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

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

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

Concerns
Improve Quality
Exit weak accounts
Improve yields
Reprice on RaRoC
benchmark
Reduce delivery
cost
Web / call centre
based delivery

SME - Service & Delivery

Information

Drop

box point
High value cash
transactions

Logging

requests

Call centre

Branch

Processes all
trade related
requests for a
city

Trade finance
factory

Handles

exceptions
Cross sells
Monitors accounts

Account/
Relationship
manager

Customer

Credit factory

For

all
transactions
except high
value cash

ATM

Processes all
pure credit
related
requests

Information

Provide

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

Internet

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

10

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

11

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

12

Smart card solution for FSCs

Input

Merchant
Store

Credit
Debit
e-purse

Bank Account/
Credit History

Farmer Service Center

Output Sale
Collect Money

Online update of Bank accou

13

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

14

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, E-Purse and Loyalty

15

16

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

17

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

18

19

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
payment-1999
Only Bank in India with million online
customers
Monthly average transactions per online
customer- 7

20

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

21

Channel Usage
Call
Centre
4%

ATM
51%

Internet
4%

Branch
41%

Internet
Call
5%
Centre
6%

ATM
47%

Apr 2001

Branch
C ash Transactions
J an-02
18%
Apr-01
19%
Non Cash Transactions
J an-02
41%
Apr-01
50%

A TM

Cops
7%

J an 2002

C all Centres

82%
81%
33%
39%

22

Branch
35%

Net

C OP S

Nil
Nil
9%
6%

7%
5%

10%
Nil

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

23

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

24

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

25

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

26

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

27

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

28

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

29

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

30

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

31

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

32

e-enabling the economy

Thank You !!!