Cash management in north India: Competition and prospects; Citibank N.A., New Delhi

Abstract

Fast collection of receivables occupies a significant position in the sales cycle of a company. To meet their working capital requirements, organisations resort to borrowing funds from the market, delaying their payments and collecting the credit extended to the customers at the earliest. The cost of capital being high for short term loans, it is not always possible to meet the working capital requirement by raising funds from the market. It is here that the fast collection mechanisms play an important role of cutting the time taken in realising funds. The conventional collection systems are largely unautomated and hence slow, mostly paper based, and it takes about 21- 22 days to realise an outstation collection. The newer collection systems offer a much faster service employing couriers and electronic banking thereby reducing the above duration to 5-6 days. The institutions offering such services extend a short-term credit to the organisations until such time taken in realising their collections. The institutions vary in establishing guidelines for extending this credit as well as in the geographical spread of their services. Citibank offers fast collection and disbursement services at the four Metros and further augmented by its vast courier network and arrangement with correspondent banks to cover 400 locations. As more and more organisations and institutions are acknowledging the role of cash management, similar services are being offered by American Express Bank, ANZ Grind lays Bank, Bank of America, Corporation Bank, Punjab National Bank and Industrial Finance Branch of State Bank of India.