e-Finance for Development - An Indian Perspective

Monterrey, Mexico March 19, 2002

Agenda
    

Development Banking in India ICICI - Development framework Sectoral initiatives Legal structure in India Going Forward

Development Banking in India



Priority Sector in India characterised by

       

Low capitalisation and limited assets Geographical diversity and high mortality Poor access to capital markets Non accessibility to credit history Cash intensity in transactions Cyclical fund requirement and high commodity risk Informal sector and uncorporatised High dependence on Govt. support/ subsidies

Poor financial disclosure on account of tax issues  High risk perception has led to high borrowing costs

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Agenda
    

Development Banking in India ICICI - Development framework Sectoral initiatives Legal structure in India Going Forward

ICICI Group - Development framework



Product lead approach for each sector

Small and Medium Enterprise (SME)  Agriculture and Micro Finance  Community Banking  Internet and Electronic Banking


Product and delivery technology dependent  Branch remote approach  Central processing centres enable optimum monitoring


Agenda
    

Development Banking in India e-initiatives in ICICI Group Sectoral initiatives Legal structure in India Going Forward

SME - Strategic framework

Concerns Improve Quality Exit weak accounts Improve yields Reprice on RaRoC benchmark Reduce delivery cost Web / call centre based delivery Aspirations Non capital intensive growth Liability/ fee income Cash management product Innovative delivery Smart / Credit cards Web / call centre delivery Service relationships Banker for services rather than credit

SME - Service & Delivery

 Drop box

point  High value cash transactions Branch Call centre

Handles

 Information  Logging requests

Processes all trade related requests for a city Trade finance factory

exceptions Cross sells Monitors accounts

Processes all pure credit related requests

Customer

Account/ Relationship manager

Credit factory
 Provide

 For

all transactions except high value cash Internet

 Information

ATM

support backbone for  Logging all transaction requests requests  Services RPC/CPC doorstep Processing centres* deliveries

Online Products
Bill Junction Utility bill payments Pay Seal electronic payment system Corporate Infinity online transfer/ settlement system

e-banking in ICICI

ICICI Markets online FX, Debt, SME Portal

ICICI Direct and ICICI Select

Business Multiplier web interface

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Agri - Micro-credit initiatives



Innovative structure for micro-credit in rural areas

Overcome the reach problem  Lower administration costs


Channels for delivering micro-credit

Sugar companies  Seed producers  Input companies  NGOs and micro credit institutions


These channels help build volumes, reduce costs and monitor credit risk

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Agri - Farmer Service Centres (FSCs)



FSC provides one stop solution to the farmer

    

Agri extension support Inputs and other services Credit Market linkage Rural infrastructure

These FSCs are promoted by Agri Input suppliers , and avoids duplication of efforts by different players

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Smart card solution for FSCs

Input Merchant Store
Credit Debit e-purse

Farmer Service Center

Bank Account/ Credit History

Output Sale

Collect Money

Online update of Bank accounts

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Smart Cards An alternative



Difficulty in rural banking



Management of Cash
 

Cost of idle cash Cost of cash handling infrastructure

Geographical spreads

Solutions through
Elimination/ reduction of cash handling  Innovation of low cost delivery channels


Smart Card - an ideal vehicle

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Smart Cards at ICICI



Smart Cards launched in October 2000

Infosys Campus in Bangalore  Manipal Academy of Higher Education (MAHE)


New Initiatives
Satyam Smart Card  HPCL Petro Card  Work on multiple application card - Debit, Credit, EPurse and Loyalty


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Social Initiatives - ICICIcommunities



Give Online: On-line donation channel

Retail donors can donate to specific initiatives across India  100% of donations reach the initiative  Prompt feedback on utilisation of grant  Rs. 11.5 million towards Gujarat Earthquake


Shop the Cause: On-line shopping mall

Over 100 exquisite hand crafted products available  The only facility of its kind available to non-profits in India


