capital markets and cma

NIIT UNIVERSITY

MBA (FINANCE & BANKING)

Submitted By-

Vaibhav Soni/Roll No. P301413CMG380/Batch VI

Page 1

INTERNSHIP REPORT

ICICI Bank – Capital Market Divison,FortInternship Final Report – Term IVIndustry Mentor : Mr. Anil Gadoo

Submitted By- Vaibhav Soni/Roll No. P301413CMG380/Batch VIPage 2

ACKNOWLEDGEMENT

I would like to take this opportunity to thank my mentors Mr. Anil Gadoo, (Capital Market Divison) for their support and guidance during the internship.

My thanks and appreciations also to my colleagues at the branch for helping us in our efforts to understand the various products used in Capital Markets Division.

FINANCIAL INSTITUTIONSAND CAPITAL MARKETS GROUP (Mumbai)


GENERAL OVERVIEW & STRUCTURE OF THE GROUP

The FICMG Mumbai operates from ICICI Bank Corporate office located at Fort,Mumbai (Capital markets division) and Bandra Kurla Complex ,Mumbai (Financial institution Group). The FIG team deals with Insurance Companies, Mutual Funds, Banks & Aggregators, whereas the CMD team deals broadly with Broking Houses and exchanges. Both the teams consist of dedicated Relationship Managers and Account Managers who take care of Business and Operations team.

FICMG

FIG CMD

INSURANCE BANKS, NBFC’sCOMPANIES, AND

BROKING HOUSESMUTUAL FUNDS AGGREGATORS

AND FI’s

AND EXCHANGE

OBJECTIVE & PERMORMANCE OF THE GROUP

The main objective of the group is to maximize fee revenue and float by providing CMS and other financial services (like LC, BG etc) to Financial institutions and brokering houses and exchanges.

In 2012-13, the Net interest income (NII) generated by the CMD was Rs 224.2 mn while the fee based income received was at Rs103.8 million. Total average float achieved by the CMD was at 2820 million. For 2013-14, CMD is targeting the total average float of around Rs 3620 million.

Top clients of CMD:

Edelweiss Securities ICICI securities Angel Broking India Infoline M F Global Motilal Oswal ICCL NSE Dolat Capital NCX

Products

Bank Guarantees

The Bank issues bank guarantees to brokers on both the Capital Market and Commodity Market segment favouring the NSE/ BSE/ NCDEX/ MCX/ Spot Exchange to meet Security Deposit/ Base Capital and Margin requirements of the exchanges and Professional Clearing for trading members clearing their trades through them.

Salient Features

Margin: 50% cash or 25% in the form of fixed deposit and the balance 25% in the form of securities (2x securities). Securities refer to approved securities as per our list to be valued after applicable margin

Commission (1% - 3%) – Depending upon Client relationship/Volume/Float etc.

Secured Overdraft

Issued to meet working capital requirements of the brokers on the Capital Market segment, The Bank provides this after thorough credit appraisal in the form of overdraft against shares.

Loan against shares (LAS)

LAS would be sanctioned at an ICICI base rate 9.75% + applicable spread, against the shares as per our list to be valued after applicable margin. Stocks at the end of the day, to be valued at the previous days lowest price on the NSE. Minimum no of scrips to be pledged are four.


Overdraft against shares (OD FD)

ODFD facility is provided upto 90% of the value of fixed deposit at the interest rate of 2% above the FD interest rate.For strategic clients the spread is lowered upto 1%.

Temporary Overdraft (TOD)

The Bank at its discretion provides Temporary Overdrafts to meet exchange obligations and for any temporary cash flow mismatches.

Intraday

Intra-day funding facility is extended to select clients at the Bank's discretion to meet Exchange obligations (against cheques deposited in clearing or payouts to be received from the other exchanges) and client.

SERVICES OFFERED BY THE GROUP

CMS (Cash Management Services):

Cash Management services are offered to corporate clients for effective utilization of their financial resources. It is the process by which a company’s treasurer minimizes float by reducing the time taken for collections and payments.

