ICICI Bank: Challenges

in Rural Marketing
Group 4, Section D

Decision Questions
CHALLENGE: How to scale up the rural banking

operation?

Optimal sales and distribution model

Terms of engagement with MFIs

Evaluation and selection of the right customer

Logistics of evaluating the creditworthiness of the rural client

Mechanics of Lending and repayment

Integration of the rural banking structure with the existing

organizational structure

Rewards and Incentives for stakeholders

Type of Promotional material

Rural Retail Banking-Current

Scenario

India: 40% of the population does not have a bank account

Rural India: The figure is 70% with 87% having no access to formal
credit

Only ~ 1/60 villages have more than 1 bank branch

Decline in number of bank offices (5.5%), reduction in deposit and

credit amount (2.2% and 1.9%) respectively

Average population served by urban bank ~15,000 as compared to

rural ~12,800

Sources of credit from informal money lenders increased (17.5%26.8%) and surprisingly declined in the case of commercial banks
(35.2%-26.3%) in the period 1991-2002

$82 billion credit is still informal and comes from agricultural lending.
36% of rural credit is from informal sources

Conclusion: Formal banking in the rural sector is in a poor state

Rural Retail BankingEconomics

Nature of Demand: Seasonal, though products
like education and personal loans-Non-Seasonal
Customer Segments

Farmers

Personal
Consumption/Farming

Traders/Dealer
s

Investment in Business

Large
Corporates

Financial Services Support

Technology: Fino Package helped track loan

details

ICICI Rural Banking:

Channels
Branch
Branch
Based
Based

Non-Branch
Non-Branch

DCPB
DCPB

Vikas
Vikas
Sahyogis
Sahyogis

Mandi
Mandi Branch
Branch

MFI
MFI

Crop
Crop Cluster
Cluster Branch
Branch

Business
Business
Correspondents
Correspondents

What would make ICICI attractive

to rural customers?
Ease of getting loan- Less paper work,

standardized rates, trustworthy Vikas Sahyogis

Microfinance Opportunities from more MFIs. MFIs

are deeply integrated self help groups which keep

regular checks as well provide trustworthiness to
customers
Improved customer awareness by frequent

marketing campaigns in Haats

Awareness of rural banking facility through NGOs

Recommendation 1: Utilize CAPS, MFIs

and Vikas Sahyogis for Rural Banking

Rationale:

MFIs have deeper rural customer reach and understanding

Spandana: Disbursements rose from 30-3000 million (1998-2005)

Loan portfolio growth of Cashpor 2.6-5.8 million (1999-2006)

KYC is a one time operation and could be completed by

ICICI field agents or could be handled by the DCPB, being
the technology hub

Customer Credit worthiness is monitored by the self-help

groups of an MFI

Transaction cost advantage as compared to traditional

branch

Partnering with VCs

MFI caters to 1000-5000 customers

Incentive Structure Design:

CAPs and Kiosks

Assign an ICICI credit officer for a particular (hub

and spoke) to monitor the rules and regulations on
a timely basis ( e.g Weekly visits to the hub,
fortnightly visit to the spoke)

11 franchisees with ~2-3 spokes in Ahmednagar (Hubs

could be combined on the basis of Geographic
closeness)

Vikas Sahyogi

Incentivize on the number of and credit worthiness of

loans offered

Pay 10-20% payment upfront and rest on the recovery of

the loan

Introduce many Vikas Sahyogis to increase competition