A PROJECT REPORT ON

“TO STUDY THE LIQUIDITY MANAGEMENT IN BANKS”

I.K. GUJRAL PUNJAB TECHNICAL UNIVERSITY

KAPURTHALA

In partial fulfillment of the requirement for the Award of degree

Master of Business Administration (MBA)

SUBMITTED BY: SUPERVISED BY:

ABHAY PANWAR Ms. NEETI
MBA 4THsemester (Assistant professor)
Roll Number: 2309214

(Assistant professor)

DEPARTMENT OF MANAGEMENT

CT INSTITUTION OF MANAGEMENT & IT MAQSUDAN

(JALANDHAR)

(2023 – 2025)

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 TABLE OF CONTENT

Chapter Title Page

No

STUDENT DECLARATION 3

FACULTY DECLARATION 4

ACKNOWLEDGMENT 5

1 INTRODUCTION 6-14

2 REVIEW OF THE LITERATURE 15-16

3 NEED, SCOPE & OBJECTIVE OF THE STUDY

3.1 OBJECTIVES OF THE STUDY 17

3.2 SCOPE AND NEED OF THE STUDY 17

4 RESEARCH METHODOLOGY 18-20

5 DATA INTERPRETATIONS & DATA ANALYSIS 21-32

6 TEST CORRELATION 33

7 FINDINGS,SUGGESTIONS & RECOMMENDATIONS 34-36

8 CONCLUSION 37

9 BIBLIOGRAPHY 38-39

10 ANNEXURE 40-43

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 STUDENT DECELERATION

I “Abhay Panwar” hereby declare that I have completed a research project titled
“TO STUDY THE LIQUIDITY MANAGEMENT IN BANKS” Under the
guidance of Ms. Neeti (Assistant Professor).

Further I hereby confirm that the work presented here is Genuine and original
and has not been published elsewhere.

ABHAY PANWAR

SIGNATURE OF THE STUDENT

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 FACULTY DECLARATION

I hereby declare that student Abhay Panwar has undergone her Project Report under my
periodic guidance on the project titled “TO STUDY THE LIQUIDITY MANAGEMENT IN
BANKS”.

Further I hereby declare that the student was periodically in touch with me during his Project
and the work done by student is genuine and original.

Signature

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 ACKNOWLEDGEMENT

This project in itself is an acknowledgement to the inspiration, drive and valuable guidance
contributed to it by many individuals. This project would never have been the light of day
without the help and guidance that have been received. I would like to express my sincere
appreciation and thanks to Ms.Neeti (Assistant Professor) who guided me all throughout for
this Project. It is under her valuable guidance, constant interest and encouragement, I have
completed this project. She devoted her ever- precious time from her busy schedule and
helped in complete understanding of the Project. Finally, I would like to thank my professor
Ms. Neeti whose most valuable experience was the reason for my project to be a success.

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 CHAPTER -1

INTRODUCTION TO BANKS

A bank is a financial institution licensed by a government. Its primary activities

includeproviding financial services to customers while enriching its investors. Many financial
activities were allowed over time. For example banks are important players in financial
markets and offer financial services such as investment funds. In some countries such As
Germany, banks have historically owned major stakes in industrial corporations while inother
countries such as the United States banks are prohibited from owning non-
financialcompanies. In Japan, banks are usually the nexus of a cross-share holding entity
known as thezaibatsu. In France, banc assurance is prevalent, as most banks offer insurance
services (andnow real estate services) to their clients.

The level of government regulation of the banking industry varies widely, with countries
suchas Iceland, having relatively light regulation of the banking sector, and countries such
asChina having a wide variety of regulations but no systematic process that can be
followedtypical of a communist system Banks act as payment agents by conductingchecking
or current accounts for customers, paying cheques drawn by customers on thebank,
andcollecting cheques deposited to customers' current accounts. Banks also enable
customerpayments via other payment methods such as telegraphic transfer, EFTPOS, and
ATM.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques
depositedtocustomers' current accounts. Banks also enable customer payments via other
paymentmethods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting

termdeposits, and by issuing debt securities such as banknotes and bonds. Banks lend money
bymaking advances to customers on current accounts, by making installment loans, and
byinvesting in marketable debt securities and other forms of money lending.

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Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment services
such as remittance companies are not normally considered an adequate substitute for having a
bank account.

Banks borrow most funds from households and non-financial businesses, and lend most
fundsto households and non-financial businesses, but non-bank lenders provide a significant
and inmany cases adequate substitute for bank loans, and money market funds, cash
managementtrusts and other non-bank financial institutions in many cases provide an
adequate substitute to banks for lending savings to.

COMMERCIAL ROLE OF BANKS

The commercial role of banks is not limited to banking, and includes

1)Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand

2)Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other

means.

3)Issuing bank drafts and bank cheques

4)Accepting money on term deposit

5)Lending Money by way of overdraft, installment loan or otherwise

6)Providing documentary and standby letters of credit (trade finance), guarantees,

performance bonds, securities underwriting commitments and other forms of off-balance
sheet exposures

7) Safekeeping of documents and other items in safe deposit boxes

8) Currency exchange

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INTRODUCTION TO LIQUIDITY MANAGEMENT OF BANKS

Liquidity management refers to overall monetary conditions, reflecting the extent of

mismatch between demand and supply of overall monetary resources, for a central bank, the
concept of liquidity management typically refers to the framework and set of instruments that
the central bank follows in steering the amount of bank reserves in order to control its price,
consistent with the ultimate goals of monetary policy (Bindseil, 2000).

