MEANING OF CASH

8/8/2019 MEANING OF CASH

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MEANING OF CASH

There are two ways of viewing the term cash. In a narrow sense it includes actual cashin the form of notes and coins and bank drafts held by a firm and the deposit withdrawable on demand. In broader sense, it includes even marketable securities which can be

immediately sold or converted into cash.

THE NEED TO HOLD CASH

TRANSACTION MOTIVE

A company for its business purpose always enters into transaction with other entities.While some of these transactions may not result in immediate cash inflow/outflow, other may result so. So firms always keep a certain amount as cash to deal with routinetransactions.

PRECAUTIONARY MOTIVE

Contingencies have a tendency of coming when they are least expected for ex: - asudden accident etc. The firm has to be prepared for all such contingencies so thatlosses can be minimized. For this the company maintains some amount of ready cash.

SPECULATIVE MOTIVE

Companies also maintain cash balances in order to reap the benefit of the opportunitiesthat do not take place in the regular business activities. These transactions are of absolute speculative nature for which firms need cash.

OBJECTIVES OF CASH MANAGEMENT

Cash is the most liquid of all the assets and can be put to alternative uses. Thus idlecash has an opportunity cost as it could be invested to fetch a positive return. Thus, theobjective of cash management can be regarded as one of making short-term forecastsof cash position, finding avenues for financing during periods when cash deficits areanticipated and arranging for repayment/investment during periods when cashsurpluses are anticipated with a view to minimizing idle cash as far as possible.

MODELS FOR DETERMINING OPTIMAL CASH

Optimal level of cash and marketable securities reduces and minimizes the cost such astransaction cost costs incurred for transferring marketable securities to cash or viceversa. Inconvenience cost and opportunity cost the interest earnings foregone onmarketable securities for holding cash.


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INVENTORY MODEL

In this model the opportunity cost, i.e., the carrying cost of holding cost is balancedagainst the fixed cost associated with securities transactions to arrive at an optimalbalance. By using EOQ formula, the firm attempts to determine the funds transfer sizethat will minimize the total cash cost which include total transaction cost and totalcarrying cost.

STOCHASTIC MODEL

According to this model cash flows are stochastic and random. Basically in this modelthere are two limits defined one is the lower limit and the second is the upper limit.Within these two limits lie one point which is called the return point. Upper limit is thelimit which restricts the cash from exceeding after that point. Miller says that reachingthis point signifies that there is excess cash and thus the company has idle cash whichincurs opportunity cost and hence it is advisable to invest it in marketable securities as itwill fetch something in return. The investment should be done till it reaches the returnpoint because return point is that point which indicates the average requirement of cashby the company at any point of time. Another point is the lower limit which signifies thatif cash reaches that point it is time for the company to sell its marketable securities andincrease its cash in order to reach the return point because the minimum point has beenreached and if it does not sell its securities it may be possible that it cant be able to

meet its short term obligations at time which can hamper its goodwill.A PROBABILITY APPROACH

For those firms, whose cash flows are neither reasonably predictable, nor reasonablyunpredictable, a probabilistic approach can be applied. In this approach end-of-periodcash balances are estimated for different cash flow outcomes. For more precision,length of the period is usually short one week or less. This probabilistic information,together with information about the fixed transaction cost and interest earnings oninvestments in marketable securities is required to estimate the initial balance betweencash and marketable securities. Then we compute the expected net earnings [interest

earned (fixed transaction cost + opportunity cost)] associated with initial levels of marketable securities for different possible cash flow outcomes. The level at whichexpected net earnings are maximized is the optimal level of marketable .securities

ACCOUNTING STANDARDS (AS 3) CASH FLOW STATEMENT


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OBJECTIVE:-Information about the cash flows of an enterprise is useful in providing users of financialstatements with a basis to assess the ability of the enterprise to generate cash and cashequivalents and the needs of the enterprise to utilize those cash flows. The economicdecisions that are taken by users require an evaluation of the ability of an enterprise togenerate cash and cash equivalents and the timing and certainty of their generation.

