-11: Table showing easiest ways to verify the Account Balance..............................32

Table 4.1-12: Table showing Rating on Effectiveness of Cash Management Services...........33

Table 4.1-13: Table showing Comfortable Risk/Return Scenario...........................................35

Table 4.1-14: Table showing Better Control of Cash Positions...............................................36

Table 4.1-15: Table showing Top Challenges to Cash Management Process Efficiency........37

Table 4.1-16: Table showing Awareness of Penalties to make Cash available.......................38

Table 4.1-17: Table showing preferred Channels to access Banking Services........................39

Table 4.1-18: Table showing Investment Banking Product most familiar with......................40

Table 4.1-19: Table showing ICM Services given more Importance by the Bank..................41

Table 4.1-20: Table showing satisfaction with the Charges imposed by Banks for not maintaining the Minimum Balance..........................................................................................42

Table 4.1-21: Table showing Opinion about the Cash Management Services in Bank...........43

Table 4.1-22: Table showing strategy to control Customer Erosion from Banks....................44

Table 4.1-23: Table showing Reason behind choosing the Bank for holding Accounts.........45

Table 4.1-24: Table showing Bank is providing Single point of Access to Customers...........46

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Table 4.1-25: Table showing satisfaction level with the Cash Management services in Bank..................................................................................................................................................47

viii

CHAPTER 1INTRODUCTION

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CHAPTER 1

1.1. INTRODUCTION

Cash Management is a marketing term for certain services offered primarily to larger

business customers. It may be used to describe all bank accounts (such as checking accounts)

provided to businesses of a certain size, but it is more often used to describe specific services

such as Cash Concentration, Zero Balance Accounting, and Automated Clearing House

Facilities. Sometimes, private bank customers are given Cash Management Services.

1.2. Cash Management Services generally offered

The following is the list of services generally offered by banks and utilized by larger

businesses and corporations:

1.2.1. Cash Concentration Services

Automatically moving funds automatically between client accounts using sweep account

of the bank for better cash administration. Consolidate your monies from a number of bank

accounts (sub accounts) into a single master account for better cash administration.

Figure 1.2.1-1 Cash Management Services

1.2.2. Account Reconcilement Services

An accounting process used to compare two sets of records to ensure the figures are in

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agreement and are accurate. Reconciliation is the key process used to determine whether the

money leaving an account matches the amount spent, ensuring that the two values are

balanced at the end of the recording period. Any mismatch or anomalies are referred to as

breaks.

Balancing a checkbook can be a difficult process for a very large business, since it

issues so many checks it can take a lot of human monitoring to understand which checks have

not cleared and therefore what the company's true balance is. To address this, banks have

developed a system which allows companies to upload a list of all the checks that they issue

on a daily basis, so that at the end of the month the bank statement will show not only which

checks have cleared, but also which have not. More recently, banks have used this system to

prevent checks from being fraudulently cashed if they are not on the list, a process known as

positive pay.

1.2.3. Advanced Web Services

Most banks have an Internet-based system which is more advanced than the one

available to consumers. This enables managers to create and authorize special internal logon

credentials, allowing employees to send wires and access other cash management features

normally not found on the consumer web site.

Armored Car Services: Large retailers who collect a great deal of cash may have the

bank pick this cash up via an armored car company, instead of asking its employees to deposit

the cash.

1.2.4. Automated Clearing House

A clearing house can be simply described as an ‘electronic system’ that can be used to

transfer funds between funds. The financial institutions use this to make payments, especially

to employees (e.g. – direct deposit).

This involves the financial institution associating with an exchange, which settles

trades and regulates delivery. A bank-clearinghouse functions as an intermediary between

financial institutions.

Supposing, there are multiple transfers that are to be carried out from a Bank A, to

another bank, called Bank B and vice versa. In the likelihood of the absence of a clearing

house, each transaction would have to be individually carried out; in its stead, if both the

banks opt to use an interbank clearing house, then they can bundle the transactions which

allows them to handle them efficiently.

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Making the decision to bank or even expand your operations overseas can be difficult.

One must navigate the international payments through the foreign banking system.

Examples of clearing houses

Clearing House Interbank Payments System (CHIPS) is an American clearing

house. It is held privately and caters primarily to large-value USD transactions both

domestically and internationally. Just to suggest a hint of the scale of its operation –

in a single day it allows settling well over US$1 trillion a day and around 250,000

interbank payments. CHIPS is held by a group of financial institutions. According to

the US regulations, "any banking organization with a regulated U.S. presence may

become an owner and participate in the network." Until 1998 however, in order to

participate in the CHIPS network, a financial institution was mandated to maintain

either a branch or an agency in New York City. A non-participant willing to make

international payments through CHIPS will then have to avail the services of one of

the participants into CHIPS, acting as its agent or correspondents. Usually the high-

value payments that are not time-sensitive are preferred to be sent by CHIPS instead

of Fedwire (It is another clearing house that is operated by the Federal Reserve

Banks, USA) as it is comparatively a cheaper means to carry out inter-bank

transactions and payments.

Fedwire funds Service – operated by the Federal Reserve’s Banks, the Fedwire

system allows fund-transfers between all its participants. It is preferred especially

for time-critical transfer and large-value payments; both, for domestic and

international markets. It is designed for very high degree of resilience and

redundancy. On an average the number of payments exceeded 500,000, even in

2007; and the total value was approximately over 2.7 trillion.

Euroclear – It is the largest central securities depository in the world. Specializing

in securities based transactions and its safe-keeping and asset servicing of these

securities. It settles security based transactions; both, International and domestic.

The products that are dealt with range from bonds, equities, derivatives and

investment funds. It also acts as the International Central Securities Depository

(ICSD) and Central Securities Depository (CSD) for many European countries

securities. It owns EMXCo (Leader in providing investment-fund order routing in

the UK) and TRAX (which is a trade matching and reporting system). It is owned

and governed by its users (market) and has acquired many other institutions. It is

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one of the oldest settlement systems, conceived in the year 1968. Till the end of

2000, the Euroclear system was operated by the Belgian branch of the New York

state bank Morgan Guaranty Trust Company, of New York (MGT). MGT

transferred the operating activities to Euroclear bank in 2001. Its settlement and

depositary system, which is fully computerized, ensures the safe payment and

delivery of Eurobonds.

1.2.5. Balance Reporting Services

Corporate clients who actively manage their cash balances usually subscribe to secure

web-based reporting of their account and transaction information at their lead bank. These

sophisticated compilations of banking activity may include balances in foreign currencies, as

well as those at other banks. They include information on cash positions as well as 'float'

(e.g., checks in the process of collection). Finally, they offer transaction-specific details on all

forms of payment activity, including deposits, checks, and wire transfers in and out, ACH

(automated clearinghouse debits and credits), investments, etc.