Liquidity management is Efficient Management of cash (Outflows/Inflows) to improve

liquidity and returns while implementing adequate control and managing risks. Liquidity
management can generally be defined as the efficient utilization of cash through coordinated
management of payments, collections and cash balances. The objectives are to reduce costs,
enhance control and optimize returns as well as reduce the inventory holdings. Traditionally,
liquidity management involved personalized services offered by the bank's staff to the
company's treasurer via mails, telephone, calls, faxes etc or visits to the bank initiated
transactions. But with the advent of computer technology, liquidity management services
have been automated to a large extent.

Many banks now allow their corporate customers to perform online inquiries and transaction
services (payment, collection and liquidity management) through PC or Internet via a web
interface. With such a system in place, a company can perform most of the liquidity
management functions themselves without relying on a bank staff to act as the executor of
their requests.

With the splurge in the credit off-take in the recent past, banks have had to increase their
reliance on bulk funding short -term sources. At the same time many of them have also been
paring their excess Statutory Liquidity Ratio (SLR) portfolio to fund the credit growth. While
this strategy helped them till the recent past, it is unlikely to help them in future given the fact
that most of the bank's SLR portfolio are just about adequate to meet the statutory
requirements, hence leading to a scramble to garner bulk deposits.

Though it is a known phenomenon that banks borrow short-term and lend long-term, the
mismatch has increased in the last 1-2 years with the increasing thrust to expand asset base.

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The mismatch is accentuated with the increasing preference of the corporate and high net
worth depositors to invest in banks only for short-terms or through more tax efficient
fixedmaturity plans (debt schemes) floated by various mutual funds. Consequently banks in

the recent past have had to increase reliance on the short-term sources of deposits. Though
the banks have begun marketing the long-dated fixed deposits to retail investors by enticing
the depositors with tax benefits and higher interest rates, ICRA does not expect a significant
shift in the asset liability mismatch (ALM) profile of the banks at least over the short term. In
addition, Reserve Bank of India's (RBI) immediate objective to curb the rising inflation
numbers is likely to keep a tight liquidity profile over the short term. As a result, banks will
have to find alternate sources of funds or may have to curtail their credit growth rates till such
times the liquidity profile improves. It also find that unlike in the past, wherein no bank
considered slowing business volumes, some of them have in fact in the current scenario,
started deliberating on the necessity of curbing business growth for the next 3-4 months.

Liquidity management helps the banks in:

Properly timing the disbursements.

Some payments must be made on a specified or legal date, such as Social Security payments.
For such payments, there is no liquidity management decision. For other payments, such as
vendor payments, discretion in timing is possible. Government vendors face the same cash
management needs as the Government. They want toaccelerate collections. One way vendors
can do this is to offer discount terms for timely payment for goods sold.

Eliminating idle cash balances.

Every Rupee held as cash rather than used to augment revenues or decrease expenditures
represents a lost opportunity. Funds that are not needed to cover expected transactions can be
used to buy back outstanding debt (and cease a flow of funds out of the Treasury for interest
payments) or can be invested to generate a flow of funds into the Treasury's account.
Minimizing idle cash balances requires accurate information about expected receipts and
likely disbursements.

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Ensuring timely deposit of collections.

Having funds in-hand is better than having accounts receivable. The cash is easier to convert
immediately into value or goods. A receivable, an item to be converted in the future, often is
subject to a transaction delay or a depreciation of value. Once funds are due to Government

they should be converted to cash-in-hand immediately and deposited in the Treasury's

account as soon as possible.

Monitoring exposure and reducing risks

The Banks have the responsibility to use timely, reliable, and comprehensive financial
information and systems. To that end, banks encourage to improve their liquiditymanagement
practices by using electronic funds transfer (EFT) whenever cost effective, practicable, and
consistent with statutory authority. So there is a need to monitor the exposure and reduce the
risk.The need for liquidity management arises from central banks' concept of liquidity
measured in terms of the monetary base, of which it is the monopoly supplier.

The supply of monetary base by the central bank depends on:

-The public's demand for currency, as determined by the size of monetary transactions and
the opportunity cost of holding money and,

-The banking system's need for reserves to settle or discharge payment obligations.

In fulfilling these needs, central bank also attempt to control and modulate liquidity
conditions by varying the supply of bank reserves to meet its macroeconomic objectives
subject to the constraint of financial stability. Capital flows have little effect on liquidity in
the presence of equivalent current account deficits that result in the absorption of capital
flows in the economy Bank reserves are, therefore, influenced through reserve requirements
or open market operations. In so doing, central banks attempt to affect the level of short-term
interest rates in a manner in which market movements of these interest rate movements are
smoothened out as volatility of any monetary or non-monetary asset prices can be costly in
terms of real output and investment decisions. It is from this standpoint that a central bank
decides to modulate its market operations over a chosen time horizon to reflect its policy
stance.

