Treasury is a major function of financial institutions

Treasury is the backbone of the financial institutions. The major dealings of institutions are centered on money and credit related matters. For the success of every institution the proper management of fund assumes the highest importance. Every financial institution has to manage fund in foreign accounts i.e. Nostro Accounts in order to meet its foreign obligations. Treasury maintains fund in top class international banks. Similarly treasury maintains fund in local banks as well as for various purposes like fund transfer or draft issuance, draw on places where it does not have its own branches. Banks often possess idle fund. Treasury weighing the situation, parks the idle or excess fund on accounts which generate revenue. Often it lends the excess or idle fund in the call money market.

The exchange rates of different currencies keep changing in the international market. It is the responsibility of treasury to decide on which currencies to buy and which is to sale. On the prudent decision of treasury banks earns from exchange rate fluctuation. Treasury management involves various activities related to fund management. Its scope is very extensive and covers a wide area like banking, government organizations, charitable and corporate organizations etc. Every institution has separate treasury department for the effective management of all treasury related activities. The department contributes a significant portion in the bank's overall profit, which is mainly through their efficient fund management achieved by coordination with various departments and division of the Institution.     

There are some major functions of treasury based on the function of treasury department can be segregated in three parts. One is front office, middle office and last one is bank office. Each segment carries its own special task. Front office is the dealing room where the dealers make decisions on trade and investment. Some of the major functions include purchase and sale foreign currencies make placement and investment locally and abroad, manage liquidity requirement of the bank by purchasing Treasury bill, government bond, NSB and maintaining CRR, fix and publish Fyc. Exchange rates daily and make all arrangements for corresponding banking. Middle office functions are correspondent banking, setting parameters, interest rate sensitivity analysis and setting reviewing limits compliance. Likewise back office is the support of treasury from where the necessary entries are passed. The functions of back office treasury are to prepare transaction confirmations, prepare debit or credit advice, handle the dispatch of deal confirmations, handle processing of placement and deposits taken and file all treasury related documents.