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Innovations in Delivery Channels



Sustainable Access for Rural India (SARI) project

Partners: MIT Media Labs, Harvard University, IITChennai, I-Gyan, DHAN Foundation, ICICI Ltd  Providing reliable Internet access through Kiosks in rural Madurai using corDECT WiLL  100 kiosks managed by entrepreneurs to be set-up  Providing e-governance, communication and information services


Possibility of delivering banking services through Internet kiosks being explored

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Internet Banking
    

First Bank in India to launch website - 1996 First Bank in India to launch Internet Banking - 1997 First Bank in India to launch online bill payment1999 Only Bank in India with million online customers Monthly average transactions per online customer7

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Internet Banking - Statistics

    

117% increase in transaction volume since April 2001 More than 1 million contacts in February 2002 Coverage across 100 locations in the country 103% increase in internet banking registrants since April 01 84% increase in transactions since April 01

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Channel Usage
Call Centre 4%
Internet 4%

Branch 41%

Call Centre 6%

Internet 5%

Cops 7%

Branch 35%

ATM 51%

Apr 2001
Br an ch Cash Tr an sact i o n s Jan-02 18% Apr-01 19% No n Cash Tr an sact i o n s Jan-02 41% Apr-01 50% A TM 82% 81% 33% 39%
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ATM 47%

Jan 2002
Net Nil Nil 9% 6% 7% 5% 10% Nil COPS

Cal l Cen t r es

Retail Initiatives - Utility Payments

First bank to introduce this service in India  Tie-ups with 50 utilities for online payments  Talks with state governments/ municipalities to facilitate e-governance


AP Govt. initiative - eSevaonline  Vizag Municipality - Saukaryam



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Agenda
    

Development Banking in India e-initiatives in ICICI Group Sectoral initiatives Legal structure in India Going Forward

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e-banking related laws



e-banking governed by:

Information Technology (IT) Act, 2000  Internet Banking guidelines of the Central Bank


India is the 2nd country in Asia to initiate technology related act  e-banking encouraged through:


Focussed legislation  Access to IT skills, computers and incentives to ISPs



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Salient features of IT Act

Drawn as per the UN Model Law for IT  Legal recognition to


Electronic records  Electronic contracts  Digital signature



Appointment of certifying authority and controller

Issuer of public and private key  Controller - repository of all the signatures


e-Governance- Filing of documents in e-form

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Central Bank guidelines

     

Bank to have security policy approved by Board of Directors Introduction of logical access control systems Security buffers between bank system and internet Products to be compliant with domestic foreign exchange regulations Setting of inter bank payment gateway Mandatory disclosure of risks in internet based dealings

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Agenda
    

Development Banking in India e-initiatives in ICICI Group Sectoral initiatives Legal structure in India Going Forward

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Creating the e wave - Statutory



Legal validity for e transaction

Consumer Protection  Negotiable Instrument Act  Acceptance of electronic based document


Full Account Convertibility  Exchange Control Laws  Strengthening the Intellectual Property Laws


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Creating the e wave - Infrastructure



Encourage internet/ e usage

Voice over Internet  Improvement in telecom infrastructure  Tax incentives for internet based transaction  Incentive for electronic settlement


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Creating the e wave - Banking

Allowing appointment of third parties for banking  Allowing variable interest rates on deposits  Modifications in service area approach to encourage competition in the rural areas  Undertaking specific initiatives to provide an impetus to rural banking


Computerisation of operations of banks especially the rural operations  Land Records Computerisation  Networking of Post Offices


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Creating the e wave - Electronic

Standards for smart cards  Guidelines on smart card interoperability  Changes in Central Bank guidelines


Eligibility of clients  Loading of value  Provision of written reports and receipts



Govt. incentives to stakeholders  Govt. encouragement for ATMs/ POS infrastructure terminals


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e-enabling the economy Thank You !!!