A Study of Cash Management of ICICI Bank PDF

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This study emphises how ICICI Bank manage his/her cash trancation on the basis of day to day activities performed by them....

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RESEARCH REPORT ON

CASH MANAGEMENT OF ICICI BANK SUBMITTED FOR PARTIAL FULFILLMENT OF AWARD OF Post Graduate Diploma in Management

BY MS. RINI NIGAM ROLL NO: MBF201014 UNDER THE SUPERVISION OF PROF. J. S. SHUKLA

APEEJAY INSTITUTE OF TECHNOLOGY, SCHOOL OF MANAGEMENT February, 2012

DECLARATION

The work in this report is based on the original work carried out by me at “Apeejay Institute of Technology, School of Management, Greater Noida”. No part of this report has been submitted elsewhere for any other degree or qualification and it is all my own work unless referenced to the contrary in the text.

Rini Nigam MBF201014

CERTIFICATE This to certify that Ms. Rini Nigam, Roll No.: MBF201014 a student of PGDM (B&F) 2010-2012 batch of Apeejay Institute of Technology, School Of Management, Greater Noida has done the project work on Cash Management of ICICI Bank under my supervision and guidance. I understand this project report is being submitted to Apeejay Institute of Technology, Greater Noida for award of degree of Post Graduate Diploma in Management. To the best of my knowledge, this report has not been submitted to any other University for award of any other degree.

During this period, I have found the performance of her work satisfactory.

Prof. J. S. Shukla

Prof. D. N. Bajpai Director, Apeejay Institute of Technology, Greater Noida

Date:

Date:

ACKNOWLEDGEMENT

I, hereby take the opportunity to express my deep and profound gratitude to Prof. J. S. Shukla, my research project guide for giving me an opportunity to do a project on CASH MANAGEMENT OF ICICI BANK. I thank him for his valuable guidance and support which proved indispensable in the completion of this report.

Last but not the least I would also like to thank my family and friends for their support during the completion of the project.

All may not have been mentioned but none is forgotten.

Name: Rini Nigam Course: PGDM (B&F) Roll No. MBF201014

TABLE OF CONTENTS CHAPTER NO.

TITLE

PAGE NO.

DECLARATION

i

CERTIFICATE

ii

ACKNOWLEDGEMENT

iii

1) CORPORATE PROFILE i.

OVERVIEW

ii.

HISTORY

iii.

GRAPHICAL PRESENTATION

iv.

FINANCIAL POSITION

v.

COMPETITORS

2) CASH MANAGEMENT SERVICE 3) RESEARCH METHODOLOGY 4) RESULT AND ANALYSIS 5) CASE STUDY i.

CASE STUDY

ii.

ANALYSIS OF THE CASE STUDY

6) LIMITATIONS , CONCLUSION & RECOMMENDATION i.

LIMITATIONS

ii.

CONCLUSIONS

iii.

RECOMMENDATIONS

7) REFERENCES 8) APPENDIX i.

QUESTIONNAIRE

ABSTRACT

In a business done financially affects cash eventually. Cash is to a business is what blood is to a living body. A business cannot operate without its life-blood cash, and without cash management, there may remain no cash to operate. Cash movement in a business is two-way traffic. It keeps on moving in and out of business. The inflow and outflow of cash never coincides. Important aspect which is unique to cash management is time dimension associated with the movement of cash. Due to non-synchronicity of cash inflow and outflow, the inflow may be more than the outflow or the outflow is more than the inflow at a particular point of time. Left to shift cash flow is apart to follow monotonic pattern, and showers of cash may be heavy, scanty or just normal. Hence there is a dire need to control its movement through skillful cash management. The primary aim of cash management is to ensure that there should be enough cash availability when the needs arise, not too much, but never too little.

OBJECTIVES:

It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of the organization. Basically it tells what all have been studied while making the project.

➢ To learn about various aspects of ICICI BANK cash management. ➢ To gain insights about functioning of ICICI cash management. ➢ To explore the future prospects of ICICI cash management.

CHAPTER -1 CORPORATE PROFILE

OVERVIEW ICICI Bank is India's second-largest bank with total assets of Rs. 3,793.01 billion (US$ 75 billion) at March 31, 2011 and profit after tax Rs. 37.58 billion for the year ended March 31, 2011. The Bank has a network of 1,443 branches and about 4,721 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

The Bank is expanding in overseas markets and has the largest international balance sheet among Indian banks. ICICI Bank now has wholly-owned subsidiaries, branches and representatives offices in 18 countries, including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada, Russia and the UK (the subsidiary through which the hisave savings brand is operated), offshore banking units in Bahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong and Sri Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa, Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting the NRI (Non-Resident Indian) population in particular. ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in total income to Rs. 9,712.31 crore in Q2 September 2011 over Q2 September 2010. The bank's current and savings account (CASA) ratio increased to 28% in 2011 from 25% in 2010.

