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JCR1 PDF
1
Amar KJR Nayak, PhD., Strategic Management, Xavier Institute of Management, Bhubaneswar, India
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• How critical was technology in the global remittance business?
• What are its problems of delivery in India?
• What are the technological challenges that the company faces?
Not only was the company faced with the challenge of competition from other
established players in the industry but also from potential customers for international
banking and remittance business. A few quotes below highlight this point.
My family lives in Ernakulam. Who other than SBI will get money to my parents?
--US respondent
Why should I choose a different bank when my family has been using SCB since 1990?
--US respondent
World Banking & Remittance Business:
The history of banking started with the transaction between goldsmith and people. As a
token of receiving gold the goldsmith used to issue a receipt. In this process the
goldsmith started issuing receipts for specific values of gold, and it became the first
banknotes. With the start of the industrial era goldsmiths turned into full-fledged bankers.
Indeed they have played a major role in the initial phase of industrialization. To further
increase their power and influence, these banking groups started influencing governments
or monarchies and strategically utilized the service of these governments or monarchies
for their self interest. And as a result only those politicians came to power who have
played according to the will of banking groups. In the twentieth century these banking
groups were able to discover a new way of money transformation, which identifies that
by periodically restricting the money supply, crashes within the emergent stock
exchanges of the world could easily be engineered, and one can examine this statement
from the example of famous Wall Street Crash of 1929. In economic terms it will be
categorized as transfer of wealth rather than destruction of wealth. In the later stage these
groups were concentrating on destabilizing a multitude of traditional cultures and
creating a series of homogenized trading blocks to replace them.
Banking has been the stronghold of established business houses. It was more so in the
foreign remittance business. Large Exchange Houses with huge banking and distribution
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networks gave little scope for other banks to enter this business. ICICI Bank, though
energetic did not have the nature of infrastructure to enter in to the international markets.
Even some of the Indian Banks had more overseas branches than ICICI Bank had. It had
only about six years of experience as a bank operating in the retail segment. Entering into
such an international banking and foreign remittance business was a tough call for ICICI
Bank in 2001. How did the company make inroads to such a global industry?
While the inflows in the world remittance business has grown by about 90% over the
period 2002-07, the inflow of remittance business in the developing countries has grown
by nearly 110% during the same period. Out of a total inflow of remittances of $ 318
billion in the world, developing countries accounted for $ 240 billion. The highest
growth of 136% has been in the upper middle income countries. Interestingly, on the
other hand, the outflows of remittances from the developing countries have been as high
as 226% during 2002-07 (see Exhibit 1). The market for remittance business to India
during 1975-2003 is best illustrated in Exhibit 1b.
India, Mexico and Philippines have been the top remittance receiving countries for over a
decade now. China, Spain, and many others have also shown significant growth during
the same period. Remittances received by India have grown from US$ 8,453 million to
US$ 27,607 million during the period 2002-06 (see Exhibit 2).
Why have been there such high growths in the developing countries? Is it the Diaspora of
the developing countries in the industrially advanced countries? Is the differential in
interest rates in the industrially advanced country the cause for the movement of foreign
capital to the developing countries? The annual rate of interest in Japan is the lowest with
around 1-2% for short term loans up to one year period. Similarly, the rate of interest in
USA, Europe, and Great Britain ranges between 3-6% as compared to 10-18% in several
developing countries like India (see Exhibit 3).
Indian business through export and Import has also grown several times over during the
last two decades. From a crisis of foreign exchange in 1991, India has moved far ahead
from it. From US$ 5.63 billion foreign currency reserve in 1991, the amount stood at US$
199.17 billion in March 2007. NRI deposit in India has also grown by over 300% during
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the same period (see Exhibit 4 & 5). See also Exhibit 6 for the inflows, outflows and local
withdrawal figures for the period 1999-2008. How have these factors contributed to the
foreign remittance business?
After independence the government took major steps in banking sector reforms. It
nationalized many banks and formed State Bank of India to act as the principal agent of
RBI to handle banking transactions all over the country. The Government instituted a
number of policies such as
(i) 1949: Enactment of Banking Regulation Act
(ii) 1955: Nationalization of State Bank of India
(iii) 1959: Nationalization of SBI subsidiaries
(iv) 1961: Insurance cover extended to deposits
(v) 1969: Nationalization of 14 major banks
(vi) 1971: Creation of credit guarantee corporation
(vii) 1975: Creation of regional rural banks
(viii) 1980: Nationalization of seven banks with deposits over INR 2000 million
As the Indian economy opened up, several foreign banks came to India. ATM stations,
phone banking and net banking were introduced in the country. Slowly the customers
were introduced to foreign exchange. Indian banking industry’s business has increased
from US$ 469.4 billion in 2002 to US$ 1171.29 billion in 2007. The aggregate deposits
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of Scheduled Commercial Bank have risen from 17.8 percent in 2005-06 to 25.2 percent
as on January 4, 2008. With all these achievements Indian banks started aspiring to
become global and have a global presence. Many Indian banks started to expand their
branches in foreign countries. Setting up subsidiaries and investing in joint ventures were
other modes for international expansion.
