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Treasury Management in Banking
Dec 2025 Examination
Q1. India is experiencing a rise in external debt and a decline in foreign exchange reserves held by the RBI, while interest rates and inflation are falling—indicating a likely appreciation of the Indian Rupee (INR). These macroeconomic conditions pose significant currency risk for both the central bank and corporate entities.
In the context of the above scenario Apply your knowledge of currency risk management to: Explain how the Reserve Bank of India (RBI) can apply internal and external techniques to manage the Balance of Payments (BoP) under these circumstances and Suggest, justify appropriate internal and external strategies that corporates can use to manage currency risk associated with External Commercial Borrowings (ECBs) and import payments in light of a strengthening INR. (10 Marks)
Q2. Critically evaluate the role of the Clearing Corporation of India (CCIL) in the trading and settlement of Forex Spot and Forward Derivatives for bankers and FX-retail corporates. How has CCIL’s intervention impacted the traditional roles of platforms like Thomson Reuters and brokers in India’s forex market? Support your evaluation with relevant examples or data. (10 Marks)
Q3(A). Explain, with an example, the impact on a bank’s profitability and the lending rates offered to customers when the Repo Rate is decreased and increased, respectively, by the RBI. You are required to construct a real-life or hypothetical scenario to demonstrate how changes in the Repo Rate influence a bank’s profitability and lending decisions. (5 Marks)
Q3(B)The Reserve Bank of India (RBI) employs monetary policy tools such as the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to manage liquidity and ensure financial stability in the economy.
In context to the given scenario, imagine a scenario where the RBI decides to reduce both CRR and SLR to address sluggish economic growth.
Create a well-structured explanation that highlights the impact of this policy action on the following aspects: Liquidity in the banking system, prevailing market interest rates and Banks’ overall profitability Further, formulate a logical justification, supported by an example, to explain why and under what macroeconomic conditions the RBI would choose to reduce CRR or SLR. (5 Marks)
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