With the rise in globalization and the integration of markets world over, treasury operations have undergone an enormous change. This change has been sweeping India and making integration of treasury operations more and more important for Indian banks. The basic aim of this integration is to improve the profitability of banks and insulate against risks. Banks are changing their organizational structures and their way of functioning to maximize their gains from these operations. However, there exist certain challenges that need to be addressed.

In general terms and from the perspective of commercial banking, treasury refers to the fund and revenue at the possession of the bank and day-to-day management of the same. Idle funds are usually source of loss, real or opportune, and, thereby need to be managed, invested, and deployed with intent to improve profitability. There is no profit or reward without attendant risk. Thus treasury operations seek to maximise profit and earning by investing available funds at an acceptable level of risks. Returns and risks both need to be managed.

In this context, treasury operations are becoming more and more important to the banks and a need for integration, both horizontal and vertical, has come to the attention of the corporates. The basic purpose of integration is to improve portfolio profitability, risk-insulation and also to synergize banking assets with trading assets. In horizontal integration, dealing/trading rooms engaged in the same trading activity are brought under same policy, hierarchy, technological and accounting platform, while in vertical integration, all existing and diverse trading and arbitrage activities are brought under one control with one common pool of funding and contributions.

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