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passenger baggage, personal gifts, donations to charitable/religious institutions in India,
etc. There has been steady rise in all these various categories of private transfers (see
Exhibit 8).
The Indian remittance market comprises of multiple corridors, each with a distinct set of
customer segments that have diverse remittance needs and behavior. Indian immigrants
follow a varied profile across geographies providing cheap labour in the GCC countries
and to meet the needs of specialized software developers, doctors, engineers, and nurses
in US, Europe and Australia. This creates two distinct types of immigrant; blue-collar
workers and white-collar workers. According to the World Bank the value of migrant
remittance is increasing at a rate of 10% every year, which offers significant business
opportunities for banks and income through three ways, viz., remittance charges, forex
income & float income.
What has been driving the growth of private transfers including the foreign remittances to
India? Is it the huge Indian Diaspora spread across the world? Indians comprise about 58
% in Mauritius, 38% in Fiji, 37% in U.A.E, 19% in Bahrain, 10 % in Oman and 7% in
Singapore. Over a million Indians live in several of the industrially developed countries
like U.K. (2.2 million), Australia (1.9 million), U.S.A (1.68 million) and South Africa
(1.1 million). Many people from this large Indian Diaspora look forward to remit some of
their income back to India for various purposes. Indian banks are also well spread in
many foreign countries; 22 branches in U.K., 11 branches in Hong Kong, 9 each in Fiji
and Singapore (for details see Exhibit 9).
There are a large number of banks in India with wide networks, large deposits and huge
manpower to tap the opportunities in the foreign remittance business and other private
transfer business. For the statistics of banks in India see Exhibit 10. Several Indian banks
have branches in many foreign countries. Allahabad Bank has 40 foreign branches, State
Bank of India has 33 foreign branches, and Bank of India has 21 foreign branches (see
Exhibit 11). With rapid changes in the regulatory policies of the Government, India has
turned out to be a hot spot of business activity in the world. The regulatory changes in the
banking industry and the ever increasing demands of the global Indian compound the
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dynamics of business for the banks in India (see Exhibit 12 for the challenges that the
Indian banking industry have been facing). Competition among the Indian banks is also
well poised. Different banks have different strengths and have different strategies on
aspects like retail/product capability, customer base and delivery / technology platforms.
In the above context of worldwide banking, Indian banking industry, global Indians
spread across the continents, and studying the internationalization process of ICICI Bank
through the remittance business is exciting to analyze.
With the new regulations in the banking industry and increasing opportunities for retail
banking, ICICI set up ICICI Bank in 1994. Later in 2000, ICICI Bank acquired Bank of
Madura and in 2002, ICICI Ltd., along with two other group companies, was merged
with ICICI Bank. Through these mergers, and reorganization, ICICI Bank emerged as a
formidable force in the banking industry. See Exhibit 13 and Exhibit 14 for the
evolutionary path of ICICI Bank. As on March 31, 2007, ICICI Bank had 17 subsidiaries.
N. Vagul had steadily built ICICI as a development financing institution through its early
years and subsequently ICICI had successfully set up ICICI Bank in 1994. With the
liberalization and privatization processes in India since 1991, the Indian banking industry
had taken a different turn during the period 1991-2000. When K.V. Kamath took over as
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the CEO of ICICI Bank in 1996, the banking industry in India was fast changing with
several banking deregulations underway and increasing competition in the market.
Around this time, the bank had a high employee turnover to the extent that it could
destabilize the operations of the bank. Kamath wondered how to manage the manpower.
He also wondered if technology was a solution to handle some of these problems and
would it also help in the company’s growth plans.
International Banking:
By June 2001, ICICI Bank with a total income of INR 14690 million and successful
domestic operation with a short span of its inception, the company was looking for
growth for the future. The top executives including K.V. Kamath, Bhargav Dasgupta and
Lalita Gupte wondered if they should enter the world markets and whether they would be
able to compete outside their domestic turf. If at all they entered the international
banking, in which products they should begin. With many large banks with large network
of branches in India and abroad, how should ICICI Bank invest to get a share of the
international banking business? Who should manage the international operations? Will
the existing manpower in the bank be sufficient and be able to handle both the domestic
and the international operations?