Efficient cash management services is about getting funds in time, quick transfers, quick realization of outstation cheques, easy disbursements, account reconciliation, controlled processes and customized MIS. While these contribute to effective cash management, reliable and accurate information is an indispensable aid to a smooth cash flow. This in turn will ensure an optimum utilization of working capital. The operations under Cash Management Services are carried out at 300 plus branches and RPC's of ICICI Bank Ltd.

CMS

COLLECTIONS OR PAYMENTS OR LIQUIDITY ANDRECEIVABLES PAYABLES INVESTMENT

MANAGEMENT MANAGEMENT SERVICES


Benefits of CMS

Financial Benefits - Reduction of the period between the date a company’s customer pays a bill and the date when the funds become available. This period called collection float, results from mail, processing and clearing time.

Reducing collection float through the cash management product may translate into substantial savings for the company.

Operational benefits - If the client’s company’s treasury operation requires 75 people to process payables and the products reduces that number to 6 then there is definitely an operational benefit. With downsizing and productivity at the forefront of many customers concerns, operational gains recently have assumed priority over float issues.

Control benefits - These products allow the clients to improve their control over internal processes and thereby improve speed and accuracy of reconciliation. Generally in all these products there are fraud prevention, security and other controls.

COLLECTIONS OR RECEIVABLES MANAGEMENT

ICICI Bank offers a wide range of collection products to meet the specific requirements of the clients. The products offered are as follows:

Local cheque Upcountrycollection cheque

collection

Collections

Management

Electronic

Cash collectionscollections

RTGS integrated collections


FEATURES

Wide network coverage of over 670 own locations and over 4200 correspondent bank locations

Capability to process cheques drawn at any location

Assured payment on fixed day basis, irrespective of the fate of the instrument sent in for clearing

Instrument outstanding report and credits in the pipeline report available to strengthen internal control

Multiple channels available for receipt of data including e-mails, faxes, courier and the Internet

Prompt realisation of cheques through an extensive network, supported by correspondent banking relationships

Availability of information on the amounts deposited at multiple locations with information available at the instrument level

Provision of uploading the system generated deposit slip details, in a single file Customised MIS and availability of scan images of instruments at select locations

PAYMENTS OR PAYABLES MANAGEMENT

The Bulk Disbursements (I-Multipay) product is offered to corporate clients to effect bulk disbursement of funds on their behalf to their specified beneficiaries at specified locations across the country. These disbursements may be towards vendor payments, supplier payments, salary payments etc. These are usually high-volume payouts that may need to be made at multiple locations or for multiple accounts. The payments can be made by both physical mode and electronic mode. Physical mode of payment includes writing Customer Cheques (CC), Remote Cheque Printing (RCP), and Internet Based Cheque writing (IBCW) Pay Orders (PO), Demand Drafts (DD) and electronic mode of payment includes direct funds transfer to beneficiaries holding an ICICI Bank account (I-Bank Funds Transfer) or with other banks through Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT), Electronic Clearing Services (ECS) and NECS (National Electronic Clearing service)

I-Multipay is a pre-funded product, wherein the client makes the entire funding to the Bank pertaining to the transactions in advance of the disbursement except for all cheque products.

Subsequently, the client’s issuance request is processed in the Integrated Payments System (IPS) and disbursements are affected.Presently I-Multipay is offered at 694 ICICI Bank locations which are steadily increasing and 3004 correspondent locations for demand draft.


FEATURES

Payment solutions of ICICI Bank offered through Integrated Payment System (IPS) not only offers multiple modes of payment but also facilitates functional, operational and financial benefits like:

Single file upload to effect multiple modes of payments Web-based access for uploading and authorising printing requests ERP extractor for extracting data directly from the ERP system Host-To-Host connectivity for Straight Through Processing of transactions Data encryption for enhanced security Partial batch authorisation and processing Dynamic signature printing Printing of instruments and direct dispatch to beneficiaries Tracking of dispatches Advices over e-mail to beneficiaries Customised annexure printing for cheques At par cheques payable at over 700 locations Customised MIS

Collections – Master Setup

Client mapping involves creating client masters or modifying masters of existing clients in CMS applications and issuing letters to clients for initiating CMS transactions only after arrangements are finalized with the clients by the business groups.

