e-Finance for Development - An Indian Perspective

1. 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

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 & Delivery Processes all trade related requests for a city • Information • Logging requests • Drop box point • High value cash transactions Call centre Branch Trade finance factory • Handles exceptions • Cross sells • Monitors accounts Processes all pure credit related requests Account/ Relationship manager Customer Credit factory • Provide support backbone for all transaction requests • Services doorstep deliveries • For all transactions except high value cash • Information • Logging requests RPC/CPC ATM Internet “Processing centres*”

10. 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

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. 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

13. Input Merchant Store • Credit • Debit • e-purse Farmer Service Center Collect Money Online update of Bank accounts Smart card solution for FSCs Bank Account/ Credit History Output Sale

14. 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

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

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

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

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

33. e-enabling the economy Thank You !!!