ICICI BANK LTD by wuyunyi

VIEWS: 6 PAGES: 24

									New Technologies for Small and Medium -
              Size Enterprise Financing


                           Washington D.C.
                          December 6, 2002
ICICI Bank - The e-Universal Bank



                                        Globally held
  Assets of US $
                                       (ADR, FII own
      21 bn
                     Second largest     47% stake )
                     Bank in India -
                      Technology
                        Leader
     Rated by                             First Indian
   Moodys above                           Bank to be
  sovereign rating                     listed on NYSE



                             2
       A universal banking powerhouse...

     Retail Financial Services       Corporate Financial Services

         Car Loans                              Term Loans

      Mortgages                                 Project Finance

    Credit Cards                                 Commercial Bank

Personal loans                                      Investment Bank

      Deposits                                    Venture Capital

     Life Insurance                            Genl. Insurance

        Mutual funds                            IT Services



                                 3
  Establishing an international presence


Canada                                  UK

 USA                                                             China

                                                        UAE


                                                              Singapore




         Phase I   : Offices opened/to be opened shortly
         Phase II : Geographies under advanced stage of evaluation
                                                    4
   Universal Banking Theme
   Leveraging Technology to enhance delivery capabilities

                     Empanelled expert for
                       tax Solutions
                      B2Band accounting
   Smart Card                advice             Portals



                                                 e-Commerce
Web Trading            Technology                 initiatives


      Internet                                Call Centre
      Banking               Mobile
                            Banking
                                    5
Importance of SME Sector in Technology

             Single largest employer
SME Sector   Fastest to adopt innovation
             Ensures equitable wealth distribution


  Use of     Higher productivity
             High quality- greater competitiveness
Technology
             Sustainable revenue models

             Enables virtuous cycle of technology,
 Virtuous    innovation, competitiveness, openness to
  cycle      market economy and globalisation



                             6
      Financing options for SME
   SME           Duration of
                                      Suitable type      Suitable Channel
 Lifecycle        financing
                  required

                    Long              Seed capital /
 Creation                                                 Promoters
                                        Subsidy
                                    VC / Angel               VC /
Start up           Long              investor /           Promoters
                                      Subsidy/
                                   Tax incentive           VC/ Angel
Upto                Long        VC / Angel investor /      Investor /
breakeven                      Subsidy/ Tax incentive/     Promoters

                  Mid Term                                VC / Bank /
 Growth                              Loan/ Debt/ IPO      Promoters

Sustainable      Short term          Bank Finance /      VC / Bank / Debt
  growth                               Debt/ IPO             markets


Maturity         Short term        Public Debt/          Capital Market/
                                  Capital Market          Debt markets


                                 7
Financing for SMEs


               Financing for SMEs



Unit Level -
                                    Cluster Financing
Standalone



                     Unique for               Productised
                      cluster




                          8
      Financing intervention for technology


 Financing intervention for technology can happen at 2 levels

                                        Cluster & System Level
        Unit Level
                                      •Cluster financing
  Direct Finance to SME by
                                      •B2B models
•VC
•Equity                               •Internet payments in closed
•Loans                                   user groups
•Capital Markets                      •Smart cards in closed loops
                                      •Technology based
                                        financing solutions




                                 9
Constraints in Financing SME’s..

                                  SME’s perception of Banks
Banks perception of SME’s
                                  • No special schemes for
   Lack of transparency of             technology financing
    information                      • Inadequate and delayed
   Low technology                      credit
   Low capitalization / Collaterals • Cumbersome procedures
   Vulnerable to market changes • Insistence on collaterals
   High risk sector                 and
                                        guarantees
   Low profitability
                                     • High rates of interest



                                   10
SME Financing
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 mitigation
       Reduction in cost of transactions
       Delivery – cost and reach


                                11
         Enabling Framework for Technology Financing
                                                                Financing Quality
                                   Enabling technology          Initiatives
       Technical education/
       skilled manpower            transfer incentives

 Fiscal Measures,                                                        Priority Sector
 System and                                                              Mandated Lending
 Infrastructure


Cluster Development                 Technology                         Specialised Stock-
                                                                       markets
                                     Financing

VC/ Angel incubators                                                    Competitive pressure
                                                                        to encourage
                                                                        innovation
           Institutional
           framework of nodal      Industrial extension   Protection to nascent
           agencies for            services               technical units
           refinance/ guarantees

                                                  12
BIS 2 Proposals – Advantage SME

Banks   free to evolve capital allocation according
 to internal rating based approach
SME’s 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


                                 13
ICICI Bank Initiatives

SME Portal - Internet Banking Gateway for B2B
sites



Supply Chain Financing on B2B loops




Subsidiary network role in technology financing


                         14
15
Case Study I - Supply Chain B2B Solution

                                ABC Ltd
               ICICI Bank
                                Purchase
                                  Order
                Dealer
  SME          Overdraft
 Dealer        Account             ERP
                                 Interface




                                Despatch
                                 Invoices




                        16
    Case Study II - Smart card solution for FSCs

                                 Merchant       • Credit
                        Input
                                  Store         • Debit
                                                • e-purse



                                                 Bank Account/
Farmer Service Center                            Credit History



                        Output Sale


        Collect Money                 Online update of Bank accounts


                                17
Innovations in Delivery Channels

                            Sustainable Access for Rural
                                India (SARI) project

                              Partners: MIT Media Labs,
                              Harvard University, I-Gyan,

                                      Providing reliable Internet
                                       access through Kiosks
      Innovative Delivery               using corDECT WiLL
         Mechanisms
                                      100 kiosks managed by
                                    entrepreneurs to be set-up

                                    Providing e-governance,
                                    and information services
                              Delivering banking services
                                through Internet kiosks


                             18
          Other initiatives - I

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




                        e-banking in ICICI Bank


                                                   Roaming Current
   ICICI Markets
                          ICICI Direct and ICICI      Account
  online FX, Debt,
                                  Select            web interface
    SME Portal




                                        19
Other Initiatives - II

                         Fleet card for transporters

                           Smart card for retailers
                          Escrow payment services
OTHER INITIATIVES
                               Cluster Financing
                          Facilitating e-Sales Tax/
                               Octroi payments

                         Shopping Mall arrangements


                          20
Subsidiary network support technology financing

                                   Software consulting development
 ICICI Infotech Services           IT enabled services
         Limited                   IT infrastructure

ICICI Web Trade Limited            Internet based broking services



                                   Business process outsourcing
ICICI OneSource Limited            Call Centre Activities


   ICICI Information               Investment in equity
                                   Investment in medium sized IT
   Technology Fund                  companies

   ICICI Equity Fund               Investment in equity
                                   Investment in securities of
                                    medium sized IT companies

ICICI Eco-Net Internet &           Investment in equity
                                   Investment in unlisted internet &
    Technology Fund                 technology companies

                           21
Our recommendations

  Lifecycle approach to determine which channel to
  fund SME requirement

  Fiscal benefits to attract VC funds

  Dedicated Institutions


  Public-private partnership

  Banks to be permitted to use non-bank
  infrastructure to deliver services

                           22
     Road Ahead
                            Directed lending norms
                               to include all tech
                                 intensive SME




    Tax incentives
                                                        Re-finance ,
Infrastructure status
   to IT, Bio-tech,
                        Public - Private Partnership    guarantees,
                                                       subsidies, VC funds
        telecom




                               Liberalised norms
                                for tech transfer
                              JV with foreign VC




                                          23
Thank You

								
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