Global Markets - Business
In today’s banking set up, treasury plays a vital role in boosting bottom line by optimally managing bank’s liquidity, enhancing return on deployment of surplus available and extending a range of foreign exchange related services to the customers. At SBI, these functioning are conducted in an integral manner by the Global Markets Department. Global Markets department plays a very critical role in ensuring regulatory reserve requirements as mandated by the RBI from time to time. The department also offers products like derivatives, gold forwards, OIS and manages bank’s proprietary trading and investment portfolio.
The dynamic liquidity management ensures that short term investment portfolio is actively churned to generate better returns. The debt portfolio’s performance, which constitutes a significant portion of Bank’s investment portfolio, depends significantly on interest rate movements and system wide liquidity conditions. However, active management of portfolio ensures that portfolio yield is kept at optimal level and profit is continuously booked. The desk actively invests in G Secs, SDLs, T Bills, Corporate Bonds and Commercial Papers depending on the risk appetite, liquidity conditions and yield & duration interplay.
The equity desk does proprietary trading and manages strategic investments of the bank. The desk keeps exploring good investment opportunities to enhance returns while maintaining a reduced risk appetite during uncertain times. The desk also makes active investments in Mutual Funds.
The Private Equity and Venture Capital desk invests in capital scarce start-ups which offer potential of higher returns with enhanced risks.
Being the biggest bank of the country and with the role of a market maker, the Forex desk endeavours to provide the best prices to corporates, ranging from large corporate houses with established treasury to emerging SMEs, both in the Public and Private Sectors space. Forex desk is one of largest liquidity providers in the inter-bank market over both Refinitiv and CCIL platforms. It is also one of the largest volume generators in Currency Futures market over various exchange houses. In addition to these, the bank also provides Indian Rupee and Foreign Exchange Derivative products to corporates for hedging their interest rate and currency risks, within the regulatory stipulations.
Structured Products desk manages Options book and MIFOR book with enhanced price making ability. Treasury Marketing Group markets various treasury products offered by the Bank, to its customers to mitigate Exchange Rate Risk /Interest Rate Risk in their exposures. Dedicated Treasury Marketing Officers continuously engage with the customers giving them various inputs about markets as part of the advisory services offered by the Bank. A large treasury requires large Back Office set up also. Global Markets department has Forex Back Office in Kolkata and Rupee Back office in Mumbai (split in two – GMU Mumbai and Security Services Branch). We are members of FEDAI (for forex treasury activities) and FIMMDA (for Rupee treasury activities).
Equity Desk, a subset of Global markets Department, deals in equity investments in primary as well as secondary market. It also manages the Bank’s investment in Mutual Funds. Equity & Mutual Fund investments are part of Non-SLR Investments of the Bank. The framework for investments is defined in the Bank’s Domestic Investment Policy and Trading Policy. Apart from Bank’s internal policy, it is also guided by RBI guidelines, SEBI Guidelines & Guidelines formulated by respective Exchanges for Institutional Investors.
Investments in equity shares & mutual funds are restricted to the companies and mutual fund schemes which are part of the respective Universe. The scrips in the Equity Universe are short listed on the basis of specific themes, members of some important indices etc. It is approved by Corporate Centre Investment Committee-I (CCIC-I) and is reviewed at half-yearly intervals. Mutual fund Universe comprises of Liquid,Debt,Duration&Equity schemes which are shortlisted on the basis of Value Research rating,CPR ranking, Portfolio composition and various other parameters. The Universe is approved by various committees depending on their sanctioning powers.
Important Regulatory Ceilings
- Aggregate exposure of the bank to the Capital market in all forms should not exceed 40% of its net worth as on 31st March of previous year.
- Overall ceiling for direct investment in shares & units of equity-oriented mutual funds - 20% of the Bank's Net Worth.
- Ceiling for investment in units of Liquid schemes of Debt Oriented Mutual Funds-10% of the Bank's Net Worth.
- Ceiling for HFT portfolio - 20% of the Bank's net worth or Rs. 400 crore, whichever is lower.
- Banks are not allowed to undertake arbitrage trading and short-selling of shares.
Forex & Financial Engineering & New Products
We are the largest public sector bank of India, having a strong presence in the area of foreign exchange with more than 12% market share. We have extensive International Branch Network, with more than 230 Branches in 40 countries across the Globe.
We offer variety of foreign exchange services to clients, to hedge the risk arising out of currency fluctuations. We provide ease of operation to clients, by offering the services of electronic and voice trading for booking Forex rates on real time basis.