In order to achieve growth, the Board of ICICI Bank decided to expand into international
markets. The Board of ICICI Bank asked Lalita Gupte to lead the internationalization
process. Subsequently, Bhargav Dasgupta was invited to join Gupte to build the
international banking business of ICICI Bank. The management team of international
business deliberated on the international strategy of the firm. First, it looked into the
existing model, where the bank followed its customers, whether corporate or retail.
Second, it looked into the alternative modes of servicing the customers based in different
parts of the world. Third, it evaluated on how to leverage its banking and business
network to expand in the international markets.
Today, the International Business Group has grown significantly and the IB Group
consists of over 3000 people. It is further supported by nearly 300 technical people and
150 operational people. However, how did the company realize the plans it set forth for
itself. How did the managers succeed in implementing their plans and ideas?
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The company undertook a detailed study of the leading players from India, type of
product/service and proposition and the mode of platform for the delivery of services.
During the period, 1996-2001, the State Bank of India with about 50 million customer
base had about 17% growth. With nearly 9000 branches and 100 ATMs it had a large
reach in the country. HDFC had over 200 ATMs, 130 branches, 1.4 million customers
and had grown at about 74%. Citi Bank with 1.8 million customers had about 130 ATMs
and 11 branches and grew at about 14%. ICICI Bank had over 5 million customers and
had grown at 76%. It had 400 branches and 600 ATMs (see Exhibit 15).
For its international remittance business, the company offered two major routes, viz., the
Vostro Account and the Nostro Account. The Vostro system was essentially for
customers with Indian Rupee Account and Nostro was for other customers. Nostro
worked with the help of SMART software that is a middle ware called the Customer
Delivery Channel Interface (CDCI). The various banking services of the company and
the key features of each are provided in Exhibit 16. The commission/charges of the
company for the different types of remittances vary from 0.125% to 0.2%. The details of
the charges are provided in Exhibit 17. Does the company earn only from these
commissions or does it earns from other means? Did it benefit anything from the
currency float for sometime?
While the company did create different accounts to cater to the international remittance
and that there was possibly a good margin in the business, what were complexities that
the company had to resolve in order to operate in the international remittance business?
How could the technology be used seamlessly across the international borders?
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Transactions had to be done across different regulatory frameworks of different countries,
different time zones with different operating hours of people, different systems and
processes in different banks based in different countries, international partners with
different working styles. Further, with thousands of automated transactions in a day, the
issues of reconciliation because of various differences in different countries and minor
errors in data entry could block the whole transaction process. While banks are used to
deal with all these issues through their manual transactions in the domestic business, the
problems indeed were unlimited especially when technology was to be used to
intermediate most of these international transactions. Views of a few senior executives
from the International Business Division given below indicate the nature of complexities
involved.
“We needed to understand the clearing system in India and in other countries, regulatory
norms of different countries, understand the technological interfaces, adopt architectural
changes in our technology and develop several expertise to service our international
clients seamlessly.”
“Given the anti-money laundering issue in international money transfers understanding
the ‘Know your Customer’ norms in different countries were crucial for us to operate
safely in this business”
“It was indeed very different experience to work with our foreign partners. While we in
India followed a top-down approach for scaling up any of our business models, our
partners in USA and Europe used the bottom-up approach for scaling up. We had some
difficulties in the beginning and had to accept the different working styles in other
countries.”
Anchal Kapoor, DGM, IB Division
“Our major concern in the international remittance business has been the ‘reconciliation
of accounts’. With thousands of transactions every day registered from different
countries, minor manual data entry errors or technical errors could lead to severe
restrictions to overall transaction process. Often, problems of reconciliation has been
like a nightmare in this business”
Girish Nayak, GM, IB Division
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International Remittance Strategies:
ICICI as an organization is divided into six major product divisions like; Retail Banking,
International Banking, Rural, Micro-Banking and Agri-Business, Government Banking
and Corporate Centre. The ICICI Group strategy is summarized in Exhibit 18. The
company identified international banking as a key opportunity, aiming to cater to the
cross-border needs of clients and leveraging the domestic banking strengths to offer
products internationally.
ICICI Bank chalked out different strategies for different markets. In the traditional model,
it offered partner bank based products and bank branch based products. In the Innovative
Model, it offered the online Product web-based access and alliance partners. See Exhibit
19 for the details of each offer. The overall strategy of the Group can be put into an
analogy of a beautiful building with solid foundation and strong pillars supporting the
structures as illustrated in Exhibit 19 b. The top management of ICICI Bank seems to
have had a clear reason for the expansion of its business world-wide as can be seen from
the statement below.
“We believe that we have to serve our customers anywhere in the world”
K V Kamath, CEO
However, how would a young bank from a developing country develop the network to
challenge the existing well established highly networked international bank and exchange
houses? How did the company plan to leverage with the correspondence banks and to
leverage technology for its internationalization plans? With regard to these issues, the top
management team responsible for the international business had the following thoughts.
