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8/3/2019 Ghosh ICICI Bank

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New Technologies for Small andMedium - Size Enterprise Financing

Washington D.C.December 6, 2002


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ICICI Bank - The e-Universal Bank

Assets of US $21 bn

Globally held(ADR, FII own47% stake )

Second

largest Bankin India -Technology

LeaderRated byMoodys above

sovereignrating

First Indian

Bank to belisted on NYSE


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Retail FinancialServices Corporate FinancialServicesTermLoans

ProjectFinance

CommercialBank

InvestmentBank

VentureCapital

Genl.Insurance

ITServices

CarLoans

Mortgages

CreditCards

Personalloans

Deposits

Life Insurance

Mutualfunds

A universal bankingpowerhouse...


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Establishing an internationalpresence

Canada UK

UAE

Singapore

USA China

Phase I : Offices opened/to be opened shortly

Phase II : Geographies under advanced stage of evaluation


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Smart Card

Technology

Universal Banking Theme

Empanelled expertfor tax and

accounting advice

Web Trading

InternetBanking

MobileBanking

Call Centre

B2B SolutionsPortals

e-Commerceinitiatives

Leveraging Technology to enhance delivery capabilities


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SME Sector

SME Sector

Higher productivityHigh quality- greater competitiveness

Sustainable revenue models

Higher productivityHigh quality- greater competitiveness

Sustainable revenue models

Use of

Technology

Use ofTechnology

Enables virtuous cycle of technology,

innovation, competitiveness, openness to

market economy and globalisation

Enables virtuous cycle of technology,

innovation, competitiveness, openness tomarket economy and globalisation

Virtuouscycle

Virtuouscycle

Single largest employerFastest to adopt innovation

Ensures equitable wealth distribution

Single largest employerFastest to adopt innovation

Ensures equitable wealth distribution

Importance of SME Sector in Technology


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Financing options for SME

Uptobreakeven

Long

Sustainable

growth

VC / Bank /Debt marketsBankFinance /Debt/ IPO

Shortterm

Growth Loan/ Debt/IPO

Mid Term

Creation PromotersLongSeed capital /

Subsidy

SMELifecycl

e

Suitable

type

Duration offinancing

required

Suitable

Channel

Start upVC / Angelinvestor /Subsidy/

Tax incentive

Long VC /Promoters

Maturity

Public Debt/CapitalMarket

Shortterm

VC / Angel investor /Subsidy/ Tax incentive/

VC/ AngelInvestor /Promoters

VC / Bank /Promoters

CapitalMarket/ Debt

markets


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Financing for SMEs

Financing for SMEs

Unit Level -Standalone Cluster Financing

Uniquefor

cluster

Productis

ed


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Financing intervention fortechnology

Financing intervention for technology can happen at 2levels

Unit Level

Direct Finance to SMEbyVCEquityLoansCapital Markets

Cluster & System Level

Cluster financing

B2B models

Internet payments inclosed

user groups

Smart cards in closedloops

Technology based

financing solutions


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Constraints in Financing SMEs..

Banks perception of SMEs

Lack of transparency of

information

Low technology

Low capitalization /Collaterals

Vulnerable to marketchanges

High risk sector

Low profitability

Banks perception of SMEs

Lack of transparency of

information

Low technology

Low capitalization /Collaterals

Vulnerable to marketchanges

High risk sector

Low profitability

SMEs perception of Banks

No special schemes for

technology financing

Inadequate and delayedcredit Cumbersome procedures Insistence on collateralsand

guarantees High rates of interest

SMEs perception of Banks

No special schemes for

technology financing

Inadequate and delayed

credit

Cumbersome procedures Insistence on collateralsand

guarantees High rates of interest


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SME Financing

Approaches to SME FinancingPrudent Segmentation

Cash flow based evaluation

Multiple channels offerings by leveraging

Technology

Migration to non-branch channels

Approaches to SME Financing

Prudent Segmentation

Cash flow based evaluation

Multiple channels offerings by leveraging

Technology

Migration to non-branch channels

Key aspects

Measurement of risk and mitigationReduction in cost of transactions

Delivery cost and reach

Key aspects

Measurement of risk and mitigationReduction in cost of transactions

Delivery cost and reach


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Enabling Framework for TechnologyFinancing