1.2.6. Lockbox services

Often companies (such as utilities) which receive a large number of payments via checks

in the mail have the bank set up a post office box for them, open their mail, and deposit any

checks found. This is referred to as a "lockbox" service.

1.2.7. Sweep Accounts

Sweep Accounts are typically offered by the cash management division of a bank. Under

this system, excess funds from a company's bank accounts are automatically moved into a

money market mutual fund overnight, and then moved back the next morning. This allows

them to earn interest overnight. This is the primary use of money market mutual funds.

1.2.8. Zero Balance Accounting

Zero Balance Accounting can be thought of as somewhat of a hack. Companies with

large numbers of stores or locations can very often be confused if all those stores are

depositing into a single bank account. Traditionally, it would be impossible to know which

deposits were from which stores without seeking to view images of those deposits. To help

correct this problem, banks developed a system where each store is given their own bank

account, but all the money deposited into the individual store accounts are automatically

moved or swept into the company's main bank account. This allows the company to look at

5

http://en.wikipedia.org/wiki/Sweep_account

individual statements for each store. U.S. banks are almost all converting their systems so that

companies can tell which store made a particular deposit, even if these deposits are all

deposited into a single account. Therefore, zero balance accounting is being used less

frequently.

Figure 1.2.8-2 Zero Balance Accounting

1.2.9. Wire Transfer

A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple

bank account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often

the most expedient method for transferring funds between bank accounts. A bank wire

transfer is a message to the receiving bank requesting them to effect payment in accordance

with the instructions given. The message also includes settlement instructions. The actual

wire transfer itself is virtually instantaneous, requiring no longer for transmission than a

telephone call.

1.2.10. Controlled Disbursement (Intraday)

This is another product offered by banks under Cash Management Services. The bank

provides a daily report, typically early in the day, that provides the amount of disbursements

that will be charged to the customer's account. This early knowledge of daily funds

requirement allows the customer to invest any surplus in intraday investment opportunities,

6

typically money market investments. This is different from delayed disbursements, where

payments are issued through a remote branch of a bank and customer is able to delay the

payment due to increased float time.

1.2.11. Cash Forecasting

Cash forecasting is backbone of cash planning. It forewarns a business regarding

expected cash problems, which it may encounter, thus assisting it to regulate further cash flow

movements. Lack of cash planning results in spasmodic cash flows.

Every business is interested in accelerating its cash collections and decelerating cash

payments so as to exploit its scarce cash resources to the maximum. There are techniques in

the cash management which a business to achieve this objective.

1.2.12. Profitable Deployment of Surplus Funds

Due to non-synchronization of cash inflows and cash outflows the surplus cash may

arise at certain points of time. If this cash surplus is deployed judiciously cash management

will itself become a profit Centre. However, much depends on the quantum of cash surplus

and acceptability of market for its short-term investments.

1.2.13. Economical Borrowings

Another product of non-synchronization of cash inflows and cash outflows is

emergence of deficits at various points of time. A business has to raise funds to the extent and

for the period of deficits. Raising of funds at minimum cost is one of the important facets of

cash management.

1.3. PURPOSE OF CASH MANAGEMENT

Cash management is the stewardship or proper use of an entity’s cash resources. It

serves as the means to keep an organization functioning by making the best use of cash or

liquid resources of the organization.

The function of cash management is threefold:

To eliminate idle cash balances . Every dollar held as cash rather than used to augment

revenues or decrease expenditures represents a lost opportunity. Funds that are not

needed to cover expected transactions can be used to buy back outstanding debt (and

cease a flow of funds out of the Treasury for interest payments) or can be invested to

generate a flow of funds into the Treasury’s account. Minimizing idle cash balances

requires accurate information about expected receipts and likely disbursements.

7

To deposit collections timely . Having funds in-hand is better than having accounts

receivable. The cash is easier to convert immediately into value or goods. A

receivable, an item to be converted in the future, often is subject to a transaction delay

or a depreciation of value. Once funds are due to the Government, they should be

converted to cash-in-hand immediately and deposited in the Treasury's account as

soon as possible.

To properly time disbursements . Some payments must be made on a specified or legal

date, such as Social Security payments. For such payments, there is no cash

management decision. For other payments, such as vendor payments, discretion in

timing is possible. Government vendors face the same cash management needs as the

Government. They want to accelerate collections. One way vendors can do this is to

offer discount terms for timely payment for goods sold.

1.4. NOTIONAL POOLING

Notional pooling is a mechanism for calculating benefit by compensating credit and debit

balances of accounts of a client, without actually transferring any funds.

Notional Pooling offered to multiple customer accounts in same country, maybe different

or same currencies are clubbed together in a single pool of accounts, so as to virtually

treat them as a single entity.

Credit value balances are offset against debit balances and the compensated balance is

used to work out the debit or credit benefit paid to customer. Also referred as ‘Interest

Optimization’.

Purpose is to Maximise Interest Earned and to Minimise Interest Paid

Notional pooling offered offsets credit and debit balances on a multi-currency basis

without the need to engage in any foreign exchange. Benefit from off-setting without

movement of funds and reduced operating expenses.

1.5. OBJECTIVES OF THE STUDY

1.5.1. Primary Objectives

To analysis the Customer Perception level and their expectation towards of Cash

Management services provided by banks.

To gain insights and compare the effectiveness of customized cash management

8

products/services offered in selective corporate banks to its clients.

1.5.2. Secondary Objectives

Comparative analysis of the selective banks about their customized products and services,

according to the customer needed.

To study the experience and expectations of the existing customers.

To study the scope of introducing new types of services.

1.6. SCOPE OF THE STUDY

The scope of the study is to analyse Customer Perception level and their

expectation towards of Cash Management services provided by banks

The study gathers information about rating the effectiveness and compare the

effectiveness of customized cash management products/services offered in

selective corporate banks to its clients.

The data was collected from the cash managers; secondary data was collected

from book manuals, magazines and websites.

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CHAPTER 2REVIEW OF LITERATURE

10

CHAPTER 2

REVIEW OF LITERATURE

2.1. REVIEW OF LITERATURE

A literature review is a text written by someone to consider the critical points of

current knowledge including substantive findings, as well as theoretical and

methodological contributions to a particular topic. Literature reviews are secondary

sources, and as such, do not report any new or original experimental work. Also, a

literature review can be interpreted as a review of an abstract accomplishment. Most

often associated with academic-oriented literature, such as a thesis or peer-reviewed

article, a literature review usually precedes a research proposal and results section. Its

main goals are to situate the current study within the body of literature and to provide

context for the particular reader. Literature reviews are a staple for research in nearly

every academic field.

