The Treasury Management was confined to fund management – maintaining adequate cash balances to meet day-to-day requirements, deploying surplus funds generated in the operations, and sourcing funds to bridge occasional gaps in cash flow. In the context of a bank, the treasury is also responsible to meet reserve requirements, viz. holding with RBI minimum cash balances required as per cash reserve ratio (CRR), and investing funds in approved securities to the extent required under statutory liquidity ratio (SLR). Thus, treasury function was essentially liquidity management, and was considered as a service center.

To date, liquidity management continues to be an important function of treasury. Bur, owing to economic reforms and deregulation of markets over the last decade or so, the scope of treasury has expanded considerably. Treasury has since evolved as a profit center, with its own trading and investment activity. Treasury connects core activity of the bank (deposit taking and lending) with financial markets by continuously accessing the markets for lending, borrowing, investing and trading in financial assts.

The treasury plays an active role in Asset-Liability Management, and with its constant exposure to markets, is well placed to advise the management of bank in internal decisions, say in product pricing and strategic investments.

It is necessary to state that treasury essentially deals with short-term fund-flow (i.e. with less than one year maturity), with the exception that as part of SLR requirement, investment in some securities is held to maturity exceeding one year.