The Statement deals with the provision of information about the historical changes incash and cash equivalents of an enterprise by means of a cash flow statement whichclassifies cash flows during the period from operating, investing and financing activities.

SCOPE

1. An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented.

2. Users of an enterprises financial statements are interested in how the enterprisegenerates and uses cash and cash equivalents.

3. A cash flow statement, when used in conjunction with the other financialstatements, provides information that enables users to evaluate the changes innet assets of an enterprise, its financial structure and its ability to affect theamounts and timings of cash flows in order to adapt to changing circumstancesand opportunities.

4. Historical cash flow information is often used as an indicator of the amount,timing and certainty of future cash flows.

The following terms are used in this statement:-

Cash comprises cash on hand and demand deposits with banks.Cash equivalents are short term, highly liquid investments that are readilyconvertible into known amounts of cash and which are subject to aninsignificant risk of changes in value.Cash flows are inflows and outflows of cash and cash equivalents.Operating activities are the principal revenue-producing activities of theenterprise and other activities that are not investing or financing activities.Investing activities are the acquisition and disposal of long-term assets andother investments not included in cash equivalents.Financing activities are activities that result in changes in the size andcomposition of the owners capital and borrowings of the enterprise.

An enterprise should report cash flow from operating activities using :-a) The direct method , whereby major classes of gross cash receipts and

gross cash payments are disclosed; or b) The indirect method , whereby net profit or loss is adjusted for the effects

of the transactions of a non-cash nature, any deferrals or accruals of pastor future operating cash receipts or payments, and


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DIRECT METHOD:-

This method shows the items that affect the cash flow of the entity. Adopting thismethod involves reflecting the gross amounts of the principal components of cashreceipts and payments from operating activities such as cash received from customers

and paid to suppliers, etc. Under this method, the amount of net cash provided by or used in the operating activities during the period are equal to the difference between thetotal amount of gross cash receipts and payments from the operating activities. In thismethod the cash received and cash paid are presented as opposed to converting theaccrual basis income to the cash flow information. The following are the principalcomponents of operating cash receipts and payments which need to be disclosed under this method:

1. Cash received from customers including leases, licenses and other receipts.2. Interest and dividends received.

3. Cash paid from employees and suppliers of goods and services includingsuppliers of insurance, advertisement and similar payments.4. Interest, income tax and other similar cash payments.5. Other operating cash receipts and payments.

This method permits the user to clarify the relationship between the net incomeand the cash flows.

INDIRECT METHOD:-

This method also known as the reconciliation method is more popular as it is

easier to prepare and it focuses on the differences between the net incomes andthe cash flows. It is generally suitable for those organizations which do not wantto disclose more information regarding the major classes of cash receipts andpayments which would otherwise be reflected if the direct method is adopted. Itbegins with the net income obtained from the income statement from the incomestatement from which revenue and expense items not affecting the cash providedby operating activities. The statement lays emphasis on the changes in the mostcurrent asset and liability items. Under this method, the interest and income taxpaid shall be disclosed in the related disclosures.

REPORTING CASH FLOW An enterprise should report separately major classes of gross cash

receipts and payments arising from investing and financing activities,except that cash flows described are reported on a net basis.


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Cash flows arising from the following operating, investing or financingactivities may be reported on a net basis:a. Cash receipts and payments on behalf of customers when the cashflows reflect the activities of the customer rather than those of theenterprise; andb. Cash receipts and payments for items in which the turnover is quick,the amounts are large, and the maturities are short.

Cash flows arising from each of the following activities of a financialenterprise may be reported on a net basis :

a. Cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date;

b. The placement of deposits with and withdrawal of deposits fromother financial enterprises; and

c. Cash advances and loans made to customers and the repaymentof those advances and loans.

