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e-Finance for Development - An Indian Perspective

Monterrey, Mexico March 19, 2002


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


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


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


box point High value cash transactions Branch Call centre




Processes all trade related requests for a city Trade finance factory

exceptions Cross sells Monitors accounts

Processes all pure credit related requests


Account/ Relationship manager

Credit factory


all transactions except high value cash Internet



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


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


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


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


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


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



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


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



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


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


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%

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



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


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


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


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



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


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


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


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


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


e-enabling the economy Thank You !!!