HISTORY ▪

1955 The Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses.

▪

1994 ICICI established Banking Corporation as a banking subsidiary. formerly Industrial Credit and Investment Corporation of India. Later, ICICI Banking Corporation was renamed as 'ICICI Bank Limited'. ICICI founded a separate legal entity, ICICI Bank, to undertake normal banking operations - taking deposits, credit cards, car loans etc.

▪

2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura was a Chettiar bank, and had acquired Chettinad Mercantile Bank (est. 1933) and Illanji Bank (established 1904) in the 1960s.

▪

2002 The Boards of Directors of ICICI and ICICI Bank approved the reverse merger of ICICI, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, into ICICI Bank. After receiving all necessary regulatory approvals, ICICI integrated the group's financing and banking operations, both wholesale and retail, into a single entity. Also

in

2002,

ICICI

Bank

bought

the Shimla and Darjeeling branches that Standard Chartered Bank had inherited when it acquired Grindlays Bank. ICICI started its international expansion by opening representative offices in New York and London.

▪

2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK), and in the UK it established an alliance with Lloyds TSB. 2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK), and in the UK it established an alliance with Lloyds TSB. It also opened an Offshore Banking Unit (OBU) in Singapore and representative offices in Dubai and Shanghai.

▪

2004 ICICI opens a rep office in Bangladesh to tap the extensive trade between that country, India and South Africa.

▪

2005 ICICI acquired Investitsionno-Kreditny Bank (IKB), a Russia bank with about US$4mn in assets, head office in Balabanovo in the Kaluga region, and with a branch in Moscow. ICICI renamed the bank ICICI Bank Eurasia. Also, ICICI established a branch in Dubai International Financial Centre and in Hong Kong.

▪

2006 ICICI Bank UK opened a branch in Antwerp, in Belgium. ICICI opened representative offices in Bangkok, Jakarta, and Kuala Lumpur.

▪

2007 ICICI amalgamated Sangli Bank, which was headquartered in Sangli, in Maharashtra State, and which had 158 branches in Maharashtra and another 31 in Karnataka State. Sangli Bank had been founded in 1916 and was particularly strong in rural areas.

ICICI also received permission from the government of Qatar to open a branch in Doha. ICICI Bank Eurasia opened a second branch, this time in St. Petersburg.

