With the interest rate scenario moving in the southward direction, many of the banks are now moving towards providing cash management services to their customers. With a large number of institutions already into this service, it might become extremely difficult for any new player to gain a strong foothold. So banks need to consider a lot of issues before launching the cash management services to reduce their implementation costs. What are those issues? Read on for more.

Bankers in India are used to the declining interest rate scenario. This resulted in squeezing spreads. Therefore, it has become a common refrain among the bankers to state that fee-based income should be enhanced. Offering Cash Management Services (CMS) is one of the many alternatives available to the bankers. In the recent past, quite a few banks have joined the bandwagon. Many more public sector banks are actively considering the launch of this service. While some have progressed, proposals are still on the drawing board in respect of many banks. Launching of Cash Management Services is different from most of the fee earning alternatives for the reason that it involves capital investment, logistics and coordination with external agencies. It is highly a transaction-oriented activity and hence, back-office support is of utmost importance.

It is going to be difficult for any new player to make a mark in the already crowded market. At the same time, it is necessary for all the bankers to provide this service to existing customers at least to retain them.

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