2.2. REVIEW OF PREVIOUS STUDIES

This chapter discusses the theoretical framework, empirical review both covering

early studies covers 1980 to 1999 and the current studies covers 2000 to 2009. At the

end the summary of whole discussion has been provided.

Cash concepts

According to (Davidson et al, 1999), cash is any medium of exchange, which is

immediately negotiable. It must be free of restriction for any business purpose. Cash has

to meet the prime requirements of general acceptability and availability for instant use

in purchasing and payment of debt. Acceptability to a bank for deposit is a common test

applied to cash items. This is a process of Planning, controlling, and accounting for cash

transactions and cash balances. It is channeling available cash into expenditures that

enhance productivity, directly or indirectly.

In addition, Cash is ready money in the bank or in the business. It is not

inventory, it is not accounts receivable (what you are owed), and it is not property.

These might be converted to cash at some point in time, but it takes cash on hand or in

the bank to pay suppliers, to pay the rent, and to meet the payroll. Profit growth does not

necessarily mean more cash. (Davidson et al, 1999)

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Cash management concepts

Waltson and Head (2007) explained Cash management as the concept which is

concerned with optimizing the amount of cash available, maximizing the interest earned

by spare funds not required immediately and reducing losses caused by delays in the

transmission of funds.

According to Zimmerer et al (2008) cash management is the process of

forecasting, collecting, disbursing, investing, and planning for cash a company needs to

operate smoothly. They further added that cash management is a vital task because it is

the most important yet least productive asset that a small business owns. A business

must have enough cash to meet its obligations or it will be declared bankrupt. Creditors,

employees and lenders expect to be paid on time and cash is the required medium of

exchange.

However, some firm retain an excessive amount of cash to meet any unexpected

circumstances that might arise. These dormant cash have an income-earning potential

that owners are ignoring and this restricts a firm’s growth and lowers its profitability.

Investing cash, even for a short time, can add to company’s earning. Proper cash

management permits the owner to adequately meet cash demands of the business, avoid

retaining unnecessarily large cash balances and stretch the profit generating power of

each dollar the business owns (Zimmerer et al, 2008).

In late 1980s authors played a great contribution in the concept of cash

management. Ross et al (1988:619) explained that cash management involves three

steps;

Determining the appropriate target cash balance

Collecting and disbursing cash efficiently

Investing “ excess cash ‘ in marketable securities

Determining the appropriate cash target balance involves an assessment of

the tradeoff between the benefits and cost of liquidity. The benefit of

holding cash is the convenience it gives the firm. A firm should increase

its holding cash until its present value from doing so is zero. The

incremental liquid value of cash should decline as more of it is held.

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CHAPTER 3

METHODOLOGY

13

CHAPTER 3 METHODOLOGY

3.1. RESEARCH DESIGN

The Research is based on both Analytical and Descriptive Analysis.

The Analytical study would be dealt when the Comparative analysis of the selective

banks about their customized products and services to study the experience and expectations

of the existing customers.

Also, it would be a Descriptive study when the detailed study made scope of introducing

new types of cash management services and products.

3.2. POPULATION:

Survey conducted with known sixty Cash managers, treasurers and financial officers

worldwide who are associated with selected banks (HSBC, CITI, RBS and SCB). The

survey taken into non-financial institutions and financial institutions sections. Respondents

are asked to respond the questionnaire.

3.3. SAMPLE SIZE:

The sample size for this study is about 38 from total population of 60 who are familiar

with Cash management services and acting as cash manager for leading corporates.

3.4. SAMPLING TECHNIQUE

Convenience sampling method is used for the survey of this project. It is a non-

probability sample. This is the least reliable design but normally the cheapest and easiest to

conduct .In this method Researcher have the freedom to choose whomever they find, thus

the name convenience. Example includes informal pools of friends and neighbors or people

responding to a newspaper invitation for readers to state their position on some public issue

The Period of study is during the month of October 2014 and November 2014. Care was

taken to ensure completeness and accuracy in the data collected through Survey.

14

3.5. DATA COLLECTION METHOD

3.5.1. Primary Data

Cash managers, treasurers and financial officers worldwide. The survey taken

into non-financial institutions and financial institutions sections. Respondents are

asked to respond the questionnaire.

3.5.2. Secondary Data

Secondary data are those, which have already been collected by some other persons

for their purpose and published. Secondary data are usually in the shape of finished

products. Two types of secondary data were collected for the preparation of the project

work: Internal Data was generated from company’s brochures, manuals and annual

reports External Data, on the other hand, was generated from magazines, research books,

intranet and internet.

3.6. STATISTICAL TOOL

The study has used various statistical tools for the analysis of data. The data

collected can be interpreted by various statistical tools such as Percentage analysis, Chi-

square test, and Pearson’s two-tailed correlation.

3.6.1. Percentage Analysis

To have a general idea on the opinion given by the respondents a simple percentage

analysis was carried out.

Test Statistics:

Percentage = Number of Responses * 100

Number of Respondents

3.6.2. Two way Anova

The two-way ANOVA compares the mean differences between groups that have

been split on two independent variables (called factors). The primary purpose of a two-

way ANOVA is to understand if there is an interaction between the two independent

variables on the dependent variable.

15

3.6.3. Weighted Average

An average in which each quantity to be averaged is assigned a weight. These

weightings determine the relative importance of each quantity on the average.

3.6.4. Bar Diagram:

Bar diagram is a popular form of diagrammatic representation. This diagram

consists of a series of rectangular bars standing on a common base.

The data collected from the different bank customers are represented in the tables

and Bar Diagram for better understanding.

3.7. LIMITATIONS

The study is limited to comparing the services offered in four selected Banks HSBC,

CITI, RBS and SCB.

Survey conducted only with 60 known cash managers of leading corporates.

The convenience sampling method is followed in selecting the respondents. So the results of

the study may be biased.

The data collected from the customer are qualitative in nature i.e., views perception,

satisfaction, opinion. May change from time to time

16

CHAPTER 4

DATA ANALYSIS AND

INTERPRETATION

17

CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

4.1. DATA ANALYSIS AND INTERPRETATION

Table 4.1-1: Approximate Annual Turnover of the Business

Options No of respondent Percentage %

<20,00,000 9 24%

20,00,000-50,00,000 14 37%

50,00,000-80,00,000 8 21%

80,00,000-100,00,000 5 13%

>100,00,000 2 5%

Total 38 100%

Chart 4.1-1: Chart on Approximate Annual Turnover of the Business

5.

6.