“We cannot physically be everywhere our clients are, so we will leverage our
correspondent relationship with other banks”
“Adopting the alliances model, we have been able to garner presence and distribution
reach as we set up operations globally. Our Unique Selling Proposition/Point (USP) has
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been the use of technology as a differentiating factor to garner larger share of the NRI
remittance business,”
Bhargav Dasgupta, Former Director & Core Team Member of the initial IBG
The company had substantially used the alliances and partner model in the domestic
market and it tried to replicate the same in the international markets. In the domestic
market it had alliances with the airlines and travel houses. The objective was to target
NRI when they were either visiting or leaving India. It also had a focused marketing
approach in the domestic market, where it tied up with universities and companies from
where students and employees were likely to migrate to foreign countries for different
purposes. Exhibit 20 shows the details of the initiative that ICICI Bank had undertaken in
the domestic front during 1996-2001.
To tap the opportunities in the remittance market in India ICICI launched a remittance
product in association with US based Wells Fargo to enable non resident Indians in the
US to send money to India directly from their Wells Fargo account to their beneficiary’s
ICICI Bank account in India in just 24 hours. It also launched a partnership with Mees
Pierson, Fortis’ private banking arm to provide a full range of high net worth products
and services to ICICI’s clients in India and abroad.
Technology Issues:
While the standard mode of collection and transfers of foreign remittances were through
physical outlets of the banks or the exchange houses, ICICI Bank was very weak on this
type of resource base to compete with the well established exchange houses and banks.
The fixed cost of setting up a physical outlet and the variable cost of maintaining a set-up
have generally been very high both in India and more so in the industrially advanced
countries. The company adopted technology as a solution to most of its business
transaction, products and services. The company set up an internet portal for NRI to
transfer money to India. In the above context, if the company adopted the technology
route, what would be issues of implementing the technology for dealing with foreign
remittance business? What were the initial costs of investments in technology? How did
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the company target the customers? What kind of technology platforms would the
company use? Did the company have a technology policy? What were methods of
organization to introduce technology for various businesses? What were the major
challenges in technical support? What would be the next technological challenge for the
company?
Even though the company adopted the electronic route to transfer money, it needed the
collaborations with several correspondents, viz., the exchange houses, foreign banks, and
agents. How did they convince the foreign partners to agree to their mode of money
transfer? How did the company tie-up with the banks for serving the beneficiaries of the
remittances? While the people had no option but to send money in the traditional way, the
software professionals with easy access to internet were early to adopt the technology
solutions to money transfer that the company offered. Further the speed of delivery and
tracking facility were additional advantages in the mode proposed by the company.
Money could be delivered with in 3-7 days if correspondent was a foreign bank and
within 2-3 days if the correspondent was an Indian bank.
Setting up the technology platform was a critical issue. What would be the difficulty if
the company used different systems? Would java based Windows operating system,
Pramati layer as server, Oracle database management system and the Sun Solaris
Platform be compatible to each other? How critical were the issues of memory capacity
processing speed in the business?
With technology as the mode of remittance transfer, the business became round the clock
(24*7). How would the company handle this situation? Can the company work only on a
fire fighting basis or needed to root fix the technical problems? As per the NEFT routing
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norms and IBRD regulations of punching time that is between 2PM-4PM, the
pressures to carry out the transactions increased substantially. Further, ISB is yet another
key issue in the whole system. The need for highly skilled manpower, lean teams
operating round the clock, providing connectivity, session management, and parallel
operations could have been some ways to handle the challenges posed. Views from a few
senior executives from the Technology Group given below highlight various issues.
“Our challenge was to develop standard application programming interface (API) and
standard messaging protocols, taking into account the know your customer regulations in
different countries and incorporating fields for different types of data to capture all
relevant information to meet regulatory norms in different countries from where the bank
received remittance business.”
Indranil Ghosh, AGM, Technology Group
If the company were to move from ‘anywhere to India route’ to ‘anywhere to anywhere
route’ in the remittance business, what would be the technological challenges? How does
the company handle the issue of scalability? Today the average number of transaction is
about 8000 per day in the India corridor, how would this change if the company were to
go ‘anywhere to anywhere transaction’. Will the Unix system serve its future capacity
requirement?
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Operational Issues:
The company had two types of accounts viz., Vostro INR Account and Nostro Account.