Cash flows arising from transactions in a foreign currency should berecorded in an enterprises reporting currency by applying to the foreigncurrency amount the exchange rate between the reporting currency andthe foreign currency at the date of the cash flow.

The cash flows associated with extraordinary items should be classified asarising from operating, investing or financing activities as appropriate andseparately disclosed.

Cash flows from interest and dividends received and paid should each bedisclosed separately. Cash flows arising from interest paid and interestand dividends received in the case of a financial enterprise should beclassified as cash flows arising from operating activities. In the case of other enterprises, cash flow arising from interest paid should be classifiedas cash flows from financing activities while interest and dividendsreceived should be classified as cash flow from investing activities.Dividend paid should be classified as cash flows from financing activities.

Cash flows arising from taxes on income should be separately disclosed and should beclassified as cash flows from operating activities unless they can be specificallyidentified with financing and investing activities.

CASH MANAGEMENT IN CCL :

EXPLANATION OF THE CASH FLOW STATEMENT


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1. On close scrutiny of the cash flow statement we find that there is decrease inloans and advances compared to last year. In the year 2008-09 there was anincrease in loans and advances of rs 50064.28 lakhs whereas in the year 2009-10 there was a decrease in loans and advances of rs. 141372.16 lakhs. Thisshows a positive aspect of

2. Further if we look into the change in the amount of sundry debtor from the cashflow statement than we find that there is a decrease in the amount of sundrydebtors which further states that collection from debtors has increased comparedto last year. On studying the content it was found that the payment period of thedebtors has reduced and most of power houses and steel plants clear their duesunless it falls in the category of dispute. It is a good sign from the companysperspective as because of the payment done by these organizations thecompanys profit is increasing every year.

3. There is decrease in inventory compared to last year. In the year 2008-09 therewas an increase in inventory of rs. 2311.62 lakhs whereas in the year 2009-10there was a decrease in inventory of rs.20911.21 lakhs which is further good signas it signifies that there is not much money blocked in working capital and hencethe opportunity cost in this context is not much. Further the production as well asthe sales has also increased compared to last year and thus we cannot say thisthat inventory has decreased because of the decrease in production and sales.

4. There is an increase in the amount of other current assets and decrease in theamount of other current liabilities compared to last year which further is a goodsign for the company.

5. If we consider the investing activities than we find that the company haspurchased more fixed assets compared to last year and further there is anincrease in the amount of interest on short term deposit which is further a positivesign in context of the company as the former will help show a better position inthe balance sheet and the latter is good as the company is getting more interestand hence will be shown on the credit side of the P&L account.

6. There is no change in the amount of redemption of tax free power bonds whichsignifies that the opportunity cost in this context is high because there is noincrease in amount compared to last year and hence here time value of moneycomes in picture and thus it is not a good sign from companys perspective butbecause of the stringent norms it cant do anything.

7. There is further a decrease in the amount of interest on the surplus fund parkedwith CIL and further there is a decrease in the amount of interest on investmentcompared to last year

8. Moving to the financing activities we find that there is an increase in therepayment of world bank loan and CIL loan which is a good thing for thecompany.


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WHAT IS CASH BUDGET

Cash budget is a detailed plan showing how cash resources will be acquired and usedover some specific time period. A Cash Budget is arrived at through a projection of future cash receipts and cash disbursements of the firm over various intervals of time. It

reveals the timing and amount of expected cash inflows and outflows over the periodstudied.

A cash budget is important for a variety of reasons. For one, it allows to makemanagement decisions regarding cash position (or cash reserve). Without the type of monitoring imposed by the budgeting process, one may be unaware of the cash flowthrough the business. At the end of a year or a business cycle, a series of monthly cashbudgets will show how much cash is coming into the company and the way it is beingused. Seasonal fluctuations will be made clear.

