UNIT 14 CASE STUDY :

SERVING THE GLOBAL INDIAN*

Objectives
This unit is a case study on financial services marketing and relates to various
issues concerning the banking industry in India. After studying this case, you
should be able to :
understand the changes coming out in the Indian Banking Sector,
examine different products being offered in retail as well as corporate
segments of the banking industry, and
explore strategies for globalization of Indian Banks.

Structure
14.1 Introduction
14.2 Changing Face of Indian Banking Industry
14.3 Transformation in the Indian Banking Sector
14.4 ICICI Bank Ltd
14.5 Retail Banking Business of ICICI Bank
14.6 Corporate Banking Business of ICICI Bank
14.7 Organisation Structure of ICICI Bank
14.8 The Global Growth Strategies of ICICI Bank
14.9 Discussion Questions
14.10 Appendix

14.1 INTRODUCTION
Mr. Bhargava Dasgupta heads the international business operations of ICICI
bank and he has to travel a lot these days. He is busy in building the ICICI
bank’s next big platform- globalization. He feels that it is impossible to reach to
the clients everywhere across the world physically for providing the financial
services, so it will be strategically sound to leverage the relationships with other
banks in serving the global consumer. The success of the bank in the domestic
market is largely credited to the customer orientation, high quality of customer
service, innovative financial product introductions and active involvement in
serving the emerging and latent needs of the Indian consumer.

They want to take their domestic market success to the global level. The
recent spot of operations by the bank is an indicator of becoming a global
financial service provider. ICICI bank has opened its first overseas branch in
Singapore in 2003; in mid 2003, they opened the representative offices in
London. They are close to acquire properties by the year 2003 end in Pundong
and have already procured properties in East London to start their business
operations including strategies to open offices in Toronto and Bahrain.

They have to decide about how to reach out to the global Indian in the large
part of the globe within their financial limits compared to global giants like ABN

* This case has been developed for academic purpose, for the students to have an
understanding of financial services marketing. It has been prepared from the data available
from public domain and interviews conducted in the bank by the author. This case is not to
illustrate effective or ineffective handling of administrative situation. 1
SectoralAMRO,
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Citi Bank
and other banks. Their global rollout expenditures are around Case Study:
Serving the Global Indian
Rs. 450 crores (100 Million USD) which they can fund from the domestic
balance sheet. The subsidiaries in Canada and England have already used
70 million USD of this capita.

They are also toying with an idea that some of the representative offices can
be converted to subsidiaries where they will be looking for their own capital for
operation in future period than relying on the parent company capital.
Mr. Dasgupta is of the opinion that the entry strategy in different countries is a
function of the local regulations. Many countries have the rules to run the bank
as a representative office offshore branch before they are permitted to be a
subsidiary of the parent company.

ICICI bank’s biggest business was in the area of industrial lending and few
years before they have derisked the portfolio in entering into the consumer
finance business quite aggressively. They are in the process of next growth
opportunity by serving the financial needs of the global Indian consumer. The
banks target is to make this SBU (global business) contributing one third of the
bank’s business in the coming five years (by 2008). Mr. Bhargav Dasgupta was
pulled from the Venture capital subsidiary to head this global financial service
initiative. Mr. Dasgupta is scheduled to give a presentation to the board about
the strategy to make this initiative achieve its goal. Prior to preparing his plan
for the proposed meeting, he thought of giving a bird’s eye view on the bank’s
emergence and growth as a strong player in the domestic market and also
evaluating the possible alternatives before him for serving the global Indian
consumer.

14.2 CHANGING FACE OF INDIAN BANKING

INDUSTRY
Financial sector reforms were initiated in India in early 90s with a view to
improving efficiency in the process of financial intermediation; these reforms
have facilitated greater choice for consumers, who have become more
discerning and demanding, compelling banks to offer a broader range of
products through diverse distribution channels. The traditional face of banks as
mere financial intermediaries has since altered and risk management has
emerged as their defining attribute.