Further, three different types of Nostro Accounts were initially created that are for NRI
Accounts, Credit Services, and Treasury. About 180 correspondents operate through the
Vostro Account and about 40 correspondents operate through the Nostro Account. For
every transaction, a swift code is generated and that is then passed on to the Finacle Core
Banking system of ICICI Bank. Instead of a one to one transaction, ICICI Bank
accumulates all the remittances and carries out a bulk transaction at one go. The
automatic process involves talking of different systems with each other. The SWIFT
message with remittance details from the correspondents, the core banking system
(Finacle) of ICICI Bank, foreign exchange rate system, and the NEFT system have to
process and clear the data for completion of a transaction and receipt of money (INR) at
ICICI Bank in Mumbai. On an average, the company today handles about 8000
remittance transactions a day and about 100,000 remittance transactions a year.
The issue of concern in the operations is when there is non-straight through transaction
resulting in non reconciliation of accounts. On an average there has been as much as 60-
65% non-straight through process (STP) transactions in the Nostro system in the
beginning. Today, ICICI Bank still gets about 20% non-STPs in the Nostro system and
about 8% non-STP occurs in the Vostro system. With a 24*7 hours operating system in
the global remittance business, how will the operations be managed?
While an appropriate design of the architect and platforms with largely compatible
technology may be adopted to meet the memory capacity and processing speed, what
would be the typical operational issues when dealing with foreign transactions that might
originate in any of the foreign countries (with a set of banking rules and regulation) and
need to be remitted in India? ICICI Bank can receive payments from different banks and
the payments to the beneficiary of the remittance may be remitted in a different bank.
How would the company deal with these complexities? The company deals with nearly
8000 transactions a day that come from different countries and from different banks and
it gets about 2 hours to punch in the client and beneficiary details for routing transfers to
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India through the NEFT. What kind of operational problems will the company face? A
NRI could choose to transact through Money2India, the foreign remittance portal of the
ICICI Bank (see Exhibit 21 for the steps to transaction). Would the operational issues be
resolved through such portals for foreign remittance transactions?
How much can the integration of the various systems of SWIFT, Finacle, Foreign
Exchange Rate, and NEFT solve the problems of non STPs? What if other correspondent
banks or agents are not using the same systems? How much of errors occur because of
human error in data entry? The number of non ICICI Banks that used NEFT has risen
from 13,000 a few years ago to 40,000 today. Name matching is also used to bypass
syntax errors in data entry. Integrating systems within ICICI Bank is another issue. The
basic Finacle Core Banking system has been developed by Infosys Technologies.
However, this has been modified and upgraded to meet the needs of ICICI Bank.
“We have leveraged our good relationship with Infosys to develop the Finacle Core
Banking system to meet our needs and to fully integrate our core banking system with the
SWIFT system. We are trying to integrate our Finacle Core Banking system with the
other systems that we interact with. We are also trying to convert non electronic
transaction like the transaction through demand draft to electronic transaction and we
have been fairly successful in reducing the volume of demand draft transactions from 25-
30% to 13%.”
Jegannath Shreenivas, GM, Operations Group
Why would a customer prefer demand draft (DD) to electronic fund transfer? With DD a
beneficiary can credit the money to any of his or her accounts in India. Further, DD is
easy to deliver to beneficiaries based in remote and rural India that are unconnected with
the electronic systems.
A strong team of about 150 operational professionals are dedicated to remittance business
in the company. Eighty of them are based in Mumbai (in Western India) and seventy are
based in Hyderabad (in Southern India). The operations team works closely with the
remittance business group. When a new product is proposed by the Business Group, the
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technology, operations and the legal teams meet to assess the support requirement. The
product and process needs to be approved by the Product and Process Committee before
any product is undertaken to the product launch stage.
The operation group has periodic reviews with International Business group. The
operations group has more intensive reviews and dialogues. In the initial years, the
operations group and the technology group had Technology Forums every quarter.
However, for the last three years, since 2006, Technology Forums are organized every
month. The Finacle Customer Relationship Management system helps the operations
group to lodge their requirements/complaints to the technology group and the daily
Management Information System (MIS) further aids the dialogue process between
operations and technology groups.
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“ICICI Bank is seeking to participate in India’s growth process by leveraging its strong
competencies in various segments of the business. We are continuing our focus on retail
banking. We are partnering Indian companies by providing the right product and
advisory skills to aid their rising global aspirations. Rural India continues to be
significantly untapped market and presents a major growth opportunity, which we are
seeking to address through innovative products and delivery mechanisms. We seek to
support this strategy with financial and human capital, as we move to the next level in
terms of scale of operations. Looking ahead, we see ourselves as the premier provider of
financial services in India and to Indian customers overseas, partnering our customers
and the nation in achieving growth and prosperity.”
N. Vaghul, Chairman
“Looking ahead, we believe that India will sustain high growth rates for the foreseeable
future, driven by the knowledge economy and industrial resurgence, to which rural
growth could bring an additional new dimension. As an Indian financial services group,
we seek to facilitate and participate in this growth process by making a wide range of
financial products and services available on a large scale, accessing capital to support
growth when necessary. Achieving size and scale aligned to the needs of a fast growing
modern economy, with relevance in the global context, will be a key success factor as
India grows and globalizes.”
