ICICI BANK

Challenges in Rural Banking

Group B2

Challenges for ICICI :

Expansion of rural credit portfolio
Devise an optimal sales and distribution network
Revision of existing incentive schemes
Commercial opportunities for the ICICI in
rural retail business
79% of rural population without credit access
Contribution of rural areas to the total deposits and
credit is very less
Costs of formal borrowings in terms of giving bribes
and time taken to process a loan are high, bribes
vary between 10 and 20% of total loan amount
43% of households in middle and high income
groups are from rural India

ICICI DISTRIBUTION NETWORK

DCPB
Branch

Mandi Branch
Crop Cluster Branch
Vikas Sahyogis

NonBranch

MFI Branch
Business Correspondents
Credit Access Points

EVALUATION OF BRANCH AND NON-BRANCH

CHANNEL
Branch

Non Branch

LOW

HIGH

HIGH

LOW

Expansion rate

LOW

HIGH

Competition

HIGH

LOW

Monitering Issue

LOW

HIGH

Parameters
Reach to Low Income
Group
Investment
Required

Why not to expand through Branch channel?.

High Investment is required.
Rate of expansion is low.
High competition from SBI, with 6600 rural and 972
specialized branches.
Difficulty in reaching to low income group.
So expand through Non Branch channel.
BUT ISSUES?

Low service quality

Credit Rating problems
Monitoring Issues
KYC Requirements

RECOMMENDATIONS
Create audit teams for conducting surprise audits
to monitor MFIs/CAPs
Incentive Systems for Vikas Sahyogis & CAPs:

Pay fixed salary + commission for the number of loans

processed
Have strong incentives for every loan paid back
Upfront deposit with the bank should be 10% of the
amount to be loaned and revise the figure based on the
performance

Traning programs to the partners to follow KYC.

Provide IT solutions at CAPs for better and quick
services.