Abstract

This case study details the revision in the Cash Management System at Indian Oil Corporation Limited (IOCL), one of India’s leading oil companies. As of FY 2010-2011, IOCL had 540 locations around India which served as an outlet for its finished products. The historical analysis draws on the process of receiving collections and payment methods on a day-to-day basis from each of these locations. This study also helps in understanding the Cash Management Product (CMP) and Cash Management Services (CMS) facilities provided by State Bank of India (SBI) and HDFC Bank respectively. It describes the centralized collection system and the decentralized payment system of IOCL. The introduction of Electronic Collections (e–Collections) e.g. RTGS, CORE TO CORE, NEFT, ECS, INTERNET BANKING etc. facility with a view to generating the credit receipt to the customer account in SAP at the earliest provides valuable insights into the advantages of the new system . IOCL registered around 82% of various collections through the e-collection modes. The case study also looks at budgeting of cash flows, i.e. inflows and outflows, and the analysis of variance from the actual. It involves understanding and evaluating various sources of short-term borrowings by IOCL to meet daily cash requirements and other payments which are necessary along with the daily collections. This case can be used with MBA/ MS students as a part of their Financial Management curriculum.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• This case study will help the students to:
• Get an understanding of IOCL and its organization structure.
• Understand Banking arrangements
• Collection Mechanism
• Non E-collection modes (Cheques, DD, pay order, postal orders)

Keywords

Cash management, Collection mechanism, e-collection modes, Cash management system, Cash management services, Cash flow management, Cash budgeting, Treasury activities, Internet banking, RTGS, NEFT, CORE TO CORE, Indian oil, India, State Bank of India, ICICI Bank, HDFC Bank