Treasury Management for Indian Startups: Cash, Banking & Short-Term Investments
After a funding round, a startup can suddenly hold more cash than its founders have ever managed — and most of that cash sits idle in a current account earning nothing while runway gets measured in months. Treasury management is the discipline of keeping that cash safe, liquid, and working.
What Treasury Management Covers
For an early-stage company, "treasury" isn't a separate function — it's a set of decisions the founder or finance lead makes about three things: where cash sits (which banks, which account types), how surplus cash is invested (to earn a safe return without risking liquidity), and how foreign currency exposure is managed (for startups with overseas customers, vendors, or investors).
1. Structuring Bank Accounts
| Account Type | Purpose | Key Consideration |
|---|---|---|
| Primary current account | Day-to-day operating cash — payroll, vendor payments, collections | Choose a bank with strong digital banking, API access for reconciliation, and low transaction charges |
| Secondary current account | Backup for operational continuity | Use a different bank to avoid single-point-of-failure risk during outages or account freezes |
| Sweep-in fixed deposit | Auto-converts idle current account balance above a threshold into FD, auto-breaks if needed | Earns FD-level interest on idle balances with same-day liquidity |
| EEFC account | Holds foreign currency export proceeds before conversion | Useful for SaaS/export businesses to avoid repeated conversion costs |
A simple rule for a lean finance team: at least two banking relationships, one designated as primary for daily operations and one as a backup that's kept "warm" (active, funded, with online access tested periodically) so it can take over within hours if needed.
2. The Three-Bucket Approach to Surplus Cash
| Bucket | Time Horizon | Where to Park | Priority |
|---|---|---|---|
| Operating | 0-3 months | Current account, sweep-in FD, overnight liquid funds | Instant liquidity, zero capital risk |
| Reserve | 3-12 months | Liquid mutual funds, ultra-short-duration debt funds, laddered FDs | High liquidity, capital preservation, modest yield |
| Strategic | 12+ months | Short-duration debt funds, longer-tenure FDs | Slightly higher yield, still low risk |
3. Cash Flow Forecasting Drives Treasury Decisions
Treasury decisions are only as good as the cash flow forecast behind them. A startup running a 13-week rolling cash flow forecast can confidently identify which cash is truly "surplus" (won't be needed for 3+ months) versus which is operating cash that must stay liquid. Without this visibility, founders tend to either over-invest (locking up cash that's needed sooner than expected) or under-invest (leaving everything in a 3% savings account when it could be earning more).
4. Managing Foreign Currency Exposure
Startups with foreign currency revenue (SaaS exports), costs (cloud infrastructure, contractor payments), or funding (USD investment) face FX risk on three fronts:
- Conversion timing: Converting a large USD funding inflow to INR all at once exposes the company to a single exchange rate; converting in tranches over a few weeks averages out short-term volatility
- Natural hedging: If the company has both USD revenue and USD costs (e.g., SaaS revenue and AWS/cloud bills), matching these reduces net exposure without needing any hedging instruments
- Forward contracts: For material net exposures (e.g., a startup with predictable USD revenue and INR costs), a forward contract with an authorised dealer bank locks in a conversion rate for a future date, removing uncertainty for budgeting
Most early-stage startups don't need complex hedging programs — the priority is simply tracking net FX exposure monthly as part of the regular finance close, alongside other working capital metrics covered in the working capital playbook.
5. Controls for a Lean Treasury Function
- Dual authorisation: No single person should be able to both initiate and approve a bank transfer, regardless of company size
- Bank reconciliation: Daily or weekly reconciliation of bank statements against the books, not left until month-end
- Investment policy note: Even a one-page document stating the three-bucket approach and approved instruments (e.g., "only AAA-rated liquid/ultra-short debt funds, no equity, no instruments with lock-in beyond 12 months") gives the board and auditors comfort and prevents ad-hoc decisions
- Signatory review: Bank account signatory lists should be reviewed whenever there's a change in the finance team or board composition