## Recent Developments in Cash Management
Digitalisation has transformed how firms manage cash. Key developments:
| Development | What it does |
|---|---|
| Electronic Fund Transfer (EFT) | Computerised, networked banks give instant account updates, quick fund transfers, and real-time forex rates. |
| Zero Balance Account (ZBA) | Firms keep a nil idle balance — excess funds are invested in marketable securities and sold when cash is needed. |
| Money Market Operations | Large firms invest surplus in short-term deposits (overnight up to one year); rates fluctuate with demand. |
| Petty Cash Imprest System | A fixed weekly amount is set aside for small daily expenses, reducing management effort on minor transactions. |
| Managing Temporary Cash Surplus | Extra cash parked in short-term deposits, short-/long-term flexible debt instruments, or blue-chip shares — depending on economic conditions, risk appetite and return volatility. |
| Virtual Banking | Banking services without physical branch visits (started 1970s with ATMs). |
### Electronic Cash Management System (ECMS)
Because speed is crucial, modern systems are electronic:
- Electronic data & fund transfers across all locations involved in collection, transfer and payment.
- Satellite-linked elements ensure real-time tracking and processing.
- Limited third-party access lets regular parties (brokers, vendors) track receipts/payments.
- Example: a finance company taking public deposits via sub-brokers gives them limited access to track collections and commissions.
### Benefits of Electronic/Scientific Cash Management
- Saves time; higher interest earnings & lower interest costs.
- Reduces paperwork, manpower and administrative cost.
- Greater accounting accuracy; better control and tracking of funds.
- Faster fund transfers and quick conversion of instruments to cash.
- Reduces idle float / no idle funds; easier inter-bank balancing.
- True centralised cash management; faster electronic reconciliation; fewer cheques issued.
### Virtual Banking & Payment System Reforms (Role of RBI)
Key technological developments introduced/enabled by the RBI:
- Computerised settlement of clearing transactions
- MICR (Magnetic Ink Character Recognition) for faster cheque clearing
- Inter-city & high-value clearing
- ECS & EFT, UPI platforms
- RTGS (Real-Time Gross Settlement)
- DVP (Delivery vs. Payment) for government securities
- INFINET (Indian Financial Network)
- Additional systems: CFMS (Centralised Funds Management System), SSS (Securities Services System), SFMS (Structured Financial Messaging System)
### Advantages of Virtual Banking
Lower transaction costs, faster customer service, cost efficiency (lower branch/staff costs), improved & diverse services, and 24/7 accessibility.