• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Poornima Mohandas

The new post to be occupied possibly by money market dealers will monitor inflow and outflow of funds on a minute-by-minute basis.

Mumbai , Dec. 24

THE `liquidity manager' is a new post being conceived in the treasury set up of banks. This comes as a preparatory step towards the implementation of RTGS (real time gross settlement system), the Reserve Bank of India's technology platform for immediate clearing and settlement of funds in January 2004.

The new post to be occupied possibly by money market dealers will monitor inflow and outflow of funds on a minute-by-minute basis. Management of liquidity will be of utmost concern and a challenge in itself, said the treasury head of a state-run bank.

The officer or team of officers as the case may be, will be vested with the powers to transfer funds to the `settlement account'. The settlement account is a new zero balance account to be maintained with the RBI in order to meet settlement needs which will have to be filled with funds at the start of the day dependent on the bank's needs.

The officer will have to prioritise transactions to minimise chances of a liquidity crunch during the day. In cases of a shortage of funds, he will be empowered to avail of the yet-to-be started, intra-day liquidity facility.

The intra-day liquidity facility is a provision much desired by market participants, which the central bank is to provide in order to address the intra-day liquidity concerns of players.

At present, clearing of funds of treasury transactions takes place at the end of the day after market hours or on the following day depending on the time at which the transaction takes place.

However, with RTGS each transaction will be cleared and settled independently on a minute-by-minute basis, thereby making adequate funds available at all points of time very imperative for banks.

"There will be a different way of monitoring and planning liquidity needs. As of now we do not need more people, but we will see as we go along depending on the volume of transactions,'' said Mr Sudhir Joshi, Head - Treasury, HDFC Bank. HDFC Bank is one of the four banks in which the system is being test run.

The other banks are State Bank of India, Saraswat Co-operative Bank and Standard Chartered Bank. HDFC Bank is also one of the first movers, which is trying to innovate on corporate product offerings based on RTGS.

The liquidity managers will man the payment gateway connecting the commercial bank to the Reserve Bank of India for clearing and settlement purposes.

Their responsibilities will increase much further as the full-fledged system gets off the ground in June 2004 since all corporate high value payments will be routed through the system.

According to the apex bank's timeline, the standalone RTGS will be started in January 2004 and the full-fledged system is to be in place by June 2004.

The stand-alone phase will entail clearing and settlement of solely treasury transactions and by June all high value clearing is expected to be online and instantaneous.

The ultimate aim of the RBI is to clear even retail transactions irrespective of the amount involved through this fast and technologically superior system.

With all clearing to be routed through RTGS over a period of time, banks fear a hit on their margins with the fast disappearance of their float funds. Many banks are yet to analyse and quantify the loss of float they will have to grapple with.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Rupee down 3 paise; securities flat

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line