Purposes of Cash Budgeting

Preparing cash budget will show how cash flows in and out of business. it may beused in planning short-term credit needs. In today's financial world, it is required bymost financial institutions to prepare cash budgets before making capital expendituresfor new assets as well as for expenditures associated with any planned expansion. Thecash budget determines future ability to pay debts as well as expenses. Businesses thatoperate on a casual day-to-day basis are more likely to borrow funds at unfortunatetimes and in excessive amounts. Without planning, there is no certainty that there willbe repayment of loans on schedule. However, once carefully mapped out a cashbudget, will be able to compare it to the actual cash inflows and outflows of thebusiness. One will find that this comparison will go a long way in assisting future cashbudget preparation. Also, a monthly cash budget helps pinpoint estimated cash

balances at the end of each month which may foresee short-term cash shortfalls. Cashbudgeting is a continuous process that can be checked for consistency and accuracy bycomparing budgeted amounts with amounts that can be expected from using typicalratios or financial statement relationships.

Cash collections from customers can also be estimated and scheduled by dates alongwith other expected cash receipts. With careful cash planning, one should be able tomaintain a sufficient cash balance for his needs and not put himself in the position of holding excessive balances of nonproductive cash. In the normal course of operationsin a merchandising business, for example, merchandise is purchased and sold tocustomers who eventually pay for the merchandise sold to them. Usually there is a timelag in business operations. It may be necessary to pay the suppliers for merchandise

before the merchandise is sold to the customers. Before and during a busy sellingseason the demand for cash may be higher than the inflow of cash from operations. Inthis case it may be necessary to arrange short-term loans. When the selling season isover, cash collections from customers will be relatively large and the loans can be paidoff.

Methods of Preparing Cash Budget
http://www.articlesbook.com/methods-of-preparing-cash-budget/http://www.articlesbook.com/methods-of-preparing-cash-budget/


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The method to be used for preparing cash forecast depends upon the circumstancesand needs of the business. There are generally three methods used for preparing cashbudget:

(1) Receipts and Payments Method

(2) Adjusted Earnings Method (or Adjusted Profit and Loss Method)

(3) Balance Sheet Method (or Balance Sheet Projection Method)

Receipts and Payments Method: This is the most widely-used and popular method of preparing cash budget. The estimates under this method may be divided into weekly,fortnightly or monthly basis. The method is of particular importance in business wheresale is unstable or seasonal or which suffers from shortage of liquid resources. Due toits flexibility, this method is used in planning cash at various time periods and thus helpsin controlling cash disbursement

POINTS TO BE CONSIDERED WHILE PREPARING CASH BUDGET

Time Period

The first decision to make when preparing a cash budget is to decide the period of timefor which the budget will apply.

Cash PositionThe amount of cash you wish to keep on hand will depend on the nature of your business, the predictability of accounts receivable, and the probability of fast-happeningopportunities (or unfortunate occurrences) that may require you to have a significantreserve of cash.

Estimated Sales and Expenses

The fundamental concept of a cash budget is estimating all future cash receipts andcash expenditures that will take place during the time period. The most importantestimate you will make, however, is an estimate of sales. Once this is decided, the restof the cash budget.

Expected Cash Receipts: Cash balance Cash sales Collections of accounts receivable Other income

Expected Cash Expenses: Raw material (inventory) Payroll

Other Direct Expenses: Advertising Selling expenses


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Administrative expense Plant and equipment expenditures Other payments

ANNUAL CASH BUDGET

Central Coalfields Limited (CCL),

Ranchi

CASH BUDGET

For Two Years ending 31st March 2011

PARTICULARS 2009 2010 2011

Beginning CashBalance 48616 20659 43897Cash Inflows(Income)

Cash Sales 580429 643044 712414Collection of Receivables 119640 154246 198860

Misc. Receipt 1132 1523 2049

Total CashAvailable 749817 819472 957220

Cash

Disbursments

RevenueExpenditure:

Salary & Wages 127474 189579 246453

Arrear 13118 4514 2438


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VRS 2288 1734 1315

Power & Electric 23488 28871 35488

Contractor 34884 35135 35388

Revenue Stores 51194 51060 50927Purchase Repair & Misc& Welfare 34869 36653 38528

Corporate Tax 50887 63409 79012

Total 338202 410955 489549

CapitalExpenditure: 19913 26992 36588

StatutoryPayments

Royalty 55651 58473 61438

Sales Tax 17653 19927 22077

Professional Tax 467 1103 1346

SED 4462 4087 3744

PF & Pension 35960 37924 39995Total 114193 121514 128600

Other Payments:

Loans & Advances 496 452 412

Dividend 25023 0 0

Remittances to CIL 28800 48397 68723Refund of DGCC/LSS(M)/C 23417 9321 4758

Refund of Deposits 3824 2068 1530

Payment Against PMRF 290 0 0

Bank FD 175000 155876 158841


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Total 256850 216114 234264

Total Expenditure 729158 775575 889001

Closing Balance 20659 43897 68219

INVESTMENT OF SURPLUS CASH

Investing surplus cash involves two basic problems:1. Determining the amount of surplus cash2. Determining the channels of investment.

Determining the amount of surplus cash:The cash in excess of the firms normal cash requirements is termed as surpluscash. Excess cash is generally what is above the minimum level of cash requiredby the company and that level is also called safety level of cash. The basicfactors which should be considered are:

a) Desired days of cash: This is the number of days for which cash balanceshould be sufficient to cover payments.

b) Average daily cash outflows: This is the average amount of disbursementto be made daily.

These are to be determined separately for normal and peak period.

Determination of channels of investment:Surplus cash may be either of a temporary or a permanent nature. Temporary cashsurplus consists of funds which are available for investment on a short term basis(maximum 6 months) since they are required to meet regular obligations such as taxesetc. Permanent cash surplus consists of funds which are kept by firms to use in someunforeseen profitable opportunity of expansion or acquisition of some asset.

CRITERIA FOR INVESTMENT:

Most of the companies usually have no formal written instructions for investing thesurplus cash. It is left to the discretion and judgment of the Finance Manager. But CCLdoes have some restriction which it has to follow but then too it also takes intoconsideration the following factors:


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a) Security: - This can be ensured by investing money in securities whose priceremains more or less stable and where a minimum return is guaranteed.

b) Liquidity : - This can be ensured by investing money in short-term securitiesincluding short-term fixed deposits with the bank.

c) Yeild : - Most corporate managers give less emphasis to yield as compared tosecurity and liquidity of investment. They, therefore, prefer short-termGovernment securities for investing surplus cash. However, some corporatemanagers follow aggressive investment policies which maximize the yield ontheir investments.

d) Maturity : - Surplus cash is not available for an indefinite period. Hence, it will beadvisable to select securities according to their maturities keeping in view theperiod for which surplus cash is available.

Road sale was 6.04 million last year and Net worth last year was 2661 million anddividend was 386.32 million.

As far as the cash management of CCL is concerned CIL is a cash surplusorganization. It does not have cash deficit and even if CCL gets deficit then it gets cashfrom the headquarter situated in Kolkata. Hence it does not have to do much labor andaccounting for deficit in cash balance.

CCL follows both direct method as well as indirect method of cash management. Asbeing a company it has to make cash flow statement using indirect method at the end of the year. While doing so it follows AS 3. It prepared its cash flow statement using directmethod also but it prepares that frequently and further it does not publish that in itsannual report.


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RAJRAPPA AREABILL REPORT FOR WEEK ENDING 20.03.2010

CODE

C O - 6

no.

C O - 6

dt. Name of the party

Rs.