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Various measures used by RBI for liquidity management

1) CRR (Cash Reserve Ratio)

2) SLR (Statutory Liquidity Ratio)

3)Bank rate

4)Repo Rate

5)Reverse repo

6)OMO (Open Market Operation)

CRR (Cash Reserve Ratio)

Cash Reserve Ratio is a bank regulation that sets the minimum reserves each bank must hold
to customer deposits and notes. These reserves are designed to satisfy withdrawal demands,
and would normally be in the form of fiat currency stored in a a central bank.Cash reserve
Ratio (CRR) in India is the amount of funds that the banks have to keep with RBI. If RBI
decides to increase the percent of this, the available amount with the banks comes down. RBI
is using this method (increase of CRR rate), to drain out the excessive money from the banks.
CRR currently in India is 4.00 %. The present banking system is called a "fractional reserve
banking system", as the banks are required to keep only a fraction of their deposit liabilities
in the form of liquid cash with the central bank for ensuring safety and liquidity of deposits.
The Cash Reserve Ratio (CRR) refers to this liquid cash that banks have to maintain with the
Reserve Bank of India (RBI) as a certain percentage of their demand and time liabilities. For
example if the CRR is 10% then a bank with net demand and time deposits of Rs 1,00,000
will have to deposit Rs 10,000 with the RBI as liquid cash.

CRR used as a tool of credit control- CRR was introduced in 1950 primarily as a measure
to ensure safety and liquidity of bank deposits, however over the years it has become an
important and effective tool for directly regulating the lending capacity of banks and
controlling the money supply in the economy. When the RBI feels that the money supply is
increasing and causing an upward pressure on inflation, the RBI has the option of increasing

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the CRR thereby reducing the deposits available with banks to make loans and hence
reducing the money supply and inflation.

SLR (Statutory Liquidity Ratio Statutory)

Liquidity Ratio or SLR refers to the amount that all banks require to maintain in cash or in
the form of Gold or approved securities. Here by approved securities we mean, bond and
shares of different companies. Statutory Liquidity Ratio refers to the amount that the
commercial banks require to maintain in the form of cash, or gold or govt. approved
securities before providing credit to the customers. Statutory Liquidity Ratio is determined
and maintained by the Reserve Bank of India in order to control the expansion of bank credit.
This Statutory Liquidity Ratio is determined as percentage of total demand and percentage of
time liabilities. Time Liabilities refer to the liabilities, which the commercial banks are liable
to pay to the customers on their anytime demand. The liabilities that the banks are liable to
pay within one month's time, due to completion of maturity period, are also considered as
time liabilities. Unencumbered approved securities (Government securities or Gilts come
under this) valued at a price as specified by the RBI from time to time.

The objectives of SLR are:

I. To restrict the expansion of bank credit.

Il. To augment the investment of the banks in Government securities.

III. To ensure solvency of banks. A reduction of SLR rates looks eminent to support the
credit growth in India.

The SLR is commonly used to contain inflation and fuel growth, by increasing or decreasing
it respectively. This counter acts by decreasing or increasing the money supply in the system
respectively. Currently the SLR requirements of Indian bank is 25%. if any Indian Bank fails
to maintain the required level of Statutory Liquidity Ratio, then it becomes liable to pay
penalty to Reserve Bank of India. The defaulter bank pays penal interest at the rate of 3% per
annum above the Bank Rate, on the shortfall amount for that particular day. But, according to
the Circular, released by the Department of Banking Operations and Development, Reserve
Bank of India; if the defaulter bank continues to default on the next working day, then the
rate of penal interest can be increased to 5% per annum above the Bank Rate

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Bank Rate

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank
charges on the loans and advances that it extends to commercial banks and otherfinancial
intermediaries. Changes in the bank rate are often used by central banks to control the money
supply. Bank rate in Indian is currently at 6.50%.

REPO Rate

Whenever the banks have any shortage of funds they can borrow it either from Reserve
Bankof India |RBI] or from other banks. The repo rate is the rate at which the banks borrow
thisexcess funds. The borrowing bank mortgages its government securities to carry out this
loantransaction. A reduction in the repo rate will help banks to get money at a cheaper rate.
Whenthe repo rate increases borrowing from RBI becomes more expensive. Repo comes
from therepurchasing agreement. REPO rate in India currently is 6.50%. Repo rate, is short
forrepurchase rate, and is also known as the official bank rate. Repo rate is the
discountedinterest rate at which a central bank repurchases government securities. The central
bankmakes this transaction with commercial banks to reduce some of the short-term liquidity
inthe system. When the sale is concluded, the securities are subsequently resold at
apredetermined price. The repo rate is dependent on the level of money supply that the
centralbank chooses to set as part of its monetary policy.

The central bank has the power to lower the repo rates while expanding the money supply
inthe country. This enables the banks to exchange their government security holdings for
cash.In contrast, when the central bank decides to reduce the money supply, it implements a
rise inthe repo rates.

When the central bank of the nation makes a decision regarding the money supply level
therepo or repurchase rate is determined by the market in response to the rules of supply
anddemand.The securities that are being evaluated and sold are transacted at the current
market price plus any interest that has accrued. When the sale is concluded, the securities are
subsequently resold at a predetermined price. This price is comprised of the original market
price and interest, and the pre-agreed interest rate, which is the repo rate.

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Reverse repo

A Repurchase agreement (also known as a repo or Sale and Repurchase Agreement) allows a
borrower to use a financial security as collateral for a cash loan at a fixed rate of interest. In a
repo, the borrower agrees to sell immediately a security to a lender and also agrees to buy the
same security from the lender at a fixed price at some later date.