Interpretation

24% of the respondents’ annual turnover is less than 20,00,000, 37% respondents are earning 20,00,000-50,00,000, 24% of them comes under 50,00,000-80,00,000, 13% of them comes under 80,00,000-100,00,000 and the rest 5% of the respondents’ turnover is more than 100,00,000

18

Table 4.1-2: Table Showing Bank chosen for ICM Services

Options No of respondents Percentage %

Standard Chartered Bank 9 24%

HSBC Bank 11 29%

CITI Bank 10 26%

RBS Bank 8 21%

Total 38 100%

Chart 4.1-2: Chart Showing Bank chosen for ICM Services

Interpretation

24% of the respondents chosen Standard Chartered Bank for ICM services, 29% chosen HSBC Bank, 26% chosen CITI Bank, 21% of them chosen RBS bank

19

Table 4.1-3: Table showing Bank’s Cash Management Service Rating

Terms 1 2 3 4 5 Total

Quality of personnel 4 3 9 9 13 38

Industry expertise & knowledge 14 4 8 12 0 38

Advisory services 6 7 17 6 2 38

Quality of execution 8 19 8 3 0 38

Innovative/Tailored business solutions 9 2 7 18 2 38

Level of commitment to your cash management business

11 7 15 1 4 38

Understanding of your business 7 7 16 4 4 38

Cash management network capabilities 4 8 21 4 1 38

Liquidity/Credit facilities 8 18 7 5 0 38

Implement netting/In-house banking 2 11 15 7 3 38

Payment/collection methods 7 0 19 11 1 38

Multi-currency capabilities 9 10 6 12 1 38

Cross-border low value payments 15 17 3 3 0 38

Access to all applicable clearing systems 3 14 3 18 0 38

Cash flow forecasting capabilities 4 14 4 16 0 38

Compatibility with your own systems 3 10 9 16 0 38

Quality of electronic banking security 3 12 8 12 3 38

Electronic banking applications 2 3 29 3 1 38

20

Chart 4.1-3: Chart Showing Bank's Cash Management Service Rating

Interpretation on Cash Management Services Rating:

Majority of the respondents ranked quality of personnel as 5; as far industry expertise &

knowledge most of them ranked 1, Advisory services are ranked as 3, Quality of execution are

ranked as 2, Innovative/Tailored business solutions are ranked as 4, Level of commitment to

cash management business are ranked as 3, Understanding of business are ranked as 3, Cash

management network capabilities are ranked as 3, Liquidity/Credit facilities are ranked as 2,

Implement netting/In-house banking are ranked as 3, Payment/collection methods are ranked as

3, Multi-currency capabilities are ranked as 4, Cross-border low value payments are ranked as 2,

Access to all applicable clearing systems are ranked as 4, Cash flow forecasting capabilities are

ranked as 4, Compatibility with your own systems are ranked as 4, Quality of electronic banking

security are ranked as 2 & 4, Electronic banking applications are ranked as 3

21

TWO FACTOR ANOVA DATA ANALYSIS:

To find the effect of two nominal predictor variables such as “Bank of the respondent” and

“Service Rating Category” on a continuous outcome variable “Respondent Rating”. A two-way

ANOVA test analyzes the effect of the independent variables on the expected outcome along

with their relationship to the outcome itself.

Null Hypothesis:

H01 = There is no significant effect from the “Bank” factor on the response of the respondents.

H02 = There is no significant effect from the “Service Rating Category” factor on the Levels of satisfaction of the respondents.

Alternate Hypothesis:

H1 = There is a dependency between the bank they are using currently for their cash management

services and Respondents service rating across various service categories

From the data collected to rate their cash manager on a sliding scale of 1=V Poor to

5=Excellent across various service categories. Below are the collected categorized data for each

bank all the responses collated based on the service-rating.

BANK 5 4 3 2 1HSBC 23 63 78 33 1CITI 9 48 58 46 19SCB 2 35 42 44 39RBS 1 14 28 45 57

Note: For the hypothesis, a 95% confidence level is used. This means you can be sure that 95% of the

time the result is actually correct. And it has a 5% risk of arriving at a false conclusion.

Anova: Two-Factor

SUMMARY Count Sum Average VarianceHSBC 5 198 39.6 957.8CITI 5 180 36 436.5SCB 5 162 32.4 300.3RBS 5 145 29 512.5 SA 4 35 8.75 102.9167A 4 160 40 431.3333N 4 206 51.5 462.3333DA 4 168 42 36.66667SDA 4 116 29 589.3333

22

ANOVASource of Variation SS df MS F P-value F crit

Bank of the respondent 313.35 3 104.45 0.275206 0.842175 3.490295Service Rating Category 4274 4 1068.5 2.815299 0.073601 3.259167Error 4554.4 12 379.5333 Total 9141.75 19

INFERENCE:

There are two null hypotheses: one for the “Bank of the respondent” and the other for the

“Service Rating Category”:

H01 = There is no significant effect from the “Bank” factor on the response of the

respondents.

Since the p-value for the rows = .8421 > .05 = α (or F = 0.27 < 3.49 = F-crit) we can’t reject the

null hypothesis, and so at the 95% level of confidence we conclude there is no significant

difference in responses received based on the bank of the respondents.

H02 = There is no significant effect from the “Service Rating Category” factor on the

response of the respondents.

Since the p-value for the columns = .073 > .05 = α (or F = 2.81 > 3.21 = F-crit) we can’t reject

the null hypothesis, and so at 95% level of confidence we conclude there is no significant

difference in Service Rating Category.

23

WEIGHTED AVERAGE:

From the data collected to rate their cash manager on a sliding scale of 1=V Poor to 5=Excellent

across various service categories. In the lead categories, each voter’s score across all service

categories are consolidated. Each voter’s final score is then weighted depending on the annual

turnover of the part of the business for which the voter is responsible, as follows:

1. Greater than $100,00,000 – a Weight factor of ‘5’ is applied

2. Between $80,00,000 to 100,00,000 - a Weight factor of ‘4’ is applied



5. Lower than $20,00,000 - a Weight factor of ‘1’ is applied

Based on the weighted average calculation method, final score is then weighted depending on

the annual turnover of the part of the business for which the voter is responsible, and final score

of the bank achieved from that:

BANK Weighted Average

HSBC 3.539215686

CITI 3.04589372

SCB 2.563888889

RBS 1.896825397

Inference:

Based on the calculation results, Respondents have voted HSBC the number one international

cash manager, CITI Bank was ranked second for ICM services, SCB ranked as third and RBS as

fourth best ICM provider.