LakhsLTC/LLTC 2.15

13317.03.10 0.04

203117.03.10 0.16

203017.03.10 0.07

203217.03.10 0.15

210817.03.10 0.22

210917.03.10 0.19

210717.03.10 0.14

210517.03.10 0.05

210617.03.10 0.07

TOTAL 1.09Exgratia 2.18 TOTAL 0SPARES FOR HEMM BILL - 3.19 (A)

150 05.06.09 Cummins India Ltd 0.07

70511.11.09

S T I Marketing PvtLtd 0.07

91831.12.09

Bharat Power Corp PLtd 0.28

93725.02.10

S T I Marketing PvtLtd 0.05TOTAL 0.47

SPARES FOR HEMM BILL- 3.19 (B)

1198

15.03.1

0 Narayan Engg 0.83TOTAL 0.83

SPARES FOR E & M 3.20B

120717.03.10 Laxmi Ind Gases 0.03

124419.03.10 Shanti Entp 0.06


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125119.03.10 Moving Spares 0.06

124719.03.10 Raj Traders 0.04

124919.03.10 Raj Traders 0.06

124819.03.10 Raj Traders 0.04

40819.03.10 B E M L 9.07

TOTAL 9.36SPARES FOR WASHERY 3.21(A)

112627.02.09 L & T Ltd 0.14

14130.05.09 L & T Ltd 0.93

241 04.07.09 L & T Ltd 0.77

24204.07.09 L & T Ltd 0.01

TOTAL 1.85SPARES FOR WASHERY - 3.21 B

123016.03.10 R K Sales 0.2

Vat - 13.14REFUND OF E/M & S/M14.11 TOTAL 0

363517.03.10 0.01

363417.03.10 0.08

374717.03.10 0.03

385619.03.10 0.17

385719.03.10 0.04

TOTAL 0.33CAPITAL 15.11

TOTAL 0

GRAND TOTAL 27.37

Certified that all the bills appearing in the pending bills position are lying in cashsection awaiting for payment.


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EXPLANATION OF THE CASH INDENT

The indent of Rajrappa area shows how much is the requirement of cash in thatparticular area. This indent is prepared on a weekly basis. On close scrutiny of theindent we find that most of the requirement is for the spare parts which the area itself purchases. It is because these items are essential for the smooth functioning of themachineries i.e. it ensures that production procedure is not hampered because of non-availability of materials. These items are such which are very essential and if dispatchedfrom the head quarters will take time and will affect the continuity of production. Thepurchase of such items is generally made from the manufacturers itself. Thesemanufacturers are located not only in Jharkhand but outside as well.

Besides the spare parts it also requires cash for LTC/LLTC i.e. leave travel

concession.LTC are given to government employees. The LTC amount is rs 1.09 lakhwhich is given once in a block of two calendar years and hence it is for the year 2008-09and 2009-10. LTC to hometown is admissible irrespective of the distance between theheadquarters of the government servant and his hometown.

Apart from LTC there is also Exgratia payments but the amount for the weeklyrequirement for payment under this head is nil. Exgratia payments are those paymentswhich are made to an individual in respect of loss or damage to personal property in asituation where the firm accepts no liability for the loss or damage but is willing to makesome reimbursement without accepting liability. Exgratia payments are not made in

situation where the loss is fully insured, either by the individual or by the firm.

FINDINGS

1. Since it is government organization it has to follow government norms which arevery stringent in nature. The surplus cash which the company has it cant investanywhere and there are certain specified places only where it can invest andthus the opportunity cost in terms of CCL becomes very large.

2. The headquarter enjoys a good control over the regional areas and henceregional areas are not given any extra surplus cash wherein to use it for anycreative purposes.


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3. Cash Management will be successful only if cash collections are accelerated andcash payments (disbursements), as far as possible, are delayed. But since mostof it sales are to government organizations so no strict rules can be implementedin this regard.

