1. Consumer Banking in India : The ICICI Experience
June 17, 2008

2. Contents India: Consumer Banking Landscape
ICICI Bank: Consumer Finance Experience
Risk Management in Consumer Finance
Learnings’ for International Banking

3. Changing Consumer Demographics....
Increasingly affluent, with a bulging middle class
The youngest population in the world
65% of population below 35 years of age
Increasing literacy levels
Higher adaptability to technology
Urbanisation is a continuing trend
Increasing "consumption" mindset in India
Consumer Demographics of India

4. …driven by a growing consuming class…
2000: Per capita GDP US$ 500
2007: Per capita GDP US$ 1,000
2015: Per capita GDP US$ 1,500
Consuming class population estimated at about 260 mn1
Consuming class population estimated at about 350 mn1
Consuming class population estimated at about 600 mn1
35% growth
70% growth
From per capita GDP of US$ 1,000 to US$ 1,500: consuming population to grow manifold
Estimates based on NCAER data. Consuming class comprises middle and high income households 4 4

5. …with an upward migration of incomes..
(households in million)
FY1996
FY2002
FY2010
Estimate
Middle income 33 50 98
High income 1 3 10
Middle income : US$ 2, ,670 per household p.a.
High income : > US$ 11,670 per household p.a.
Rising affluence and growth of the consuming class
NCAER data for top 24 cities in India shows migration to higher income levels growing at over 40% per annum

6. ..and low market penetration..
Life Insurance Penetration
Mutual Funds Penetration
Source: Swiss Re
Source McKinsey
Mortgage Market Penetration
Retail Credit / GDP at 13% as compared to 60%* in Malaysia & 90%* in the US
113 mn people are likely to retire by 2016
Need for retirement planning now
Source McKinsey
* At the end of 2005, Source IMF

7. ..offering banks a huge opportunity..
US$ bn
114
30% 88
40% 62
Robust growth in consumer credit in India
Across product segments
Growth to moderate to 12-15% due to the large base effect
Source: Reserve Bank of India

8. ..and resultant Economic growth…
Rising consumption
Multiplier effect
Rising income
Rising production
GDP growth
Nominal Consumption expenditure growth tracking nominal GDP growth
The multiplier effect at work
India on a high growth trajectory with an average GDP growth rate of 8.7% over the last four years
Expected growth rate of 8-8.5% during FY 09

9. Contents ICICI Bank: Consumer Finance Experience
India: Consumer Banking Landscape
ICICI Bank: Consumer Finance Experience
Risk Management in Consumer Finance
Learnings’ for International Banking

10. Retail finance: the ICICI experience
ICICI Limited : 1955 to 1999
One of India’s leading Financial Institutions
Single Product - Focused on project finance
Well recognised brand in the corporate segment
No presence in the consumer segment

11. Key challenges at the time of entry into consumer finance
Well entrenched competition
Change in mindset required
Focus on decentralisation & empowerment
No experience in consumer finance
Finding the right way to approach the market was a key challenge
Lack of scale
Low relevance for intermediaries and vendors
High cost of funds
Creating a retail organisation

12. Bank’s consumer finance strategy
Aspirations
S t
r o n g
B r a n d
Multi product offerings
The one stop financial shop
Product differentiation
Pan-India provider of full suite of retail products
Sound selling strategy
Leveraging corporate & channel relationships
Focus on cross selling
Multi channel offerings
Technology led delivery of products
Market leadership
&
Scale
Efficient operations
Superior service quality at optimum cost

13. Establishing new paradigm in consumer credit distribution…
Doorstep delivery
Point-of-sale delivery
Agents taking product to the customer
Availability of credit at the customer’s home or office
Strong channel partner network
Manufacturers, dealers, realtors
Availability of credit at point-of-sale of product
“Enhanced customer convenience” the key selling proposition

14. …and achieving economies of scale….
Particulars
Before 1995
Now
Product Portfolio
Single product
complex retail & corporate finance products
Branches/ Offices 6
>1,300
ATMs -
~4,000
Employee Base
1,000
>40,000
Customer Base
3,000
31 Mn
Internet customers -
18.3 Mn

15. …by leveraging technology channels…
Usage
20001
Usage
20081,2
Branches2
94% 7%
ATMs & POS terminals 3%
37%
Internet 2%
21%
Call centre & mobile banking 1%
30%
ICICIDirect – The Online trading platform caters to more than 1.4 million customers handling about 3,50,000 trades a day
For savings accounts.
Excluding 5% of transactions processed at centralised operations centres