A repo is equivalent to a cash transaction combined with a forward contract. The cash
transaction results in transfer of money to the borrower in exchange for legal transfer ofthe
security to the lender, while the forward contract ensures repayment of the loan to the lender
and return of the collateral of the borrower. The difference between theforward price and the
spot price is the interest on the loan while the settlement date of forward contract is the
maturity date of the loan. Reverse repo in India currently is3.35 %.Reverse Repo rate is the
rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always
happy to lend money to RBI since their money are in safe hands with a good interest. An
increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this
attractive interest rates. It can cause the money to be drawn out of the banking system

Due to this fine tuning of RBI using its tools of CRR, Bank Rate, Repo Rate and Reverse
Repo rate our banks adjust their lending or investment rates for common man.

OMO (Open Market Operations)

Open market operations are the means of implementing monetary policy by which a central
bank controls its national money supply by buying and selling government securities, or other
financial instruments. Monetary targets, such as interest rates or exchange rates, are used to
guide this implementation. Since most money is now in the form of electronic records, rather
than paper records such as banknotes, open market operations are conducted simply by
electronically increasing or decreasing ('crediting' or'debiting') the amount of money.

Newly created money is used by the central bank to buy in the open market a financial asset,
such as government bonds, foreign currency, or gold. If the central bank sells these assets in
the open market, the amount of money that the purchasing bank holds decreases, effectively
destroying money. The process does not literally require the immediate printing of new
currency. A central bank account for a member bank can simply be increased electronically.

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 CHAPTER – 2

LITERATURE REVIEW

1. Funding Liquidity and Risk-Taking Behavior

Muduli and Dash (2024) examined the relationship between funding liquidity and banks' risk-
taking behavior in India.Their study revealed that banks with higher funding liquidity tend to
exhibit increased risk-taking, particularly during economic recoveries.Larger banks with
higher deposit shares demonstrated lower risk-taking behavior, emphasizing the importance
of liquidity regulation alongside capital requirements to ensure a stable banking system.

2. Bank Capital, Liquidity Creation, and the Role of Bank Culture

Nguyen, Matousek, and Muradoglu (2024) investigated how bank culture influences the
relationship between regulatory capital and liquidity creation.Using machine learning
techniques to analyze U.S. banks' 10-K reports from 1995 to 2019, the study found that a
strong bank culture can mitigate the negative impact of regulatory capital on liquidity
creation.This effect was more pronounced in smaller banks with traditional funding structures
and higher profitability, suggesting that regulators should consider bank culture in
supervisory frameworks.

3.Gupta and Kashiramka (2024) explored the moderating role of environmental, social, and
governance (ESG) disclosures on the relationship between liquidity creation and bank
stability in the Asia-Pacific region.Their analysis of 178 commercial banks from 2010 to
2019 indicated that higher liquidity creation positively impacts bank stability, with ESG
disclosures enhancing this effect.The study also highlighted variations in this moderating role
between advanced and emerging economies, underscoring the importance of integrating ESG
practices into banks' internal processes.

4.Thakor and Yu (2024) introduced the concept of "funding liquidity creation," referring to
banks' role in creating private money through lending that generates deposits.Their study
found that between 2001 and 2020, 92% of bank deposits resulted from funding liquidity
creation, averaging $10.7 trillion annually.The research also highlighted that better-
capitalized banks are more capable of creating funding liquidity, especially during periods
when cash deposit balances are stable or declining.

5. Climate Risk, Bank Profitability, and Liquidity Creation

Lee and Alam (2024) examined the impact of climate risk on bank profitability through the
liquidity creation channel in G7 countries.Their findings suggest that climate risk adversely
affects bank profitability by influencing liquidity creation, highlighting the need for banks to
consider climate-related factors in their liquidity management strategies.

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6.Borio and Drehmann (2024) explored the relationship between liquidity risk management
in banks and its implications for systemic stability. The study revealed that while effective
liquidity risk management at individual banks is crucial, it is equally important to consider
the interconnectedness of banks. They noted that liquidity stress in one bank can lead to
contagion and systemic crises. The research stresses the need for regulators to consider
systemic liquidity risk and not just individual bank liquidity when designing regulatory
frameworks.

Key Findings: The study highlighted that macroprudential policies, such as the
countercyclical buffer and systemic liquidity risk buffers, are essential in managing
systemic risk.

7.Basel III and Its Indian Adaptation: Research by Patel (2019) and Chakrabarti (2021)
shows that while the Indian banking system initially struggled with Basel III compliance,
there has been significant improvement over the years. Indian banks, particularly public
sector banks, faced challenges in maintaining liquidity ratios due to the slower pace of capital
infusion and risk aversion. However, compliance with these measures has gradually enhanced
banks' resilience against liquidity shocks.

8.The volatility in deposits, particularly from the retail sector, is one of the biggest
challenges. Chakrabarti and Sahu (2022) identified that the Indian banking sector
experiences significant fluctuations in deposit levels during periods of market uncertainty or
political instability. This volatility is exacerbated by the rise of alternative investment
products, such as mutual funds, which compete with bank deposits.

9. Indian banks, particularly the public sector banks (PSBs), often face challenges related to
the asset-liability mismatch. This is because PSBs typically fund long-term assets, such as
home loans, with short-term liabilities. Research by Venkatesh and Kumar (2020) suggests
that this mismatch poses a risk to liquidity, especially when there is an unexpected outflow of
deposits. The issue is more acute during times of economic crisis, such as the 2008 financial
crisis and the COVID-19 pandemic.