“The bank expects one-fourth of its balance sheet from the overseas business and also
aiming to make a position among the top ten banks of the world within next five years.”
K.V. Kamath, Chief Executive Officer
“The last fiscal saw a significant scale-up of our international operations and expansion
of our global footprint to 18 countries. We are now a preferred international bank,
offering best-in-class products to Indian corporations going global and the Indian
Diaspora by leveraging our international presence and strong technological capabilities.
Our products and services for the NRIs were supplemented by offerings to the local
customers, furthering our transformation into a global bank. Indian corporations are
today undertaking large projects, big-ticket overseas acquisitions and rising huge capital
from international markets. Our corporate banking strategy takes a unified global view
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of our clients and offers them a comprehensive suite of commercial and investment
banking products apart from the working capital loans and project finance.”
“We are now India’s biggest bank in terms of overseas business is concerned and from
here we are aiming at a contribution of 25 per cent from international business in 2008.”
Chanda Kochhar, Joint MD and Chief Financial Officer2
2
The designations of executives given in the case were as when the case was being studied and written in
the year 2008.
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Questions for Discussion
1. What are the major issues of internationalization that the above case throws up?
2. What were the challenges faced by ICICI Bank while entering new markets?
3. What are the international strategies of ICICI Bank that would be applicable to other
Indian companies going international?
4. What are the international strategies of ICICI Bank that are unique and are not
applicable to other Indian companies?
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Exports Imports
Year Total Total
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Exhibit 6: Inflows and Outflows from NRI Deposits and Local Withdrawals
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Note:
CP: Country Population
IDP: Indian Diaspora Population
ID: Indian Diaspora
BIB: Branches of Indian Banks
Source: Government of India, Indian Diaspora Web, Reserve Bank India, 2007
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Note:
PNB: Punjab National Bank, UTI – Now Axis Bank, SBP – State Bank of Patiala
SBM – State Bank of Mysore, OBC – Oriental Bank of Commerce, SBT – State Bank of
Travancore, UBI – Union Bank of India, SBI – State Bank of India
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Afghanistan — — — — — — — 1 — — — — 1
Australia 1 — — — — — — — — — — — 1
Bahamas 1 — 1 — — — — — — — — — 2
Bahrain 2 — — — — — — — — — 1 — 3
Bangladesh 4 — — — — — — — — — — — 4
Belgium 1 — 1 — — — — — — — — — 2
Cayman — — — 1 — — — — — — — — 1
Island
Channel — — — 1 — — — — — — — — 1
Islands
China 1 — — 1 — — — — — — — 2
Fiji — — 9 — — — — — — — — — 9
France 1 — — 1 — — — — — — — — 2
Germany 1 — — — — — — — — — — — 1
Hongkong 1 1 — 2 1 — 2 — — 2 1 1 11
Israel 1 — — — — — — — — — — — 1
Japan 2 — — 2 — — — — — — — — 4
Kenya — — — 4 — — — — — — — — 4
Maldive 1 — — — — — — — — — — — 1
Island
Mauritius — — 8 — — — — — — — — — 8
Oman 1 — 3 — — — — — — — — — 4
Seychelles — — 1 — — — — — — — — — 1
Singapore 1 — 1 1 — 1 1 — — 2 1 1 9
South 1 — 1 — — — — — — — — — 2
Africa
South — — — — — — 1 — — — — — 1
Korea
Sri Lanka 3 — — — — 2 1 — — — 1 — 7
Thailand — — — — — — 1 — — — — — 1
United
Arab
Emirates 1(DIFC) — 6 — — — — — — — 1(DIFC) — 8
United 6 — 8 6 1 — — — 1 — — — 22
Kingdom
United
States
of America 3 — 1 2 — — — — — — — — 6
Total 33 1 40 21 2 3 6 1 1 4 5 2 119
Notes:
AHB – Allahabad Bank, IOB – Indian Overseas Bank, BoB – Bank of Baroda, PNB – Punjab National
Bank, BoI – Bank of India, DFIC – Dubai International Financial Centre
Source: Department of Banking Operations & Development, Reserve Bank of India.
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• With a chain of more than 65,000 branches, Indian Banking system is one of the largest
banking networks in the world
• The retail-banking sector contributes 1/5th of the overall bank credit.
• The Indian retail-banking sector is growing at a rate of 122% per annum.
• The retail-banking sector of India will reach a worth of $310 billion by the year 2010,
predicted by the experts.
• During the year 2000-2005, the entire assets of the banking industry increased with a
compound annual growth rate of 14% touching a worth of $523 billion from $ 271
billion.