16. … with a focus on cross-sell…
Deposits
Credit card
Bonds
Loans
Pvt. banking
Debit cards
Insurance
Mutual funds
Customer service & sales force automation
Campaign management solutions
Live data warehouse
Walk in customers
Private banking customers
Salary account customers
Corporate
banking customers
To achieve market leadership in consumer finance in India

17. The ICICI Group today Largest private sector bank in India
Largest consumer credit provider
Largest private sector life insurer
Largest private sector general insurer
Leading asset management company
Largest private equity & venture fund
Leading securities and broking company
Consolidated banking assets of US$121 bn; market cap of US$ 20bn

18. Contents Risk Management in Consumer Finance
India: Consumer Banking Landscape
ICICI Bank: Consumer Finance Experience
Risk Management in Consumer Finance
Learnings’ for International Banking

19. Risk Management Practices
Robust Credit Assessment & Practices
Customer identification (KYC) a regulatory requirement
Stringent credit practices for customer assessment
Income documents used to assess ability to pay
Fixed Obligation to Income Ratio as % of monthly salary a key parameter
Loan to Value ratios to ensure customer equity
Bureau checks - No lending to people with bad credit history
Validation of information by physical and telephonic checks
Upfront communication of Most Important Terms i.e. interest rate, tenure, etc..

20. Risk Management Practices (Contd..)
Strong Credit Policies
Non existence of negative amortization products / interest only products
Portfolio controls using risk analytics
Collection processes & policies
Focus on Customer Service
Compliance with Banking Codes and Standards Board of India (BCSBI)
Alternative mechanisms for dispute resolution – “DISHA”
Customer education on “Safe Banking”
Regulatory requirements
Risk weights on most retail assets higher than Basel II requirements
High requirements for general provisions
General provisions on unsecured loans at 2%

21. Contents Learnings’ for International Banking
India: Consumer Banking Landscape
ICICI Bank: Consumer Finance Experience
Risk Management in Consumer Finance
Learnings’ for International Banking

22. International Opportunity : Key Drivers
Leveraging Indian skill and cost advantages for global competitiveness
Seeking ethnic familiarity and India linkage, but with internationally-benchmarked products and services
Leveraging the India base
Use of technology to support business growth at minimum incremental cost
Agnostic approach: no mainframes
Substantially lower technology costs than global banks
Leveraging Technology Capital

23. ICICI Bank: Low cost technology as competitive advantage
* ICICI Bank spending as 100 units per account
Source: Mckinsey

24. Leveraging Technology in UK & Canada
Direct banking model: Easy-to-use, completely online banking account
Strategy: Leveraging the experience of having executed a successful internet banking strategy in India
Account opening forms processed in India
All treasury-related back-office operations are done out of Mumbai
Cost effective and scaleable customer acquisition and servicing model
Raised US$ 7.4 bn of retail deposits

25. ICICI Bank Remittance services
Inward remittances facilities into India from over 40 countries worldwide
Leveraging state of art technology
Wide product with low cost and innovative online as well as offline channels
ICICI Bank pioneered online money transfers through Money2India.com
Instant transfer products launched from ICICI Bank overseas branches/ subsidiaries
24X7 customer service accessibility through and phone
Plans to extend remittance expertise in over 30 non-India remittance corridors
ICICI Bank awarded the Asian Banker Award for ‘Excellence in Remittance business’ in Asia Pacific region

26. Our global presence UK
Belgium
Russia
Canada
Germany
China
USA
Hong Kong
Bahrain
Bangladesh
Qatar
Malaysia
UAE
Thailand
Mumbai
Singapore
Sri Lanka
Indonesia
South Africa
Subsidiary
Representative Office
Overseas Branch
Largest international balance sheet among Indian banks

27. In summary Consumer finance opportunity in India strong
Strong consumption cycle
Growing consuming class
Rising incomes
ICICI Bank identified retail banking as an opportunity for growth
Focus on customer convenience
Developing and leveraging technology channels
Achieved market leadership in consumer finance in India
International banking as the next growth horizon
Leveraging technology for direct banking services
Replicating customer orientation in NRI services and remittance business

28. Thank you