PROBLEMS AND PROSPECT OF CASH MANAGEMENT IN MONEY DEPOSIT BANKS

CHAPTER ONE

1.0   INTRODUCTION

The concept of management was evolved as a result of existence of man. Hence, it could be traced back to the evolution of money. In this case, the origin of money which brings about cash management in our contemporary commercial backs really comes as the aftermaths of the difficulties of trade by barter.

Trade by barter is a system and practice where goods are exchanged for goods and services. Barter system has many defects and drawbacks.

These include the difficulty of double coincidence of wants, time and energy wastage, difficulty in ascertaining the value of commodities, discouragement of large quantities and variety of purchases, deferred payment, installment payment and borrowing large scale production and such like.

Having identified the defects inevitable by barter system, people were false to fashion out a generally acceptable means of exchange i.e. money. It worthy to note that the paper money presently in use was originated from the receipt the goldsmith issued to people who kept gold and other valuables with them. As goldsmiths were taught to be honest, merchant people started keeping their gold with them for safe custody.

In retain the goldsmith gave the depositors receipts promising to return the gold on demand. These receipt of the goldsmith were substitutes for money, such paper was back by gold and was convertible on demand into gold. This ultimately led to the development of bank note and today, money has another form other than paper called coin.

Thus, money is any thing that is generally acceptable as medium of exchange for making payment, settlement of debt or other business obligations. The qualities of money such as generally acceptability, portability, durability homogeneity, divisibility, recognizatbility and scarcity make money and prudent management.

Paper money and coins are collectively called cash. Today, customer deposit money with banks and banks give a promise to pay on demand the amount deposited by the customer.

The customer can withdraw all his or her money in cash for the purpose of settling his or her debts or he or she can issued cheque by asking the bank to transfer the stated sum form his deposit to beneficiary.

So, the continued patronage of a bank by a customer depends on some important factor among which are the following:

• Availability of cash to meet the immediate and urgent needs of customers.
• The qualities of services rendering.
• The proximity of the back to the customer’s business premises.

The approach ability and business acquisitive of its manager e.t.c.

Of all the reasons listed above, there is one which ranks supreme to all other reasons and that is the ability to strike balance between the shareholder and customer i.e. problem of profitability and liquidity are equally the utmost. The bankers has to keep enough cash in order to meet customers demand at the time will serve the interest of the shareholder who are expecting returns over the investment.

1.1   STATEMENT OF PROBLEM

In course of the study, the research is centered on ineffective cash management in our country’s commercial banks with particular attention to Union Bank that which deprives our country’s banking industry of competing with banks of developed countries of the world.

The following recommendations are suitable for the solution to the problems of cash management.

1. There should be experienced and honest personnel employed into the bank for effective and efficient management of cash.
2. The idle balance should be properly invested in economy income.

iii.      There should also be supervisor and implementation of loans by banks so as to ensure that the loan is well utilized for the intended purpose.

1. Cash inflow and outflow overtime period should be adequately prepared and adhered to.
2. Adequate supervision to branches without notice should be undertaken to ascertain that they operate in efficient way to improve cash management.

1.2   RESEARCH QUESTIONS

This paper intends to find answer to these questions so as to achieve it objective and for the purpose of this research work.

1. What are the saving services of the banks and their operation?
2. What are the native of operation of the bank?

iii.      What are the conditions to grant loan and on what type of collateral do you grant loan?

1. How does cash manager meet the demand of the deposit and the shareholder?
2. What is the policy of bank on the shortage or surplus declared by the central banks?
3. Does your bank has any has investment in other bank or industry?

1.3   OBJECTIVES OF THE STUDY

The main objective and aim is to examine the problems and the suggested prospects of cash management in commercial banks. It also aims the following objectives.

–        To meet payment schedule.

–        To minimize the finds committed to cash balance.

–        To proffer strategies techniques to ensure efficient cash management as this could by the commercial banks as modem financial organization.

–        To determine the appropriate target cash balance.

–        To determine how cash can be manager efficiently and effectively.

1.4   RESEARCH HYPOTHESIS PROBLEMS AND PROSPECTS OF CASH MANAGEMENT IN COMMERCIAL BANKS

H₀:    Cash management does not have positive effect on the

profitability of commercial banks.

H_i:     Cash management has positive effect on the profitability of commercial banks.

1.5   SIGNIFICANCE OF THE STUDY

The study of this research work is particularly of great importance to the bank, government, researcher and to the public.