4. First time in the history of CCL, all subsidiaries have earned profit in the year 2009-10.


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POLICY GUIDELINES FOR INVESTMENT OF SURPLUS FUNDS

A. Investment/Deployment of Surplus Funds in Appropriate Financial Instrumentsapproved by CIL Board in its 197 th meeting held on 20.7.2001

1. With revision in coal prices with effective from 31.1.2001, NCL and MCLhaving share of 32% of total coal production with only 7% of totalmanpower are generating substantial surpluses. These companies havebeen parking their surplus resources with CIL. Under the corporatizationstructure adopted by CIL, such surpluses are recognized as interestbearing loans.

2. CIL Board in its 197 th meeting held on 20.7.2001 approved the policy inrespect of Deployment of surplus fund in appropriate financial assets for

shor dett and long duration so as to enable the company generateresources for payment of interest to the PMCs on surplus funds parkedwith CIL. In absence of any investment policy, CIL has been parkingsurplus funds by way of short-term deposits since May 2001. Further, inthe aforesaid Board Meeting, CIL Board approved the Policy and ratifiedthe interim action, the summary of which is as under:

3. Investment of surplus funds in PSUs are regulated by the guidelinesreceived from the Govt. Notification dt 14.12.94, 1.11.95, 11.3.96, 2.7.96,14.2.97 and 25.11.99. The various notifications read collectively yield thefollowing set of guidelines for regulating investment of surplus funds by

PSUs:a. The mode and manner of identifying surplus funds and durationthereof should be decided in consultation with the administrativeMinistry.

b. According to para 3 of OM dt 14.12.94, it has also been stated thatdecisions for investment of surplus funds shall have to be taken bythe Board except that decisions for investing short term surplusfunds upto 1 year maturity may be delegated to the designatedgroup of Directors which should invariably include CMD and D(F).Wherever such delegation is made, the order should spell out the

levels of approval and the powers of each official. In all such caseswhere delegation is being exercised a appropriate system shouldbe made functional to ensure automatic internal reporting to theBoard at its next meeting in all cases.

c. The instruments may be selected from the following ranges asdetailed below:


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1. Keeping the aforesaid position in view the following system has beenadopted for investment of surplus funds:NDS. In short, the banks accepting the arrangement shall be grouped inthree categories based on their offered interest rate, namely those eligiblefor NDS (Interest rate at or around the median offer), 50% of NDS (interestrate lower than the median offer by 25 bps or more), 200% of NDS(interest rate higher than the median offer by 25 bps or more). Further, inorder to ensure the better return on deposits, it has been decided that thebanks offering interest rate lower by 50 bps than median rate has not beenconsidered for placing deposits.

In compliance with Govt. guidelines it has been ensured that the banks inreceipt of such deposits have, as per their latest Balance Sheet, a networth in excess of Rs. 100 crores and are in fulfillment of the currentcapital adequacy norms stipulated by RBI.

a. Furthermore, an incentive system has been built in for the banksoffering encashment without any penal charges. At the same time,a disincentive system may be built in for the banks asking penalcharges higher than the normal. One or two banks have indicatedthat premature encashment shall not be allowed by them and suchbanks were not considered for placing the deposit.

b. The deployment of funds as short term deposits in scheduled banksis an eligible instrument for investing short term surplus funds upto1 year maturity may be taken by a designated group of Directorsthat should include Chairman and Director (F). Placing surplusfunds in CIL is a day-to-day operation and that cannot be carriedout in the manner suggested in the guideline. However, keeping thespirit of the guideline and in order to ensure complete transparency,a committee of three members has been formed comprising of CGM (F) who shall chair the proceedings, CFM (B) and CFM(WBP) alternate CFM(D).

A. Investment/Deployment of Surplus Funds in Appropriate Financial Instrumentsapproved by CIL Board in its 214 th meeting held on 12.2.2004


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CIL Board in its 214 th meeting held on 12.2.2004 approved the deployment of surplus funds with


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CASH & BANK BALANCE

Year

amoun (Rs.inlakh)

2000 5341.972001 7495.072002 11906.162003 16552.792004 11155.592005 18411.432006 23482.022007 33408.782008 111546.672009 181588.392010 260700.75

MEANING OF CASH

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