• The profits of Indian banking industry jumped at a compound annual rate of 26%
touching a worth of $ 5.2 billion from $ 1.55 billion.
• Banking industry in India is undergoing a major transformation due to changes in
economic conditions and continuous deregulation.
• Continuous deregulation has made the banking market extremely competitive with
greater autonomy, operational flexibility and decontrolled interest rate and liberalized
norms for foreign exchange.
• Marketplace has been redefined with new rules.
• Banks need to access low cost funds and simultaneously improve the efficiency.
• Customers have become demanding and the loyalties are diffused.
• The competency gap needs to be addressed otherwise there will be missed opportunities.
• Investing in state of the art technology as the backbone to ensure reliable service
delivery.
• Innovating products to capture customer ‘mind share’ to begin with and later the wallet
share.
• Implementing organization wide initiatives involving people, process and technology to
reduce the fixed costs and the cost per transaction.
• The banks need some transformation initiatives in various fields for the emerging
challenges. These initiatives includes areas like; Strategy, Brand, Organization
Restructuring, Re-engineering of the key business processes, Cost efficiency, Right
Sizing and matching of skills, Creating a high performing organization, Change
management and creating a new mind set.
• ICICI Bank set-up an International Banking Group to implement a focused strategy for
its international banking business.
• ICICI was the first Indian institution to be licensed by Qatar Financial Centre (QFC).
• As on December 31, 2006 ICICI Bank had an asset base of around US$ 67 billion.
• In 2006 ICICI Bank has shown a continuous growth in its profit.
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Year Milestone
1955 The Industrial Credit and Investment Corporation of India Limited (ICICI) incorporated at
the initiative of the World Bank, the Government of India and representatives of Indian
Industry.
1960 ICICI building at 163, Backbay Reclamation, inaugurated.
1967 ICICI made its first debenture issue for INR 60 million, which was oversubscribed
1969 The first two regional offices in Calcutta and Madras set up
1977 ICICI sponsored the formation of Housing Development Finance Corporation. Managed its
first equity public issue.
1986 ICICI became the first Indian institution to receive ADB Loans
1993 ICICI Securities and Finance Company Limited in joint venture with J.P. Morgan set up
1994 ICICI Bank set up
Through the merger of Industrial Credit and Investment Corporation of India Ltd (ICICI)
and Shipping Credit and Investment Corporation of India Ltd (SCICI) by their initial
capital contribution of 75:25 respectively.
1997 The name The Industrial Credit and Investment Corporation of India Ltd. Changed to
ICICI Ltd and ICICI Ltd announced the takeover of ITC Classic Finance.
1999 ICICI Bank was listed on the NYSE through an issue of American Depositary Shares.
2000 ICICI Bank announces merger of Bank of Madura
2001 The Boards of ICICI Ltd. and ICICI Bank approved the merger of ICICI with ICICI Bank.
2002 ICICI Ltd. merged with ICICI Bank
2003 ICICI Bank announced the setting up of its first ever offshore branch in Singapore
The first offshore banking unit (OBU) at Seepz Special Economic Zone, Mumbai,
launched
ICICI Bank’s representative office inaugurated in Dubai
Representative office set up in China
ICICI Bank’s UK subsidiary launched
ICICI Bank subsidiary set up in Canada
2004 Mobile Banking Service in India launched in association with Reliance Infocomm
India’s first multi-branded credit card with HPCL and Airtel launched
2005 First Indian company to make a simultaneous equity offering of $ 1.8 billion in India, the
United States and Japan
Acquired Ivestitsionno Kreditny Bank of Russia
ICICI Bank became the largest bank in India in terms of its market capitalization
2006 ICICI Bank subsidiary set up in Russia
Representative offices opened in Thailand, Indonesia and Malaysia
2007 Sangli Bank amalgamated with ICICI Bank
ICICI Bank signed a multi-tranche dual currency US$ 1.5 billion syndication loan
agreement in Singapore
ICICI Bank Eurasia LLC inaugurated its first branch at St Petersburg, Russia
2008 ICICI Bank enters US, launches its first branch in New York
ICICI Bank enters Germany, opens its first branch in Frankfurt
ICICI Bank announces in May 2008 to open 4 new offices in USA
Source: ICICI Bank Ltd.
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Industrialization (1955 – 1964), ICICI was among the World’s first development banks
in the private sector, to quickly emerge as an important source of foreign currency loans
in the country, to facilitate import of industrial machinery and technology. During this
period ICICI was assisted with over 400 companies.
Consolidation (1975 – 1984), ICICI had consolidated and broad based the financial
system by setting up state level financial and technical institutions and the countries first
finance institution with housing specialization. This was the period when obstacles like
oil stock came into picture.