10.The Indian economy is susceptible to external shocks—such as oil price fluctuations, trade
imbalances, and global financial crises—that can disrupt liquidity management. A study by
Basu and Gupta (2021) demonstrated that Indian banks had difficulty navigating the 2016
demonetization initiative, which led to a sudden contraction in cash flow and liquidity
shortages.

11.With the rise of digital banking and fintech, Indian banks have increasingly turned to
technology for managing liquidity. Choudhury (2023) explored how digital platforms like
UPI, mobile banking, and blockchain are helping banks improve their real-time liquidity
monitoring and forecasting. These tools allow banks to quickly assess cash flows, customer
demand, and market conditions, which is essential for managing liquidity in an increasingly
digital economy.

 Real-Time Gross Settlement (RTGS) and Immediate Payment Service (IMPS)

have also been instrumental in managing liquidity as they provide instantaneous
settlement of interbank transactions.

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 CHAPTER – 3

OBJECTIVES, NEED AND SCOPE:

3.1 OBJECTIVES OF THE STUDY

The major objectives of the review are:-

1.To study the various measures used by RBI for liquidity management.

2.To know how the banks maintain liquidity.

3.To analyze how these measures affect the liquidity of banks.

4.To study which bank hold best liquidity position in the market.

3.2SCOPE AND NEED OF THE STUDY

SCOPE-The scope of the study was limited to the five banks each of public sector and
private sector of Jalandhar city.

NEED-The research gap identified from the review of literature that the various reviews were
related to Liquidity management of banks but there was no emphasis given regarding various
measures used by RBI for liquidity management and how these measure would affect the
liquidity of banks.

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 CHAPTER – 4

RESEARCH METHODOLOGY

4.1 Research Methodology

Research is the process of systematic and in-depth study or search for any particular topic,
subject or area of investigation, backed by collection, compilation, presentation and
interpretation of relevant details or data.
Research methodology is a structured and scientific approach used to collect, analyze, and
interpret quantitative or qualitative data to answer research questions or test hypotheses. A
research methodology is like a plan for carrying out research and helps keep researchers on
track by limiting the scope of the research. Several aspects must be considered before
selecting an appropriate research methodology, such as research limitations and ethical
concerns that may affect your research.

4.2 Research design:

A research design is arrangement of condition and analysis of data in manner that aims to
combine relevance to the research purpose with economy in procedure.
Research design refers to the overall strategy utilized to answer research questions. A
research design typically outlines the theories and models underlying a project; the research
question(s) of a project; a strategy for gathering data and information; and a strategy for
producing answers from the data.

Nature of Research: Descriptive Research:

Descriptive Research - Descriptive research is a type of research that is used to describe the
characteristics of a population.

4.3 Determining sources of data:

These are two main sources of data:

1. Primary data
2. Secondary data

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Primary data:
It consists of original information collected for specific research.Primarydata for this research
study has been collected through a direct survey to obtain this primary data a well structure
and standard questionnaire was prepared by the researcher.

Collection of data: Primary data: Questionnaire

Secondary data:
It consists of information that already exists somewhere and has been collected for some
specific purpose in the study. The secondary data for this study is collected from various
management books.

Collection of data: Secondary data: various literature reviews and basic information has been
taken from internet.

4.4 SAMPLING DESIGN:

1. Universe of study: Universe of study means area or the limitof the studyin which it is to
be conducted. The study is limited to Jalandhar city.
2. Sample size: The sample size was 100 individuals having prior knowledge about various
instruments of Rbi for liquidity management.
3. Sampling techniques: For the purpose of research, convenience sampling used.
4. Analysis tools: suitable mathematics and statistical techniques will be used to analyze the
data like percentage method and pie chart method.

4.5 DATA ANALYSIS AND TOOLS

Before data analysis, editing and coding of the data will be done to make the data amenable
to analysis. Quantitative data will be analyzed using Statistical Package for Social Sciences
(SPSS). Descriptive statistics including frequencies, chart, percentages, means and standard
deviations were calculated and used to summarize data into understandable and meaningful
form.

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Interferences: Interpretation of every survey question will be done.

4.6 Data Collection Instruments

The main data collection instruments to be used in this study were a questionnaire schedule
and personal interviews.

4.7 Questionnaire

The questionnaire is the main data collection instrument used in this study. One set of
questionnaire with both open and closed questions is developed. The questionnaire focused
on issue of perceptions towards digital marketing. The questionnaire will be chosen due to its
flexibility in data collection as it generates data that is simple to code for analysis particularly
when closed ended questions are used. Moreover, open ended questions allow respondents to
make an independent analysis of a problem over and above the multiple choices provided by
the researcher. The questionnaires are physically distributed by the researcher to respondents
concerned and each respondent has been allowed two weeks to complete the questionnaire
and agreements on the day and time of collecting it were made.

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 CHAPTER-5

DATA INTERPRETATION AND DATA ANALYSIS

1. Are you aware about the concept of liquidity management in banks?

Options given Responses

Yes 61.5%

No 38.5%

INTERPRETATION:

This data shows about how much individuals know about the concept of liquidity
management in banks.

The majority (61.5%) knows about it and 38.5 do not know about it.