24

Table 4.1-4: Table Showing Number of Banks Accounts maintained


1 – 10 1 3%

11 – 25 1 3%

26 – 75 12 32%

76 – 150 15 38%

150+ 9 24%

Total 38 100%

Chart 4.1-4: Chart Showing Number of Banks Accounts Maintained

Interpretation:

3% of the respondents are maintaining 1-10 bank accounts, 3% of them are holding 11-25 accounts, 32% of them are holding 26-75 accounts, 38% are holding 76-150 accounts, and 24% of them are maintaining more than 150 accounts

25

Table 4.1-5: Table showing intention to change the number of ICM providers


Yes 1 3%

No 30 79%

Don’t Know 7 18%

Total 38 100%

Chart 4.1-5: Chart showing intention to change the number of ICM providers

Interpretation

3% of the respondents are said yes and 79% of the respondents are said no and 18% of them said they don’t’ know about their intention to change the number of ICM providers

26

Table 4.1-6: Table Showing Main Reason for Changing ICM Provider


Poor overall service Personnel change at bank

1 100%

Rating downgrade of bank 0 0%

Others 0 0%

Total 1 100%

Chart 4.1-6: Table Showing Main Reason for Changing ICM Provider

Interpretation

100% of the respondents said the reason for change in ICM provider due to poor service

27

Table 4.1-7: Table Showing Usage of a Common Electronic Bank Billing Format


Yes 38 100%

No 0 0%

Don’t Know 0 0%

Total 38 100%

Chart 4.1-7: Chart showing Usage of a Common Electronic Bank Billing Format

Interpretation

100% of the respondents are said yes for usage of electronic bank billing format by their banks

28

Table 4.1-8: Table Showing Cash Management/Transaction Provided With Adequate Transparency and Accuracy


Yes 18 47%

No 11 29%

Don’t Know 9 24%

Total 38 100%

Chart 4.1-8: Chart Showing Cash Management/Transaction Provided With Adequate Transparency and Accuracy

Interpretation: 18% of the respondents are said yes and 11% of the respondents said no and 24% of the, said they are not aware of the cash management/transaction provided with adequate transparency and accuracy

29

Table 4.1-9: Table showing kind of ICM Services used to Manage Cash


Cash concentration services 20 53%

Notional Pooling services 11 29%

Automatic Balance Transfer 14 37%

Cash Forecasting Services 18 47%

High yield Investment Services 15 39%

Others 2 5%

Total 38 100%

Chart 4.1-9: Chart showing kind of ICM services used to manage Cash.

Interpretation: 53% of the respondents said cash concentration is used for managing cash in ICM services, 29% of the respondents said notional pooling services, 37% of the respondents using Automated Balance Transfer, 47% of the respondents using zero balancing accounting and 39% said high yield investment services.

30

Table 4.1-10: Table Showing Type of Investment made in Bank


Bank Fixed Deposit (Term Deposit) 12 32%

Deposits- Saving Account 19 50%

Market Based Investment Accounts 15 39%

Company Fixed Deposit 8 21%

Others 8 21%

Total 38 100%

Chart 4.1-10: Table showing Type of Investment made in Bank

Interpretation

32% of the respondents said Bank fixed deposit is made in bank, 50% said savings account, 39% said market based investment accounts, 21% said company fixed deposit and 21% respondents using other type investment accounts which is not listed.

31

Table 4.1-11: Table showing easiest ways to verify the Account Balance


Internet banking 12 32%

SMS Alerts 1 3%

Reporting Services over Email 11 29%

Mobile Banking 14 37%

Others 0 0%

Total 38 100%

Chart 4.1-11: Chart showing easiest ways to verify the Account Balance

Interpretation

37% of the respondents said the easiest way to obtain account balance is mobile banking, 32%

of the respondents prefer internet banking, 29% said reporting services over email and only 3%

of the respondents preferring SMS Alerts.

32

Table 4.1-12: Table showing Rating on Effectiveness of Cash Management Services

Offered in Modern Days

Services 1 2 3 4 5 TotalZero balance accounting/Cash Concentration 2 7 8 9 12 38Notional Pooling 10 9 14 3 2 38Automated Balance Transfer 1 5 10 17 5 38

Investment Products/Services 1 6 8 14 9 38

Term Deposits 3 14 15 2 4 38

Advanced Reporting Services 11 16 5 4 2 38

Forecasting Services 11 14 9 3 1 38

Overall satisfaction level on each services

Services Average Score obtained

Zero balance accounting/Cash Concentration 3.58

Notional Pooling 2.42Automated Balance Transfer 3.53Investment Products/Services 3.63Term Deposits 2.74Advanced Reporting Services 2.21Forecasting Services 2.18

Chart 4.1-12: Chart showing Rating on Effectiveness of Cash Management Service Offered in Modern Days

33

Overall Satisfaction Provided by Main Banking Partners for Each Service: (5 Scale Rating)

Interpretation

Rating on effectiveness of cash management service offered in modern days

Majority of the respondents voted Investment Products/Services as most effective for their business, Cash concentration also equally effective and it’s considered as best by majority of the respondents, Automated clearing house facilities also rated highly after Investment and cash concentration services,

Note also the low level of satisfaction in bank-provided cash forecasting services and Reporting Services.

34

Table 4.1-13: Table showing Comfortable Risk/Return Scenario


Low risk/return 7 18%

Moderate risk/return 23 61%

Above Average risk/return 5 13%

High risk/return 3 8%

Other 0 0%

Total 38 100%

Chart 5.13: Chart showing Comfortable Risk/Return Scenario

Interpretation

18% of the respondents are said they feel comfortable with low risk and low return scenario, 61% said moderate risk and return scenario, 13% said above average risk and return, 8% said high risk/return scenario.

35

Table 4.1-14: Table showing Better Control of Cash Positions


No 28 74%

Yes 10 26%

Total 38 100%

Chart 4.1-14: Chart showing Better Control of Cash Positions

Interpretation:

74% of the respondents said they don’t have better control over cash positions, 26% said they have better control.

36

Table 4.1-15: Table showing Top Challenges to Cash Management Process Efficiency


Lack of Streamlined Operational Processes 7 18%

Labour-Intensive Administrative Work 5 13%

Inadequate Information and Reporting Capabilities

13 34%

Sluggish Cash Flow Movement 5 13%

Poor Cash Position Visibility 8 22%

Total 38 100%

Chart 4.1-15: Chart showing Top Challenges to Cash Management Process Facility

Interpretation: 18% of the respondents said Lack of Streamlined Operational Processes as top challenge to cash management process efficiency, 13% said labour-Intensive Administrative Work, 61% said inadequate information and reporting capabilities, 13% said Sluggish Cash Flow Movement, 47% said Poor Cash Position Visibility

37

Table 4.1-16: Table showing Awareness of Penalties to make Cash available

At Short Notice


Yes 15 39%

No 23 61%

Total 38 100%

Chart 4.1-16: Chart showing Awareness of Penalties to make Cash available

At Short notice

Interpretation: 39% of them said they have awareness of penalties to make cash available at short notice, 61% said no.