We are market leaders in Foreign Exchange and derivative Products, and provide wide ranging services like:-
- Spot / Forward Rates on all G7 Currencies
- Sale and Purchase of Gold in Spot / Forward
- Interest Rate Swaps / Options
- Currency Swaps / Options
What differentiate us from others:
- Huge Network (maximum no of Authorise Branches to handle Foreign exchange transactions as per Reserve Bank of India guidelines)
- Global Reach
- Highly experienced treasury professionals to provide strategic guidance to help and minimise the foreign exchange risks.
- We offer competitive rates in a wide range of foreign currencies
- We provide most competitive slippages in FBIL reference rates
Interest Rate Markets
- Interest Rate Markets (IRM), as the name signifies, handles the portfolio of interest rate instruments for the Bank. This primarily includes managing investments for regulatory requirements like CRR and SLR, and deploying Bank's funds in various interest rate instruments for generating profits. The instruments we invest in vary from money market instruments like Commercial Papers (CPs), Certificates of Deposits (CDs) and T-Bills to dated Government Securities (G-Secs) and State Development Loans (SDLs). In addition, we also invest in Corporate Bonds issued by financially sound Indian companies. Activity at IRM desk is broadly divided into two desks – SLR and non-SLR
- The SLR desk can be further divided based on its various functions like CRR product management, investment in dated G-Secs, investment in money market instruments, etc.
- The CRR desk manages daily CRR product to maintain the Cash Reserve Ratio at the RBI prescribed percentage of Net Demand and Time Liabilities (NDTL) of the Bank. The CRR dealer has to keep a tab on all the withdrawals and deposits happening across the Bank and maintain the CRR through various borrowing and lending windows provided by the RBI like overnight Liquidity Adjustement Facilifty (LAF)/Marginal Standing Facility (MSF), Export Refinance and Term Repo as well as others available in the market like CBLO, Call and Market Repo. In addition to maintaining the CRR product based on various parameters given by RBI from time-to-time, the CRR desk has to optimize the funding costs while also deploying liquid short term funds optimally among the various avenues available.
- For funds available for a slightly longer duration, the SLR desk takes the call to invest in money market instruments like T-Bills or CDs. These funds may also be passed on to the non-SLR desk for investment in shorter duration instruments viz. CPs, shorter duration corporate bonds. The SLR desk may even raise funds through issuance of CDs to add to Bank's cash position, if required.
- The SLR desk also maintains the Statuary Liquidity Ratio (SLR) of the Bank, as prescribed by RBI. Banks have to compulsorily invest part of their NDTL in SLR securities like dated G-Secs and Treasury Bills issued by the Government of India and SDLs issued by State Governments. SLR securities are sovereign in nature and thus offer a safe haven investment. In addition, SLR securities can be tendered in repo/CBLO market to generate liquidity for the Bank. The desk also manages Bank's investment portfolio in these instruments over and above the SLR requirements.
- The non-SLR desk looks at all investments in securities issued by Indian companies like Corporate Bonds and CPs. It also handles trading in Interest Rate Futures Market (IRF) and in Overnight Indexed Swaps (OIS).
- Managing the Interest Rate portfolio of a large Bank like ours involves a large number of calls to be taken by the IRM desk. Traders on the desk have to choose between various instruments for deployment of or for raising funds. Along with the interest rate instruments mentioned above, we also collaborate with the FX Swaps desk to make use of opportunities for deploying or generating funds in the FX Swap market if it provides better returns for the Bank. Such decisions are taken by the desk on a regular basis for various tenors from overnight to 3 months to 10 years with an aim of maintaining a smooth flow of cash for the Bank's lending and deposits business and to generate superior returns from whatever funds are available to us, all while meeting the regulatory requirements.
- Private Equity is a broad term that refers to any type of equity acquired through private placement or preferential allotment, rather than through a public offer/stock market. Institutional investors may invest in private equity funds, which in turn, invest in target companies. Categories of private equity investment include angel investing, venture capital, growth capital, mezzanine capital, leveraged buyout and others.
- Private equity is essentially a way to invest in assets that aren’t traded publicly, or to invest in a publicly traded asset with the intention of taking it private. Unlike Stocks, Mutual funds and Bonds, private equity funds usually invest in more illiquid assets, i.e. unlisted companies. After investing in such companies, the PE Funds strive to improve their management, operational efficiency and profitability with the ultimate objective of maximizing their returns on investment.