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2.According to you which is the most effective method by rbi for liquidity management of
banks?

Option Given Response

CRR 10.9%

BANK RATE 43.5%

SLR 19.6%

REPO RATE 26.1%

INTERPRETATION: According to data individuals prefer bank rate as most effective

(43.5%) and Slr the least (19.6%).

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3. Why is there a requirement of specialized liquidity management by banks?

Options Responses

Keeping minimum cash 7.9%

To gain a competitive edge 29.2%

Keeping good relations with creditors 29.2%

Reduce risk 29.1%

All of the above 14.6%

INTERPRETATION:

This table shows that banks must have specialized liquidity management because to
maintain good relations with creditors (29.2%) and alsotogain competitive edge (29.2%).

Keeping minimum cash is the lease one (7.9%).

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4. How do you find the present liquidity position of your bank?

Options Responses

Fully satisfied 11.8%

Satisfied 33.3%

Dissatisfied 24.7%

Can’t say 30.1%

INTERPRETATION:

This table highlights the liquidity position of banks of respective individuals.only 11.8%
people are fully satisfied, 33.3% satisfied, 24.7% dissatisfied and 33.3% holds a neutral
position.

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5. .Kindly rate following on scale of 1-5

Options Responses Responses Responses Responses

Increase in Slr is 32% 15% 10% 7%

necessarly to control
inflation

Increase in Crr is 19% 28% 15% 05%

necessarlyto control
inflation

Public bank holds 20% 20% 12% 06%

better liquidity
position then private
banks

Inflation rate is high 16% 15% 10% 13%

due to bad policies
of Rbi

INTERPRETATION:

Above analysis shows that increase n Slr is necessarily to control inflation while many people
are also in the view that inflation is high due to policies of Rbi.Also the public banks holds
better liquidity position then private banks.

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6. How does your bank maintain liquidity?

Options Responses

By keeping minimum requirements in 21.8%

account high.

Giving low rate of interest. 31%

By investing money on market securities 28.7%

High collateral securities 18.4%

INTERPRETATION:

Above analysis shows that banks maintain their liquidity mainly by investing money in
market securities (28.7%) after that by keeping minimum account requirements (21.8%).least
one is the high collateral securities (18.4%).

26
7. Rate the measures of Rbi which helps to maintain the liquidity position in banks .

OPTIONS RESPONSES

Crr 4.4%

Bank rate 31.9%

Slr 27.5%

Repo Rate 26.4%

Open market operations 9.9%

INTERPRETATION:

The above analysis describe that Liquidity positionis mostly effected by bank rate
(31.9%),Slr(27.5%)Repo rate (26.4%),and open market operations(9.9%).

27
8. What according to you should me the appropriate method for controlling the outflow of
cash in banks?

OPTIONS RESPONSES

By keeping minimum requirements in 12%

account high

By increase in Crr 30.4%

By increase in Slr 23.9%

By giving low interest rates 19.6%

By charging high collateral security 14.1%

INTERPRETATION:

The above analysis describe that increase in Crr is the most effective way to control outflow
of cash. And keeping minimum requirements in account is the most undesirable way. Other
plays a neutral position.

28
9. Does the change in slr has any impact on liquidity position of banks?

Options Responses

Yes 30%

No 30%

Somewhat 40%

INTERPRETATION:

The above analysis shows that 30% believe that slr has impact while another 30% believes
that it does not have impact.40% believe that it may or may not have impact.

29
10. How do you find the recent increase in crr from 5 to 5.75%

Options Responses

necessary for banks to maintain liquidity 12.9%

position

it put more burden on banks 18.3%

it helps to control the inflation 31.2%

taking loan becomes more difficult 20.4%

profitability of bankis effected 17.2%

INTERPRETATION:

The above data shows that 20.4% believes that taking loan becomes difficult but the other
hand 31.2% believes that it helps to control inflation.17.2% believes that profitability of the
bank is effected while 18.3% believes that it puts more burden on banks.

30
11. According to you which pvt bank holds best liquidity position?

Options Responses

Hdfc bank 14.6%

Icici bank 25.8%

Yes bank 23.6%

Indusland bank 21.3%

ING vyasa bank 14.6%

INRERPRETATION:

The above study shows that Icici bank holds the best liquidity position while hdfc and Ing
vyasa bank holds the least liquidity position.indusland bank also shows good position in
terms of liquidity.

31
12. According to you which public bank holds best position?

Options Responses

Allahabad bank 4.1%

Sbi 33%

Union bank of india 22.7%

Punjab national bank 24.7%

Oriental bank of commerce 15.5%

INTERPRETATION:

According to above study Sbi hold best liquidity position in bank(33%).pnb holds
24.7%.Union bank of india holds 22.7%.oriental bank of commerce holds15.5%.

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 CHAPTER-6

TEST(CORRELATION)

How do you find the present According to you which

liquidity position of your public bank holds best
bank? position?

How do you find the present

liquidity position of your
bank?

1 0
According to you which
public bank holds best
position?

1 1

ANALYSIS:

This project aims to examine the correlation between two key variables: (1) how individuals
perceive the current liquidity position of their bank, and (2) which public bank they believe
holds the best position. The data collected is presented in a simple matrix format, reflecting
the responses of individuals to both questions. The intersection values in the table (such as 1,
0) indicate respondent alignment or differences in perception between the two aspects.