38

Table 4.1-17: Table showing preferred Channels to access Banking Services


Single integrated bank portal 25 66%

Multiple portals 3 8%

Via SWIFT solution 5 13%

Mobile apps 14 37%

Treasury workstation or host-to-host 1 3%

Total 38 100%

Chart 4.1-17: Chart showing preferred channels to access Banking Services

Interpretation

66% of the respondents are prefer Single integrated bank portal channel to access banking services, 8% prefer multiple portals, 13% said Via SWIFT solution, 37% said Mobile apps, 3% Treasury workstation or host-to-host

39

Table 4.1-18: Table showing Investment Banking Product most familiar with


Growth Deposit Account 23 60%

Equity underwriting 9 24%

Term Deposits 5 13%

Yield Call Deposit Account 1 3%

Others 0 0%

Total 38 100%

Chart 4.1-18: Chart showing Investment Banking Product most familiar with

Interpretation

60% of the respondents said they are familiar with Growth Deposit Account, 24% said equity underwriting, 13% said term deposits, 3% said yield call deposit account.

40

Table 4.1-19: Table showing ICM Services given more Importance by the Bank


Forecasting Services 10 26%

Advanced Reporting Services 8 21%

Zero Balancing Services 18 47%

Notional Pooling 13 34%

Company Loans 5 13%

Investment Products 15 39%

Other 0 0%

Total 38 100%

Chart 4.1-19: ICM Services given more Importance by the Bank.

Interpretation:

47% of the respondents said Zero Balancing Services given more importance by the bank recent years, 39% of the respondents said Investment Services, 34% said Notional Pooling, 26% said Forecasting Services and 21% said Advances Reporting Services.

41

Table 4.1-20: Table showing satisfaction with the Charges imposed by Banks for not maintaining the Minimum Balance


Highly Satisfied 0 0%

Satisfied 1 3%

Neutral 32 84%

Dissatisfied 4 10%

Highly Dissatisfied 1 3%

Total 38 100%

Chart 4.1-20: Chart showing satisfaction with the Charges imposed by Banks for not maintaining the Minimum Balance

Interpretation:

3% of the respondents are satisfied with the charges imposed by banks for not maintaining the minimum balance, 84% of them neither satisfied nor dissatisfied, 10% of them are dissatisfied and rest 3% are highly dissatisfied

42

Table 4.1-21: Table showing Opinion about the Cash Management Services in Bank

Services SA A N DA SDA TotalLess service fee collected for cash management services 3 5 14 4 12

38

It provides 24x7 reporting services, anywhere, anytime service 4 2 23 5 4

38

Reduces penalty incurred for over drafting/debit balances 13 17 4 2 2

38

Better forecasting of market trends to avoid losses 3 13 17 4 1 38Easy mode of cash deposit and withdrawal 3 8 21 4 2 38

Chart 4.1-21: Table showing Opinion about the Cash Management Services in Bank

Interpretation: Opinion on cash management services

Majority of them neither agree nor disagree with less service fee collected for cash management services, 24x7 reporting services, anywhere, anytime service, better forecasting of market trends to avoid losses and easy mode of cash deposit and withdrawal and majority agree with the reduced penalty incurred for over drafting/debit balances

43

Table 4.1-22: Table showing strategy to control Customer Erosion from Banks


Keep the bank in the easy reach of

customers

3 8%

Customer Friendly 22 58%

Transparent cash managing techniques 12 31%

Less fee on transactions 1 3%

Other 0 0%

Total 38 100%

Chart 4.1-22: Chart showing strategy to control Customer Erosion from Banks

Interpretation:

8% of the respondents sad to keep the bank in the easy reach of customers to control customer erosion from banks, 58% said customer friendliness, 31% said transparency in cash management techniques and 3% said to reduce fee on transactions

44

Table 4.1-23: Table showing Reason behind choosing the Bank for holding Accounts

Services SA A N DA SDA TotalExcellent service quality 4 15 14 3 2 38Using latest technology, which enables anytime service 6 22 5 4 1

38

Less Service Fee 1 14 17 5 1 38Introducing new cash management products 2 13 17 3 3 38Reliable Forecasting of Cash needs 2 18 12 1 5 38Advanced Reporting Services 1 12 22 1 2 38

Chart 4.1-23: Chart showing Reason behind choosing the Bank for holding Accounts

Interpretation:

Majority respondents agree with excellent service quality, using latest technology, which enables anytime service, reliable forecasting of cash needs as reasons for choosing a bank for holding accounts, and majority neither agree nor disagree with less service fee, introducing new cash management products and advanced reporting services

45

Table 4.1-24: Table showing Bank is providing Single point of Access to Customers


Strongly Agree 3 8%

Agree 10 26%

Neutral 6 16%

Disagree 15 39%

Strongly Disagree 4 11%

Total 38 100%

Chart 4.1-24: Chart showing Bank is providing Single point of Access to Customers

Interpretation: 8% of the respondents strongly agree that are the bank is providing single point of access to customers, 26% agree this, 16% neither agree nor disagree with this, 39% disagree with this and 11% strongly disagrees that single point access is provided by their bank to manage ICM services

46

Table 4.1-25: Table showing satisfaction level with the Cash Management services in Bank


Excellent 1 3%

Very Good 6 15%

Good 19 50%

Average 8 21%

Poor 4 11%

Total 38 100%

Chart 4.1-25: Chart showing level of satisfaction with the

Cash Management Services in Bank.

Interpretation: 3% of the respondents said their level of satisfaction with the cash management services in bank is excellent, 15% said very good, 50% said good, 21% said average and 11% said poor.

47

CHAPTER 5CONCLUSION

48

CHAPTER 5

CONCLUSION

5.1. FINDINGS OF THE STUDY

CUSTOMER PERCEPTION LEVEL ON ICM PROVIDERS:

Respondents have voted HSBC the number one international cash manager because of

their best quality of service, innovative business solutions, and multi-currency

capabilities across the globe and for understanding the customer business well.

CITI Bank was ranked second for ICM services, respondents quite happy about Quality

of personnel in the bank, Quality of electronic banking security and compatibility to all

applicable clearing systems to make the transactions more quick and cheap however

some of the respondents rated CITI low because of their inability to Liquidity/Credit

facilities in the market.

Standard Chartered Bank ranked as third ICM provider; respondents ranked positively

for their Cash flow forecasting capabilities and techniques but most of them feels that

their services like Cross-border low value payments and Level of commitment to your

cash management business is very low compared to the other ICM providers.

RBS is considered fourth in ICM service offerings arena because lack of Industry

expertise & knowledge, in effective Payment/collection methods and poor quality of

Quality of electronic banking security.

