Treasury Optimisation Opportunities in India

As businesses expand in India, it is essential that treasurers evaluate their treasury processes and systems, to ensure they are scalable to support business growth. This article looks at how corporate treasurers in India can gain further efficiencies and control by implementing treasury best practices and sophisticated banking solutions.

Bank account management

A smaller number of bank accounts offer reduced risk and the consolidation of fragmented cash positions. Treasurers who consider this option have already undertaken an account rationalisation exercise. However, continuous developments in India’s banking landscape means that an annual review of bank accounts can help identify incremental opportunities.

As companies look to set up or expand their businesses in India, an optimal account structure should be implemented from inception. Partnering with relationship banks with a strong local presence can be a key enabler: they are equipped with strong electronic banking capabilities and multiple correspondent bank arrangements, and can provide comprehensive payments and collections services – including statutory payments – across the country.

To enforce centralised control on any account opening and closure activities, treasurers should consider rolling out an account management policy. This will provide a standardised framework for the opening of new bank accounts, or changes to existing bank accounts and bank account signatories.

Visibility and control of cash

Given that optimising and securing access to group liquidity is a major objective for treasurers, gaining visibility of cash positions is a critical first step towards building a robust liquidity management framework.

To achieve this, treasurers are leveraging developments in banking technology to improve the efficiency and effectiveness of their cash visibility processes. However, different companies are at different stages of automation when it comes to bank account visibility. While some still rely on web portals of banks and email statements, sophisticated treasuries have adopted SWIFT MT940 statements delivered over host-to-host connections into their treasury systems, where the automated collation of bank account statements presents a consolidated dashboard of all cash positions.

Global MNCs have been early adopters of SWIFT MT940 statements, which help incorporate bank accounts in India into their global bank account visibility structures. While there are still issues in terms of the uniform availability of SWIFT MT940 statements from some local Indian banks, there has been a continuous improvement in the availability and quality of these statements. This is benefitting treasurers as they standardise and automate their bank account visibility in India in line with best practices in other markets. A few banks also offer bank account statement aggregation services to establish a comprehensive visibility solution for all bank accounts in India.

Once cash visibility has been achieved, the next step is to mobilise cash so that it can be used effectively to meet business needs and objectives. Corporates with multiple legal entities in India can create a single cash pool, where any surplus in one entity can fund working capital gaps in another. Prior legal and tax due diligence is recommended to ensure compliance with the provisions of Indian Companies Act 2013 and to understand any tax or regulatory implications. Sophisticated liquidity management platforms offered by banks can automate the administration of the cash pool, provide regulatory reporting and intra-day forecast of surplus balances for investments.

Treasury centralisation

For Indian MNCs, the focus on global liquidity management has steadily intensified. A regional or global liquidity concentration structure can fund working capital gaps in one country through surplus in another. A review of regulatory and tax considerations – along with an understanding of the underlying business model and treasury objectives – helps in designing an optimum liquidity management structure. This paves the way for the setting up of a regional or international treasury centre to manage the treasury needs for the business internationally.

Singapore, Dubai, Mauritius and London all have proved popular treasury centre locations for Indian MNCs. However there is no one-size-fits-all approach in treasury centralisation and the ‘best fit’ centralisation model will depend on underlying business needs.

Investment Management
Given India’s current exchange control guidelines, surplus cash in the country is not allowed to participate in regional or global cash pools. Instead, companies invest any surplus cash locally in bank deposits or other approved investment instruments. A prudent investment management policy in line with the group standards should guide these investments.

A cash stratification exercise can help in classifying the operational cash, core cash and strategic cash. The choice of instrument and its tenors can then be based on the nature of the cash surplus being invested.

Electronification of flows

There has been a tremendous shift in India’s payments landscape over the past three years. The percentage of paper cheques in overall payment volumes (excluding automated teller machine [ATM] transactions) have fallen from 52% in 2011-12 to 25% in 2014-15. There have been continuous efforts to strengthen the electronic payments landscape, with the roll out of cost-effective products and services such as the National Automated Clearing House (NACH) and Immediate Payments Service (IMPS). This has resulted in better adoption of electronic payment channels, leading to improved operational efficiencies and control environment for corporate treasuries.

Many treasuries have achieved over 90% ‘electronification’ of their payments and collections flows. Such initiatives require treasury teams to collaborate with vendor management and commercial teams for driving change. The success of these initiatives depends on the quality of banking solutions implemented, as well as support from banking partners. For instance, real-time beneficiary/remitter advice will increase the acceptance of electronic transfers by vendors and dealers.

Centralisation of account payables (AP) and account receivables (AR) Processes

Companies are benefitting from the centralisation of their AP and AR processes into shared service centres (SSCs), with India being a popular location for SSCs of global MNCs. Being a lower cost location and due to economies of scale, these SSCs can typically reduce costs by 25% to 35%. In addition to cost reductions, benefits include reduced risk, standardised processes and increased automation. To ensure that these benefits can also extend to areas such as cash flow forecasting, the SSCs need to work closely with corporate treasuries.

Indian MNCs have also been setting up SSCs within their home country to manage AP/AR processes for their global operations. Typically, the journey starts with centralising India AP/AR processes in the first phase. Once the operations are stabilised in their domestic market, the SSCs will extend coverage to other markets.

Robust bank connectivity is at the heart of all SSC initiatives. This not only ensures straight-through processing (STP) of payment instructions, but also enables straight-through reconciliation of payments and collections flows across multiple markets.


Innovative banking solutions, implementing new treasury structures and adopting industry best practices provide tremendous opportunities for global and Indian MNCs to build treasury efficiencies. Partnering with a banking service provider offering strong advisory and execution capabilities is a key enabler for corporates to achieve treasury optimisation objectives in a promising market like India.


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