- A distinctive feature of Private Equity is the value-added services provided by the Private Equity investors / Venture Capitalists to the investee companies. Private Equity investors deal with numerous entrepreneurs of various ventures in different industries. They have wide experience in handling diverse situations and foster growth in investee companies through their involvement in the management, strategic marketing and advice in financing, networking etc.
- Alternative Investment Fund (AIF) is a fund floated for pooling money of several contributors (investors) which is utilized for investing in companies which require Equity / Debt capital. The contributors of the fund are known as ‘Limited Partners (LPs)’ and generally remain passive investors. The fund is managed by an Asset Management Company (AMC), referred to as the Investment Manager. AIFs are regulated by SEBI (Alternative Investment Funds) Regulations, 2012.
- A policy for Investment in direct Private Equity, AIF and Investments which are considered strategic in nature by the Bank is approved by the Central Board of the Bank and put in place to provide a broad strategic framework for investing and managing the domestic Private Equity assets of the Bank.
- In terms of the policy, Private Equity, Strategic Investments and Alternative Investment Funds (AIFs) have the following meaning:
a. Private Equity: Direct investment in equity of start-up businesses, early stage companies, growth stage expansion capital or participating in secondary transactions of unlisted companies.
b. Strategic Investment: Direct Investment in equity of unlisted companies which are considered strategic in nature. These investments are not necessarily on short term commercial considerations.
c. Alternative Investment Funds (AIFs): These include Venture Capital Funds, Social Infrastructure Funds, Infrastructure Funds, SME Funds, Private Equity Funds, Debt Funds, Venture Debt Funds etc.
- Private Equity desk, headed by General Manager-Private Equity, looks after the portfolio of ~Rs. 5,000 Crores comprising of Private Equity investments, Strategic Investments and investments in AIFs. Bank has also floated three Joint Venture Funds; one with Macquarie group of Australia and two with Oman Investment Authority. Besides, we have also committed Rs 43 Crore in 2 Asset Reconstruction Funds.
Treasury Marketing Group
Treasury Marketing Group under Global Markets vertical, came into existence during 2005-06 as part of Treasury Process Re-engineering for providing adequate thrust to the marketing of Bank’s Treasury Products to the Institutional and Corporate clients of the Bank. 8 Treasury Marketing Units (7 RTMUs and 1 CTMU at Mumbai) were created across the country. The locations of TMUs and satellite centers are such that we have presence in all CAG/CCG/NBG centers. TMUs are staffed with well-equipped Relationship Managers Treasury (RMTs) and are headed by an AGM/CM with adequate dealing/forex background. RMTs are recruited internally through Dealer’s tests from a pool of young officers.
While RTMUs are located at Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Ahmedabad, Satellite Centers are functioning from Pune, Chandigarh, Ludhiana, Jaipur, Lucknow, Tirupur, Ernakulam and Visakhapatnam for catering to those specific geographies in response to the demand.
- To provide end-to-end solutions in the entire gamut of Treasury Products to Customers for management of their portfolios.
- To maintain link between the Branches / Relationship Managers (RMs) / Customers on one hand and the Treasury functions and delivery platform on the other.
- To expand customer activities in Money Market and Fixed Income products.
- To interact with customers about the markets and their requirements through daily telephonic conversations, emails and the most important aspect of marketing – visiting customer’s work place / branches and inviting them at our workplace (Customer Calls).
- To identify the Treasury related needs of the Customers on an ongoing basis and devise effective strategies for product push.
- To efficiently market our forex, derivative and money market products.
- To co-ordinate and assist RMs/Branch officials in various Treasury related issues.
- To provide continuous feedback to other desks about customer’s requirements and the market trends.
- To interact with other desks in Treasury for pricing and product structuring.
- To participate in various P-reviews and synergy meetings with various Business Groups which facilitate constant exchange of information on business updates, opportunities and risks.
- To keep a track on changes in RBI guidelines with respect to Forex, Derivatives and other Treasury variants and advise the RMs/other units/customers accordingly.
- To contribute by suggesting changes/improvements to the existing systems and procedures so that they are in line with the RBI guidelines.
- To expand customer activities in Money Market and Fixed Income products.
It Initiatives :
- Upgradation of e-Forex (Bank’s online exchange rate booking platform) and integration with YONO business platform.
- Regular skill building training programs conducted for all Business Groups officials. We regularly arrange various one day sessions for officials on market awareness.