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

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 3 High risk perception has led to high borrowing

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

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

SME - Service & Delivery

box point High value cash transactions Branch Call centre

Information Logging

requests

Processes all trade related requests for a city

Trade finance factory

exceptions Cross sells Monitors accounts

Customer

Account/ Relationship manager

Processes all pure credit related requests Credit factory

For

all transactions except high value cash Internet

Information

ATM

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

Online Products
Bill Junction Utility bill payments Pay Seal electronic payment system Corporate Infinity online transfer/ settlement system

e-banking in ICICI
Business Multiplier web interface

ICICI Markets online FX, Debt, SME Portal

ICICI Direct and ICICI Select

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Agri - Micro-credit initiatives

Innovative structure for micro-credit in rural areas

the reach problem Lower administration costs

Channels for delivering micro-credit

companies Seed producers Input companies NGOs and micro credit institutions
These channels help build volumes, reduce costs and monitor credit risk

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Agri - Farmer Service Centres (FSCs)

FSC provides one stop solution to the farmer

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

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Smart card solution for FSCs

Farmer Service Center

Bank Account/ Credit History

Output Sale
Collect Money

Online update of Bank accounts

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Smart Cards An alternative

Difficulty in rural banking

of Cash

of idle cash Cost of cash handling infrastructure

spreads

Solutions through
Elimination/

reduction of cash handling Innovation of low cost delivery channels

Smart Card - an ideal vehicle

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Smart Cards at ICICI

Smart Cards launched in October 2000

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

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Social Initiatives ICICIcommunities

Give Online: On-line donation channel

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

100 exquisite hand crafted products available The only facility of its kind available to

non-profits in India
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Innovations in Delivery Channels

Sustainable Access for Rural India (SARI) project

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 setup Providing e-governance, communication and information services

Possibility of delivering banking services through Internet kiosks being explored

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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

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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

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Channel Usage
Call Centre 2 %
Internet 2 %

Branch 2% 2

Internet Call 2 % Centre 2 %

Cops 2 %

Branch 2% 2

ATM 2% 2

Apr 2222
A TM 2% 2 2% 2 2% 2 2% 2
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ATM 2% 2

J an 2222
Net Nil Nil 2 % 2 % 2 % 2 % 2% 2 Nil COP S

Branch Cash Transactions J an-22 2% 2 Apr-22 1% 1 Non Cash Transactions J an-22 2% 2 Apr-22 2% 2

Call Centres

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

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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:

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

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Salient features of IT Act

Drawn as per the UN Model Law for IT Legal recognition to

records Electronic contracts Digital signature

Appointment of certifying authority and controller

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

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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

Protection Negotiable Instrument Act Acceptance of electronic based document

Full Account Convertibility Exchange Control Laws Strengthening the Intellectual Property Laws

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Creating the e wave Infrastructure

Encourage internet/ e usage

over Internet Improvement in telecom infrastructure Tax incentives for internet based transaction Incentive for electronic settlement

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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
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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

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e-enabling the economy Thank You !!!