2008 The US Federal Reserve permitted ICICI representative office in New York into a branch.

to

convert

its

GRAPHICAL REPRESENTATION OF ICICI GROUP AND SOME GROWTH REPORT OF ICICI BANK

ICICI GROUP

FINANCIAL POSITION

Mar ' 08

Operating income

Mar ' 09

Mar ' 10

Mar ' 11

39,467.92 28,457.13 17,517.83 11,838.10

Material consumed

-

-

-

-

Manufacturing expenses

-

-

-

-

Personnel expenses

2,078.90

1,616.75

1,082.29

737.41

Selling expenses

1,750.60

1,741.63

840.98

601.71

Administrative expenses

6,447.32

4,946.69

2,727.18

1,248.31

-

-

-

-

10,276.82

8,305.07

4,650.45

2,587.43

5,706.85

3,793.56

3,269.94

2,679.78

65.58

309.17

466.02

448.46

5,772.43

4,102.73

3,735.96

3,128.25

23,484.24 16,358.50

9,597.45

6,570.89

Expenses capitalized Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses

578.35

544.78

623.79

590.36

-

-

-

-

Adjusted PBT

5,194.08

3,557.95

3,112.17

2,537.88

Tax charges

1,611.73

984.25

556.53

522.00

Adjusted PAT

4,092.12

2,995.00

2,532.95

2,007.28

Depreciation Other write offs

65.61

115.22

7.12

-2.08

-

-

-

-

Reported net profit

4,157.73

3,110.22

2,540.07

2,005.20

Earnings before appropriation

5,156.00

3,403.66

2,728.30

2,058.29

Equity dividend

1,227.70

901.17

759.33

632.96

-

-

-

-

149.67

153.10

106.50

90.10

3,778.63

2,349.39

1,862.46

1,335.22

Non recurring items Other non cash adjustments

Preference dividend Dividend tax Retained earnings

COMPETITORS The financial sector in India has become stronger in terms of capital and the number of customers. It has become globally competitive and diverse aiming, at higher productivity and efficiency. Exposure to worldwide competition and deregulation in Indian financial sector has led to the emergence of better quality products and services. Reforms have changed the face of Indian banking and finance. The banking sector has improved manifolds in terms of capital adequacy, asset classification, profitability, income recognition, provisioning, exposure limits, investment fluctuation reserve, risk management, etc. Sum of the competitors of ICICI bank from last few years are State Bank of India, Citibank, Canara Bank and HDFC Bank. The details of the competitors are as follows: • State Bank of India was established in the year 1806. It has network of more than 14,000 domestic and 70 foreign offices and branches. The new infrastructure has enabled the bank to further grow its ATM network with plans to add another 3,000 by the end of 2007 raising the total number to 8,600 but it has 7236 numbers of ATMs. The new infrastructure serves as the bank's backbone, carrying all applications, such as the IP telephone network, ATM network, Internet banking and internal e-mail. • The Citibank was incorporated in the year 1812, when a group of New York merchants came together to found it. It is an International bank with its operations spreading across many countries. It has more than 100 branches all over the countries

and territories around the world, where half of its 1,400 offices and ATMs are over 5,500re in the United States. It has $3.5 billion in assets and approximately 120,000 new customers in the state. It provides various strategic financial advisory services including acquisitions, mergers, financial restructurings, loans, foreign exchange, cash management, etc.

The products and services offered by the bank are Loans, Citibusiness,

Banking,

Insurance services,

Credit

cards,

Investment, Online services, NRI services, Wealth management etc. • HDFC Bank Limited was incorporated in August 1994. The bank has a Pan India network of 758 branches in 325 cities and over 1716 ATMs. Net Profit for the year ended March 31, 2006 was Rs. 1,141 crores. It has technical expertise, maintains product quality and has set global standards for itself. The bank has corporate governance and aims to attain fairness for the stakeholders. Some of the products & services offered by the bank are Accounts & Deposits - saving, current & fixed deposits, Private Banking, Loans, Cards - Credit Cards, Debit Cards, Prepaid Cards, Investment & Insurance, Forex Services, Payment Services, Internet Banking etc.

• Canara Bank was established in 1906 . The bank, along with 13 other major commercial banks of India, was nationalized on 19th July, 1969, by the Government of India. It has a network of 2542

branches, spread over 25 States/4 Union Territories of India. Its head office is located in Bangalore, India. In terms of business it is one of the largest nationalized commercial banks in India, with a total business of about Rs. 2 trillion.

CUSTOMERS

This is a common believe among the customers that, credit cards are no longer tools of personal finance. They provide an alternative means of raising working capital for companies, especially in the small and medium sector. Typically, this business segment operates by availing themselves of overdraft facility against current accounts to meet the credit requirements. However, ICICI's credit card offers them credit for short periods, without waiting for the bank to approve the overdraft. Due to which the customers have some of the follows reactions: •

Most of the customers say that when they took a home

loan from ICICI Bank, got a credit card free shortly thereafter, without asking for it or having to fill any form. These customers have the impression that the products of this bank must be having several hidden charges which are reveled later on. •

Similarly many customers say they have been paying

annual fee on different companies like Citibank and Standard Chartered bank credit cards for eight years. But they also have been waiving their fee for the last two years. They have got an SBI credit card free, even without asking for it. But this facility is not possible in case of ICICI bank credit card.

•

The customers believe that, the credit card which is

recently launched by ICICI Bank i.e. Future card is more beneficial then other credit cards. This card provides lots of benefits and facilities to the customer, who can use the card in all the retail stores of future group. It is a life time free card, at the time of your survey we found that people where more interested to know about this card. Due to recent controversy with ICICI bank the customers have lost faith upon this bank. When we approach them or create an awareness of future card of ICICI Bank, they try to give some reasons like they don’t have time or they are busy.

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

and automated

as cash clearing

concentration, zero house facilities.

balance

accounting,

Sometimes, private

banking customers are given cash management services.

Cash Management Services offered. The following is a list of services generally offered by banks and utilized by larger businesses and corporations: ▪

Account Reconcilement Services: 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. ▪

Armored Car Services: Large retailers who collect a great deal of

cash may have the bank pick this cash up via an armored car , instead of asking its employees to deposit the cash.

▪

Positive Pay: Positive pay is a service whereby the company

electronically shares its check register of all written checks with the bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud.

▪

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 ...