Preliminary analysis of the given responses suggests a potential positive relationship—those

who view their bank's liquidity positively are more likely to consider that bank as holding a
top position among public banks. For example, a value of ‘1’ in the cross-tabulation implies
agreement on both questions, whereas a ‘0’ indicates a disconnect. Although the dataset here
is limited, if expanded with more entries, a statistical correlation (e.g., Spearman or Pearson
coefficient) could be calculated to quantify the strength of this relationship.

In conclusion, this correlation test helps in understanding customer perceptions of banking

stability and reputation. A stronger correlation would indicate that perceived liquidity directly
impacts public trust and ranking, which can guide banks in shaping their financial
communication and policy strategies.

33
 CHAPTER-7

FINDINGS OF STUDY

The study aimed to evaluate the liquidity management practices adopted by banks and assess
the effectiveness of various monetary tools employed by the Reserve Bank of India (RBI). It
explored public awareness, perceptions, and satisfaction with liquidity positions across
selected public and private sector banks in Jalandhar. Through primary data collection and
analysis, key insights were drawn regarding the role of CRR, SLR, and other instruments in
maintaining financial stability. Below are the key findings of the study:

1. Awareness of Liquidity Management:

o 61.5% of respondents were aware of the concept.
o 38.5% lacked awareness.
2. Most Effective RBI Measures:
o Bank Rate (43.5%) was considered the most effective measure for liquidity
management.
o CRR and SLR were less preferred.
3. Need for Specialized Liquidity Management:
o Most respondents highlighted "competitive edge" and "creditor relations" (both
29.2%) as key reasons.
4. Satisfaction with Liquidity Position:
o 33.3% were satisfied, 24.7% dissatisfied, and 30.1% were neutral.
5. Effectiveness of Tools:
o SLR increase is considered necessary to control inflation (32%).
o Public banks are perceived to have better liquidity than private banks.
6. Methods to Maintain Liquidity:
o Most banks invest in market securities (28.7%) and offer lower interest rates (31%).
7. Bank Preferences:
o ICICI Bank leads among private banks in perceived liquidity.
o SBI is considered the best public bank in terms of liquidity (33%).
8. Impact of CRR and SLR:
o Increase in CRR is seen as the best way to control outflow (30.4%).
o 40% of respondents believe changes in SLR somewhat affect liquidity.
9. CRR Impact:
o 31.2% agree it helps control inflation.
o 18.3% believe it adds burden on banks.

34
SUGGESTIONS

Based on the findings of the study, several areas for improvement in liquidity management
practices were identified. These suggestions aim to enhance the effectiveness of both banks'
internal strategies and regulatory measures. The focus is on increasing public awareness,
strengthening financial stability, and promoting efficient policy implementation. Below are
the key suggestions derived from the research:

1. Enhance Awareness:
o Conduct financial literacy programs to improve public understanding of
liquidity management.
2. Diversify Measures:
o Banks should not solely rely on RBI’s standard measures but develop internal
strategies for liquidity optimization.
3. Policy Communication:
o RBI and banks should better communicate the rationale and impact of CRR,
SLR, and repo changes to avoid misconceptions.
4. Tech Integration:
o Embrace real-time digital tools (e.g., UPI, RTGS, IMPS) for more efficient
liquidity tracking and management.
5. Encourage Long-Term Deposits:
o Banks can promote long-duration deposits through attractive rates and tax
benefits to reduce asset-liability mismatches.
6. Regular Training for Bank Staff:
Banks should conduct regular training programs for their staff on the latest liquidity
management tools and regulatory changes to ensure effective implementation.
7. Strengthen Internal Risk Assessment Models:
Banks should develop and refine internal risk models to proactively assess liquidity risks
under various market scenarios, including stress conditions.

35
 LIMITATIONS OF THE STUDY

1. Geographic Limitation:
o The study was confined to banks in Jalandhar city, which may not reflect the
nationwide scenario.
2. Sample Size:
o The study was based on a small sample of 100 respondents, potentially
limiting generalizability.
3. Sampling Method:
o Convenience sampling may introduce bias, as it might not represent the full
diversity of bank customers.
4. Scope Restriction:
o Only five public and five private banks were considered, limiting the
comprehensiveness of the analysis.
5. Time Constraints:
The study was conducted within a limited time frame, which may have restricted the
depth of analysis and the ability to track long-term trends in liquidity management.
6. Limited Bank Representation:
Only a small number of banks (five public and five private) were studied, which may
not capture the full diversity of liquidity management practices across the sector.
7. Respondent Bias:
Responses collected through questionnaires may be influenced by personal bias, lack
of knowledge, or misunderstanding of banking terms, affecting data accuracy.
8. Lack of Longitudinal Data:
The research captures a snapshot in time and does not consider changes in liquidity
management strategies over different economic cycles or policy shifts.

36
 CHAPTER – 8

CONCLUSION

Liquidity management plays a pivotal role in the financial stability and operational efficiency
of banks. This study examined various tools and strategies employed by Indian banks to
maintain adequate liquidity, with a particular focus on the measures implemented by the
Reserve Bank of India (RBI), such as the Cash Reserve Ratio (CRR), Statutory Liquidity
Ratio (SLR), Bank Rate, and Repo Rate. Through a survey of 100 respondents in Jalandhar
city and analysis of selected public and private sector banks, the research highlighted key
insights into public perception, effectiveness of liquidity control instruments, and
comparative liquidity positions among banks.