Business groups are required to finalize arrangements with clients and obtain necessary approvals before a new client master is created or existing client master is modified in CMS applications at CMSHUB.

The process starts with the Solution Manager’s (SM’s) approaching clients and offering them Cash Management Services of ICICI Bank Ltd. The sales process involves –

Collation of clients’ needs Identification of additional / customized requirements, Market offerings etc.,

The SM’s finalize the deal with the clients on the following aspects –

Day arrangement - could be either from the date of deposit / date of shadow credit


Pricing structure MIS features Locations covered Cheques / cash pickup services etc.,

The client set up desk emails the CMS Masters team with the Master No with templates as requested the customer. The master’s team based on the templates received creates new / modifies existing masters in the following applications depending on the nature of the request

Cash Management Services (HUB) Transaction Billing Management System (TBMS) Cash@will

Activities carried out by the Master’s team can be briefly classified into the following –

Master creation in relevant systems Issuance of start-up letters to the various stakeholders Activation of masters in Cent-OB

Following a 4-eye principal, masters created in relevant systems are checked for accuracy and completeness. Both the maker and checker sign the master template once the master is created and authorized. Every master created and authorized in CMS Profunds applications is internally given a serial number for uploading the same in applications used by branches for processing CMS cheques. Once the masters are created and authorized in CMS systems and the internal master tracker is updated, start-up letters are issued by the master’s team to the concerned stakeholders. CMSHUB master’s team issues start-up letters to the following stakeholders –

Letters are issued to the Client’s Head office, intimating about the commencement of

CMS activity along with customer code details, locations activated and an instruction manual for filling the CMS deposit slip. Requisite Deposit slip stationery is also sent to the client.

Letters are issued to the client’s pickup points intimating about the pickups, customer details, product details, pickup date and the customer code allotted. Also, 2 booklets of deposit slips are provided to clients for each pick-up location by default.

Startup letters is issued to the correspondent banks whenever a new arrangement is entered into / a new location is added to an already existing arrangement with the correspondent bank.


Letters are sent to the coordinator/Courier intimating the customer details and the pickup date. A copy of the same is also forwarded to the logistics team by way of an email for fixing coordinator arrangement at that location.

In case of conversion cheques, a note on the process flow to be followed by the coordinator before presenting the upcountry instruments under conversion product to correspondent bank branches is also forwarded to the coordinators as instruction note.

An authority letter is issued to the coordinators appointed at various Correspondent Bank locations addressed to the Correspondent Bank Branch in that location

SUGGESTIONS & RECOMMENDATIONS

No. of CMS enabled branches to be increased

For a branch to be CMS enabled it should fulfill certain criteria like min no. of employees should be 5 and bandwidth should be 128 kbps. Even if the branch fulfills this basic criteria management takes the decision to make it CMS enabled only if it thinks that it will bring generate revenue, since there is a cost involved in CMS setup and training the employees. This is the main reason why only few branches in ICICI are CMS enabled. Therefore, a customer cannot deposit cheques to any location but have to come all the way to CMS enabled branch to deposit cheque. Even if some other branch accepts the CMS cheque it generally sends these cheques once in evening which reduces efficiency. However, for our key competitors like HDFC bank every branch is CMS enabled which reduces its work and increases efficiency.

For HDFC around 70 per cent bank branches can print checks at their respective locations while in case of ICICI this no. is on 65 branches.

KYC process for existing customers should be improved

Currently the process of new account opening for even an existing customer is very lengthy as the entire KYC process like collection of all relevant documents is repeated. However, in our major competitor banks the process of account opening for an existing customer has been made very simple by having a unique ID for each client which can be used to fetch all the relevant documents from the system.


CONCLUSION

The internship provided me with an opportunity to relate the theoretical concepts which we had learnt during our class room sessions. The internship also presented me with an opportunity to interact with senior officials of bank and other employees (who were handling various servicing and sourcing profiles), support groups and customers of bank. All these interactions helped me to have a comprehensive outlook of the business model and business practices of the bank.


capital markets and cma

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