TechnologyFinancing

Financing QualityInitiatives

Priority SectorMandatedLending

Specialised Stock-markets

Competitivepressure to

encourageinnovation

Protection tonascent technicalunits

Technicaleducation/ skilledmanpower

Fiscal Measures,System andInfrastructure

ClusterDevelopment

VC/ Angelincubators

Institutionalframework ofnodal agencies forrefinance/guarantees

Industrialextensionservices

Enabling

technologytransferincentives


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BIS 2 Proposals Advantage SME

Banks free to evolve capital allocation accordingto internal rating based approach

SMEs with turnover less than EUR 50 mn will

have explicit lower capital charge

Small businesses with loan size less than EUR 1 mnwith collateral will get beneficial capital allocation

Recognition to collaterals, credit derivatives,

guarantees for allocating capital

Banks free to evolve capital allocation accordingto internal rating based approach

SMEs with turnover less than EUR 50 mn will

have explicit lower capital charge

Small businesses with loan size less than EUR 1 mn

with collateral will get beneficial capital allocation

Recognition to collaterals, credit derivatives,

guarantees for allocating capital

Risk sensitive capital framework holds promise that

the regulatory framework will support SME lending by

banks

Risk sensitive capital framework holds promise thatthe regulatory framework will support SME lending by

banks


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ICICI Bank Initiatives

SME Portal - Internet Banking Gateway for B2B

sites

SME Portal - Internet Banking Gateway for B2Bsites

Supply Chain Financing on B2B loopsSupply Chain Financing on B2B loops

Subsidiary network role in technology financingSubsidiary network role in technology financing


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Case Study I - Supply Chain B2BSolution

Purchase

Order

Purchase

Order

ERP

Interface

ERP

Interface

DespatchInvoices

DespatchInvoices

Dealer

Overdraft

Account

Dealer

OverdraftAccount

ICICI Bank

SME

Dealer

SMEDealer

ABC Ltd


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Case Study II - Smart cardsolution for FSCs

Bank Account/Credit History

Output Sale

Collect Money

Farmer Service Center

Credit

Debit

e-purse

MerchantStoreInput

Online update of Bank accounts


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Innovative Delivery

Mechanisms

Innovative Delivery

Mechanisms

Sustainable Access forRural India (SARI)

projectPartners: MIT Media Labs,

Harvard University, I-Gyan,

Providing reliable

Internet accessthrough Kiosks usingcorDECT WiLL

100 kiosks managed byentrepreneurs to be set-

up

Providing e-governance, and

information servicesDelivering banking

services through Internetkiosks

Innovations in Delivery Channels


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Other initiatives - I

e-banking in ICICI Bank

ICICI Marketsonline FX, Debt,

SME Portal

Corporate Infinity

online transfer/settlement

system

Bill JunctionUtility billpayments

Roaming CurrentAccount

web interface

ICICI Direct and

ICICI Select

Pay Sealelectronic

payment system


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Other Initiatives - II

OTHER INITIATIVES Cluster Financing

Fleet card for transporters

Smart card for retailers

Escrow payment services

Facilitating e-Sales Tax/

Octroi payments

Shopping Mall arrangements


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ICICI Eco-Net Internet &Technology Fund

ICICI Infotech Services

Limited

ICICI InformationTechnology Fund

ICICI Web Trade Limited

ICICI OneSource Limited

ICICI Equity Fund

Business process

outsourcing Call Centre Activities

Internet based broking

services

Software consultingdevelopment

IT enabled services IT infrastructure

Investment in equity Investment in securities of

medium sized IT companies

Investment in equity Investment in unlisted

internet & technologycompanies

Investment in equity Investment in medium

sized IT companies

Subsidiary network support technologyfinancing


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Our recommendations

Dedicated InstitutionsDedicated Institutions

Fiscal benefits to attract VC fundsFiscal benefits to attract VC funds

Lifecycle approach to determine whichchannel to fund SME requirementLifecycle approach to determine whichchannel to fund SME requirement

Public-private partnershipPublic-private partnership

Banks to be permitted to use non-bankinfrastructure to deliver services

Banks to be permitted to use non-bankinfrastructure to deliver services


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Road Ahead

Liberalised normsfor tech transferJV with foreign VC

Directed lending norms

to include all techintensive SME

Re-finance ,

guarantees,subsidies, VC funds

Tax incentives

Infrastructure statusto IT, Bio-tech,telecom

Public - Private Partnership


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Thank You

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