Liberalization (1985 – 1994), A phase, India began to open up which leads to the private
enterprise and free play of market forces and ICICI saw the opportunity to diversify to
meet the requirements of the new paradigm, and set up country’s first rating agency, first
venture capital company and entered into asset management and banking.
Globalization (1995 – 2004), Created both challenges and opportunities, because of the
India’s move towards global economy. But ICICI enabled consumption-led growth by
accelerating the availability and affordability of retail finance and bringing world class
technology to banking, and by this it became the first Indian bank to list on the New York
Stock Exchange and emerged as a leading universal bank in India.
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Remittance-Outward
Commission on lieu of Exchange
Where remittance is made to the debit of same currency account 0.125% minimum INR 1000
Where cover is reimbursed in the same currency 0.125% minimum INR 100
Any other case where the bank doesn’t earn any exchange
margin 0.125% minimum INR 100
• All Charges are exclusive of the service tax plus cess and service is to be charged
as per the applicable service tax laws
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S
Domestic Retail Enhance share of retail deposits and sustain H
Banking leadership position in credit franchise A
R
Global Corporate Leverage corporate relationships, structuring E
& Investment expertise, balance sheet and global syndication H
Banking capability O
L
International Retail Leverage NRI opportunity and technology D
Banking capabilities E
R
Rural Banking Invest for future growth
V
A
Insurance & Asset Enhance and leverage market leadership position L
Management U
E
Source: ICICI Bank, Internal Document, 2001
Partner bank based markets, enable Wires and Check processing for
Products initiation
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Product Overseas
Proposition Platform
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• “X” a remitter, must register himself as a user with Money2India Web site
• “X” can opt to transfer money through the Automated Clearing House, which is
the clearing network for electronic funds transfer in the US.
• “X” needs to provide detail such as his US bank account number, the type of
account that he holds and the 9 digit routing number (a number given by the US
Fed to identify every branch in the US)
• ICICI Bank will validate the account for security reasons within 3 days. It does
this by making two small deposits and a withdrawal.
• Once the validation is done, “X” will be informed about this and he can initiate the
process of transferring money.
• After logging on to the Money2India website, he must provide the details of the
beneficiary such as Name, Address, Bank Account, Currency etc.
• The money is transferred from his US bank account after 1 to 2 working days to
ICICI Bank, New York.
• ICICI Bank in Mumbai receives the payment instruction from ICICI bank New
York via SWIFT.
• In the event of the beneficiary having a different bank account (non-ICICI Bank) it
may take another day.
*The dollars are converted in Mumbai and the rupee equivalent is credited to the ICICI
Bank account of the beneficiary on the 5th working day after transfer from the US bank
account
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Domestic International
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UK
USA
GCC
Fiji
Mauritius
Australia
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Exhibit 24: ICICI Bank: Financial Details (in INR 10 million)
Mar98 Mar99 Mar00 Mar01 Mar02 Mar03 Mar04 Mar05 Mar06 Mar07
12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths
Total Income 347.623 642.80 1048.10 1469.09 2762.28 12533.37 12069.23 12949.57 19368.34 29957.23
PAT net of 50.26 63.45 105.43 161.23 253.04 -2.66 1598.41 1861.19 2492.97 2995.00
P&E
GFA 218.76 261.56 315.15 589.68 4494.30 4812.98 5090.21 5525.65 5968.56 6298.57
Net Worth 266.75 308.33 1149.51 1312.62 6594.96 7283.31 8360.56 12899.98 22555.99 24663.26
Borrowings 192.23 367.89 659.47 1200.80 58969.97 44051.95 39846.11 41753.40 48666.30 70661.14
PBDITA/Total 77.82 83.47 79.58 75.64 69.39 64.00 78.03 73.70 72.66 71.55
Income (%)
PAT net of P 14.45 9.86 10.05 10.97 9.37 10.66 13.61 15.66 13.15 10.42
& E /Tot inc
(%)
RONW 22.39 22.03 14.45 13.09 6.53 17.38 20.93 18.86 14.33 13.17
ROCE 16.08 11.91 9.44 8.70 0.80 2.17 3.44 4.06 4.25 3.93
Investments - - - - 35891.08 35462.30 43435.52 50487.35 71547.40 91257.83
Equity shares - - - - 2516.83 2424.54 3107.92 3981.47 4918.55 6009.49
Debt - - - - 29158.67 31238.49 35450.07 37343.50 53012.71 70127.56
instruments
Group - - - - 608.18 782.13 1423.65 2066.69 2860.70 4072.23
companies
Non-group - - - - 8345.01 7332.33 7233.37 4768.81 3861.88 4400.08
companies
GFA: Gross Fixed Asset, RONW: Return on Net Worth, ROCE: Return on Capital Employed
Source: CMIE Data Base
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References:
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