Majority of the respondents very satisfied with quality of personnel in the bank; as far

industry expertise & knowledge most of them dissatisfied with the service

Majority of the respondents satisfied with below services of their ICM provider:

Cash Forecasting capabilities and reporting techniques

Quality of electronic banking security

Access to all applicable clearing systems

Implementation of netting/In-house banking

Majority of the respondents not satisfied with below mentioned services of their

ICM provider:

Level of commitment to your cash management business

Liquidity/Credit facilities

Unviability of Cross-border low value payments

49

EFFECTIVENESS OF CASH MANAGEMENT PRODUCTS

Majority of the respondents voted Investment Products/Services as most effective for

their business, Cash concentration also equally effective and it’s considered as best by

majority of the respondents, Automated clearing house facilities also rated highly after

Investment and cash concentration services,

Note also the low level of satisfaction in bank-provided cash forecasting services and

Reporting Services.

3% of the respondents are maintaining 1-10 bank accounts, 3% of them are holding 11-

25 accounts, 32% of them are holding 26-75 accounts, 38% are holding 76-150 accounts,

and 24% of them are maintaining more than 150 accounts.

Since most of the respondents maintain more than 100 accounts globally for their

business there is a strong need of Cash Concentration services for transferring single

currency positions from multiple accounts to their single master account to have better

control of their cash positions.

47% of the respondents said Zero Balancing Services given more importance by their

bank recent years, 39% of the respondents said Investment Services, 34% said Notional

Pooling, 26% said Forecasting Services and 21% said Advances Reporting Services.

ICM services providers can improve the level of client satisfaction in a number of

areas, notably with improvement in the areas of cash forecasting and advanced reporting

services, both of which are important to corporate practitioners and much needed

nowadays.

AREAS FOR SERVICE IMPROVEMENT

100% of the respondents are said yes for usage of electronic bank billing format by their

banks.

There is overwhelming demand among institutions for electronic bank billing, which is

the one area that should be considered by the ICM providers.

37% of the respondents said the easiest way to obtain account balance is mobile banking,

32% of the respondents prefer internet banking, 29% said reporting services over email

and only 3% of the respondents preferring SMS Alerts.

There is strong demand raising from customers that all the services should be offered in

Mobile Solutions. While most banking partners do provide some mobile services, the

breadth of such service offerings varies. Payments solutions are very common, as are

50

cash management services, but relatively few banking service providers have expanded

their mobile platforms to other service areas such as trade finance or foreign exchange

(FX).

66% of the respondents are prefer Single integrated bank portal channel to access

banking services, 8% prefer multiple portals, 13% said Via SWIFT solution, 37% said

Mobile apps, 3% Treasury workstation or host-to-host.

3% of the respondents strongly agree that are the bank is providing single point of access

to customers, 5% agree this, 89% neither agree nor disagree with this and 3% disagree

with this.

While a single integrated bank portal is the most commonly used one and it’s preferred

by most of the respondents, two in five respondents indicate that a “Mobile

Applications” would be the preferred form of access.

CHALLENGES FOR BANKS

18% of the respondents said Lack of Streamlined Operational Processes as top challenge

to cash management process efficiency, 13% said labour-Intensive Administrative Work,

61% said inadequate information and reporting capabilities, 13% said Sluggish Cash

Flow Movement, 47% said Poor Cash Position Visibility

3% of the respondents are said yes and 79% of the respondents are said no and 18% of

them said they don’t’ know about their intention to change the number of ICM providers

in that 100% of the respondents who is willing ti change the provider said the reason for

change in ICM provider due to “Poor service”

39% of them said they have awareness of penalties to make cash available at short

notice, 61% said they don’t have awareness.

3% of the respondents are satisfied with the charges imposed by banks for not

maintaining the minimum balance, 84% of them neither satisfied nor dissatisfied, 10% of

them are dissatisfied and rest 3% are highly dissatisfied

Opinion on cash management services -Majority of them neither agree nor disagree with

less service fee collected for cash management services, 24x7 reporting services,

anywhere, anytime service, better forecasting of market trends to avoid losses and easy

mode of cash deposit and withdrawal and majority agree with the reduced penalty

incurred for over drafting/debit balances

51

5.2. SUGGESSTION & RECOMMENDATIONS:

The following are the suggestions given to banks providing international cash management

services to corporates:

To match the increasing demand of corporate practitioners’ on Cash forecasting

services and Reporting Services, bank should think of introducing new products on

those areas to match customer demand.

Banks have recently invested heavily in Mobile technology solutions, but the survey

results suggest that corporate practitioners places concerns on these capabilities when

selecting a banking partner. Corporate practitioners expect all banks to offer mobile

technology so banks should invest more on mobile technologies to differentiate

themselves in this area.

Given the level of interest by the corporate practitioners in single integrated bank portal

to access all the banking services, the level of consideration by the providers to migrate

to Single integrated bank portal from Multi bank portal is less. To provide ease of

access to corporate practitioner, bank should consider to upgrade their technology to

provide Single integrated bank portal.

Improve operational efficiency by eliminating the multiple banks involvement in

moving funds, and reduce payment transfers and FX sweeps costs by providing access

to all global clearing and disbursement houses.

Majority of the respondents feels that service fee collected for ICM products are

relatively high so bank should consider reducing service charges, and lower interest

charges on overdraft.

5.3. CONCLUSIONS:

Generally speaking the treasury department of a multi-national enterprise (MNE) seeks

to maximize the return on surplus cash and minimize the cost of financing cash deficits, and

furthermore to mitigate the interest rate, currency and other financial risks. Quite apart from

ensuring the smooth and efficient processing of domestic and foreign payments and the

financial transactions associated with cross-border trade, centralized cash management is a

challenging task for companies operating worldwide, they need effective cash management

products provided by banking partners and it should be best positioned to provide them with

the best control over their cash operations.

52

The report fulfills the aim of giving a brief on effectiveness of cash management services

provided by banks for Corporates and to analysis the Customer Perception level and their

expectation towards of Cash Management services provided by banks and to gain insights

and compare the effectiveness of customized cash management products/services offered in

selective corporate banks to its clients.

Banking services providers can improve the level of client satisfaction in a number of

areas, notably with improvement in the areas of cash forecasting and regulatory advice, both

of which are important to corporate practitioners. Banks should ask themselves—and their

clients— what is required to provide best ICM services.

5.4. SCOPE FOR FUTURE RESEARCH

The results and findings of this research study exemplifies the fact that an in-depth

research has been conducted. However, the study had some limitations also such as lack of

time, lack of data, non-response, reluctant attitude and illiteracy of respondents, which posed

problems in carrying out the research. Survey questionnaire shared to 60 cash managers,

treasurers and financial officers worldwide in which we got the response only from 38 of the

respondents. In future this research can be extended to more number of respondents and

regions to find the effectiveness more accurately.

