ghosh icici bank
TRANSCRIPT
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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