e-Finance for Development- An Indian Perspective

Monterrey, MexicoMarch 19, 2002

2

Agenda

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

3

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

4

Agenda

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

5

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

6

Agenda

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

7

8

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

9

SME - Service & DeliveryInformationLogging requests

Call centre

Customer

Branch

ATM

For all transactions except high value cash

Drop box pointHigh value cash

transactions

Handles exceptionsCross sellsMonitors accounts

Account/ Relationship manager

Trade finance factory

Credit factory

RPC/CPC

Processes all pure credit related requests

Processes all trade related requests for a city

Provide support backbone for all transaction requests

Services doorstep deliveries

InformationLogging

requests

Internet“Processing centres*”

10

Online Products

e-banking in ICICI

ICICI Marketsonline FX, Debt,

SME Portal

Corporate Infinityonline transfer/

settlement system

Bill JunctionUtility bill payments

Business Multiplier

web interfaceICICI Direct and

ICICI Select

Pay Sealelectronic

payment system

11

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

12

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

Agri - Farmer Service Centres (FSCs)

13

Smart card solution for FSCs

Bank Account/ Credit History

Output Sale

Collect Money

Farmer Service Center

• Credit• Debit• e-purse

Merchant Store

Input

Online update of Bank accounts

14

Smart Cards … An alternative

Difficulty in rural banking Management of Cash

Cost of idle cashCost of cash handling infrastructure

Geographical spreads Solutions through

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

Smart Card - an ideal vehicle

15

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

16

17

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

18

Innovations in Delivery Channels

Sustainable Access for Rural India (SARI) project Partners: MIT Media Labs, Harvard University, IIT-

Chennai, 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

19

20

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

21

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

22

Channel Usage

Apr 2001

Branch41%

ATM51%

Internet4%

Call Centre

4%

J an 2002

Cops7%

Branch35%

Internet5%

ATM47%

Call Centre

6%

Branch ATM Call Centres Net COPS

J an-02 18% 82%Apr-01 19% 81%

J an-02 41% 33% 9% 7% 10%Apr-01 50% 39% 6% 5% Nil

Cash Transactions

Non Cash Transactions

NilNil

23

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

24

Agenda

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

25

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

26

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

27

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

28

Agenda

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

29

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

30

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

31

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

32

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 !!!