The study revealed that while a majority of individuals are aware of liquidity management,
there is still a significant portion that lacks basic understanding of its importance. Bank Rate
emerged as the most effective RBI tool as perceived by respondents, followed by SLR and
Repo Rate. Public sector banks, especially State Bank of India (SBI), were viewed as having
stronger liquidity positions compared to private banks like ICICI and Yes Bank. Respondents
also associated proper liquidity management with gaining a competitive edge, maintaining
good relationships with creditors, and reducing financial risk.

Furthermore, the findings emphasized the need for continuous improvement in banks’
internal liquidity monitoring systems and more proactive communication from regulators. It
was evident that changes in CRR and SLR have direct and perceived impacts on inflation,
credit availability, and customer confidence.

Despite limitations such as geographic and sample constraints, this study offers valuable
implications for both policymakers and banking institutions. Enhancing financial literacy,
embracing digital tools, and strengthening regulatory frameworks can collectively ensure
better liquidity management. In conclusion, effective liquidity strategies are essential not only
for individual bank stability but also for the resilience of the entire financial system.

37
 CHAPTER –9

BIBLIOGRAPHY AND REFERENCES

A. Books

1. Koch, T. W., & MacDonald, S. S. (2020). Bank Management (8th ed.). Cengage Learning.

• Relevance: Comprehensive coverage of liquidity risk management, CRR, SLR, and ALM
(Asset Liability Management).

2. Saunders, A., & Cornett, M. M. (2021). Financial Institutions Management: A Risk

Management Approach (10th ed.). McGraw-Hill.

• Relevance: Discusses tools like repo rates, open market operations, and liquidity creation in
banks.

B. Journal Articles

1. Muduli, S., & Dash, M. (2024). “Funding Liquidity and Risk-Taking Behavior: Evidence
from Indian Banks.” Journal of Financial Stability, 66, 101912.

• Relevance: Directly aligns with your study on how liquidity influences risk behavior in
Indian banks.

2. Gupta, R., &Kashiramka, S. (2024). “ESG Disclosures and Bank Stability: The Role of
Liquidity Creation.” Journal of Banking & Finance, 152, 106654.

• Relevance: Connects liquidity creation with financial stability, echoing your analysis of
liquidity positions in public/private banks.

• Relevance: Offers a modern dimension to liquidity discussions — climate risk — which

you may optionally include in extended versions.

38
C. RBI & Government Reports

1. Reserve Bank of India (2023). Report on Trend and Progress of Banking in India 2022–23

• URL: https://rbi.org.in

• Relevance: Detailed statistics on CRR, SLR, repo rates, LAF, and liquidity injections —
used as secondary data in your study.

2. Reserve Bank of India (2024). Financial Stability Report (Issue No. 29).

• Relevance: Insights into systemic liquidity risk and RBI’s response measures.

D. Government & Institutional Reports

1. Basel Committee on Banking Supervision (2023). Basel III: Finalising Post-Crisis

Reforms. Bank for International Settlements.

• URL: https://www.bis.org

• Relevance: Supports your references to capital and liquidity standards (CRR, SLR,
liquidity buffers).

2. Choudhury, A. (2023). “Role of FinTech in Real-Time Liquidity Management in Indian

Banks.” Indian Journal of Finance, 17(4), 34–42.

• Relevance: Connects with your point on digital tools like UPI and IMPS improving
liquidity monitoring.

39
 CHAPTER – 10

ANNEXURE

1. Are you aware about concept of liquidity management in banks?

A) Yes

B) No

2. According to you which is the most effective method by rbi for liquidity management of
banks?
A)Crr

B) bank rate

C)Slr

D) repo rate

3. Why is there a requirement of specialized liquidity management by banks?

keeping minimum cash?

A)To gain competitive edge

B)Keep minimum cash

C)Keeping goof relations with creditors

D)Reduce risk

E)All of the above

4.How do you find the liquidity position of your bank?

A)Fully satisfied

B)Satisfied

C)Dissatisfied

D)Can’t stay

40
5.

6. How does your bank maintain liquidity?

A) By keeping minimum requirement in the ac high

B) By low rate of intrest

C) By investing money in market securities

D)High collateral securities

7. Kindly rate the following measures of rbi which effect the liquidity position of banks

A)Crr

B)Bank rate

C)Slr

D)Repo rate

E)Open market operations

41
8. What according to you should me the appropriate method for controlling the outflow of
cash in banks?

A)By keeping minimum requirements in ac highB)By increasing Crr

C)By increasing Slr

D)By giving low intrest rates

E)By charging high collateral security

9.Does the change in slr has any impact on liquidity position of banks?

A)Yes

B)No

C)Somewhat

10.How do you find the recent increase in crr from 5 to 5.75%

A)Necessarly for banks to maintain liquidity position

B)It puts more burden on banks

C)It helps in controlling inflation

D)Taking loans become more difficult

E)Profitability of bank is effected

11.According to you which pvt bank holds best liquidity position?

A)Hdbc bank

B)Icici bank

C)Yes bank

D)Indusland bank

E)Ingvyasya bank

42
12. According to you which public bank holds best position?

A)Allahabad bank

B)Sbi

C)Union bank of india

D)Punjab national bank

E)Oriental bank of commerce

43
44