e-Finance for Development - An Indian Perspective Monterrey, Mexico March 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

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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 Information Logging requests Call centre Customer Branch ATM For all transactions except high value cash Drop box point High value cash transactions Handles exceptions Cross sells Monitors 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 Information Logging requests Internet Processing centres*

10 Online Products e-banking in ICICI ICICI Markets online FX, Debt, SME Portal Corporate Infinity online transfer/ settlement system Bill Junction Utility bill payments Business Multiplier web interface ICICI Direct and ICICI Select Pay Seal electronic 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 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

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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 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

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20 Internet Banking First Bank in India to launch website First Bank in India to launch Internet Banking First Bank in India to launch online bill payment 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

e-enabling the economy Thank You !!!