53

APPENDIX 1 - QUESTIONARIE

*** MBA Final Project Survey ***Project Title:

COMPARATIVE ANALYSIS OF CASH MANAGEMENT SERVICES OFFERED BY

BANKS AND IT’S EFFECTIVENESS TOWARDS CORPORATE BUSINESS

Respondents (cash managers, treasurers and financial officers) are asked to provide their

responses for the below mentioned questionnaires related to cash management services.

Responses are collected using online forms and emails.

1. What is the approximate annual turnover of the business (in EUR)?

<20,00,000 20,00,000-50,00,000 50,00,000-80,00,000 80,00,000-100,00,000 >100,00,000

2. In which bank do you opted for ICM services? Standard Chartered Bank HSBC Bank CITI Bank RBS Bank Others, specify ________________

3. How do you rate this bank's cash management service in terms of:5-point scale Rating (Poor 1 2 3 4 5 Excellent)

Terms 1 2 3 4 5Quality of personnel Industry expertise & knowledge Advisory services Quality of execution Innovative/Tailored business solutions Level of commitment to your cash management business

Understanding of your business Cash management network capabilities Liquidity/Credit facilities Implement netting/In-house banking Payment/collection methods Multi-currency capabilities Cross-border low value payments Access to all applicable clearing systems

54

Cash flow forecasting capabilities Compatibility with your own systems Quality of electronic banking security Electronic banking applications

4. Number of Banks Accounts Used or Maintained? 1 – 10 11 – 25 26 – 75 76 – 150 150+

5. Over the next year, do you intend to change the number of ICM providers you use? Yes No Don’t know

6. What would be the main reason behind you changing your ICM provider? Poor overall service Personnel change at bank Rating downgrade of bank if 'other (please specify) ________________

7. Do you want to see universal use of a common electronic bank billing format such as Bank Service Billing or similar?

Yes No Don't know

8. Do you believe that your core group of cash management/transaction banks provide you with adequate transparency and accuracy around their banking service fees?

Yes No Don't know

9. What kind of ICM services you opted to manage your cash? Cash concentration services Notional Pooling services Automatic Balance Transfer Cash Forecasting Services High yield Investment Services Others, specify ________________

10. What type of investments you have made in bank? Bank Fixed Deposit (Term Deposit) Deposits- Saving Account Market Based Investment Accounts Company Fixed Deposit Others, specify __________________

11. What are the easiest ways to obtain your account balance? Internet banking SMS Alerts Reporting Services over Email Mobile Banking

55

Others, specify __________________

12. What do you rate the EFFECTIVENESS of cash management service offered in Modern days? (Rank, 1 = Most Preferred; 2= Preferred; 3= Neutral; 4=Less Preferred; 5=Useless)

Services 1 2 3 4 5Zero balance accounting

Notional Pooling

Automated clearing house facilities

Investment Products/Services

Easy mode of cash deposit and withdrawal Term Deposits Advanced Reporting ServicesForecasting Services

13. Which risk/return scenario you would be most comfortable with? Low risk/return (max return 6% pa & min return 3% pa) Moderate risk/return (max return 8% pa & min return 5% pa) Above Average risk/return (max return 12% pa & min return 10% pa) High risk/return (max return 25% pa & min return 20% pa) Other, _________________________

14. Do you have better control of your cash positions? No Yes

15. Top Challenges to Cash Management Process Efficiency? Lack of Streamlined Operational Processes Labour-Intensive Administrative Work Inadequate Information and Reporting Capabilities Sluggish Cash Flow Movement Poor Cash Position Visibility

16. Are you aware of the penalties you would need to incur to make your cash available at short notice?

Yes No

17. Preferred channels to access their banking services? Single integrated bank portal Multiple portals Via SWIFT solution Mobile apps Treasury workstation or host-to-host

56

18. Which of the investment banking product are you most familiar with? Growth Deposit Account Equity underwriting Term Deposits Yield Call Deposit Account Others, Specify __________________

19. Which of these following ICM services is given more importance (marketed) in your bank for effective Cash Management?

Forecasting Services Advanced Reporting Services Zero Balancing Services Notional Pooling Company Loans Investment Products Other _________________

20. Are you satisfied with the charges imposed by Banks for not maintaining the minimum balance?

Highly Satisfied Satisfied Neutral Dissatisfied Highly Dissatisfied

21. What is your opinion about the Cash Management Services in your Bank? (Being SA=Strongly Agree; A=Agree; N=Neither Agree nor Disagree; D=Disagree; SD=Strongly Disagree)

Services SA A N DA SDALess service fee collected for cash management services

It provides 24x7 reporting services, anywhere, anytime service

Reduces penalty incurred for over drafting/debit balances

Better forecasting of market trends to avoid losses Easy mode of cash deposit and withdrawal

22. What strategy must be followed to control customer erosion from banks? Keep the bank in the easy reach of customers

Customer Friendly

Transparent cash managing techniques

Less fee on transactions

Others, specify __________________

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23. Reason behind choosing the bank for holding your accounts?

(Being SA=Strongly Agree; A=Agree; N=Neither Agree nor Disagree; D=Disagree;

SD=Strongly Disagree)

Services SA A N DA SDAExcellent service quality Using latest technology, which enables anytime service Less Service Fee Introducing new cash management products Reliable Forecasting of Cash needs Advanced Reporting Services

24. Bank is providing single point of access to customers – comment

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

25. Rate the level of satisfaction with the cash management services in bank? Excellent Very Good Good Average Poor

REFERENCES

Books:

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Moorad Choudhry , An Introduction to Banking: Liquidity Risk and Asset-Liability Management

Ruth Wandhöfer , Transaction Banking and the Impact of Regulatory Change Lex van der Wielen International Cash Management

Journal References: 30th_Annual_Cash_Management_Services_Survey (EY Cash Management Services) EuroMoney cash management report

E-References:

www.hdfc/india.com www.rbs.com www.scb.co.in www.hsbc.com Investopedia Referred to Book CASH MANAGEMENT MADE EASY for better understanding of the

concept

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http://www.hsbc.com/

http://www.scb.co.in/

http://www.rbs.com/

http://www.amazon.com/Lex-van-der-Wielen/e/B00J5JC0P0/ref=dp_byline_cont_book_1

http://www.amazon.in/s/ref=dp_byline_sr_book_1?ie=UTF8&field-author=Ruth+Wandh%C3%B6fer&search-alias=stripbooks

http://www.amazon.com/Moorad-Choudhry/e/B001I9ONIM/ref=dp_byline_cont_book_1

mba project report - liquidity management

Documents

cash needs

cash balance

cash reserves

cash concentration

best use of cash

entitys cash resources

cash inout flows

customer oriented services