The Indian financial system is identified with two set of institutions viz.
regulators and intermediaries. Regulatory Institutions are statutory bodies
assigned with the job of monitoring and controlling different segments of the
Indian Financial System (IFS). These Institutions are given adequate powers
through the vehicle of their respective Acts to enable them to supervise the
segments assigned to them. It is the job of the regulator to ensure that the
players in the segment work within recognized business parameters maintain
sufficient level of disclosure and transparency of operations and do not act
against the national interests. At present, there are two regulators directly
connected to Indian financial system. They are Reserve Bank of India and
Security and Exchange Board of India. Intermediary financial institutions include
banking and non banking financial institutions.

The banking financial institutions participate in the economy’s payments

mechanism, i.e., they provide transaction services, their deposit liabilities
constitute a major part of the national money supply, and they can, as a whole,
create deposits or credit, which is money. Banks, subject to legal reserve
requirements, can advance credit by creating claims against themselves. Other
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financial institutions can lend only out of resources put at their disposal by the
savers.

Financial institutions are the primary source of long term lending for large
projects. Conventionally, they raised their resources in the form of bonds
subscribed by RBI, Public Sector Enterprises, Banks and others. With the
drying up of concessional long term operations funds from the Reserve Bank in
the early 1990s, financial institutions have increasingly raised resources at the
short end of the deposit market.

The Banking Segment in India functions under the regulation of Reserve Bank
of India. This segment broadly consists of commercial banks and co-operative
banks. Non-banking Financial Institutions carry out financing activities but their
resources are not directly obtained from the savers as debt. Instead, these
Institutions mobilize the public savings for rendering other financial services
including investment. All such Institutions are financial intermediaries and when
they lend, they are known as non-banking financial intermediaries (NBFIs) or
investment institutions. Some of the major non-banking financial intermediaries
include Unit Trust Of India, Life Insurance Corporation (LIC) and General
Insurance Corporation (GIC). Apart from these NBFIs, another part of Indian
financial system consists of a large number of privately owned, decentralized,
and relatively small-sized financial intermediaries. Most work in different,
miniscule niches and make the market more broad-based and competitive.
While some of them restrict themselves to fund-based business, many others
provide financial services of various types. The entities of the former type are
termed as “non-bank financial companies (NBFCs)”. The latter type is called
“non-bank financial services companies (NBFSCs)”.

The commercial banking structure in India consists of two major set of players
scheduled commercial banks and unscheduled banks. The scheduled commercial
banks constitute those banks which have been included in the Second Schedule
of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those
banks in this schedule which satisfy the criteria laid down vide section 42 (60)
of the Act. This sub sector broadly consists of private sector banks, foreign
banks. The banking sector is dominated by Scheduled Commercial Banks
(SCBs). As at end-March 2002, there were 296 Commercial banks operating in
India. This included 27 Public Sector Banks (PSBs), 31 Private, 42 Foreign and
196 Regional Rural Banks. Also, there were 67 scheduled co-operative banks
consisting of 51 scheduled urban co-operative banks and 16 scheduled state
co-operative banks.

14.3 TRANSFORMATION IN THE INDIAN BANKING

SECTOR
Financial sector reforms were initiated in India in early 90s with a view to
improving efficiency in the process of financial intermediation, enhancing the
effectiveness in the conduct of monetary policy and creating conditions for
integration of the domestic financial sector with the global financial system. The
first phase of reforms had an approach of ensuring that ‘the financial services
industry operates on the basis of operational flexibility and functional autonomy
with a view to enhancing efficiency, productivity and profitability’. The second
phase, guided by Narasimham Committee II, focused on strengthening the
foundations of the banking system and bringing about structural improvements.
Among others, the important issues relate to corporate governance, reform of
the capital structure (in the context of Basel II norms), retail banking, risk
management technology and human resources development
3
SectoralThe
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significanttransformation of the banking industry in India is evident from Case Study:
Serving the Global Indian
the changes that have occurred in the financial markets, institutions and
products. While deregulation has opened up new vistas for banks to augment
revenues, it has entailed greater competition and consequently greater risks.
Cross-border flows and entry of new products, particularly derivative
instruments, have affected significantly on the domestic banking sector, forcing
banks to adjust the product mix, as also to effect rapid changes in their
processes and operations in order to remain competitive in the global
environment. These developments have facilitated greater choice for consumers,
who have become more discerning and demanding compelling banks to offer a
broader range of products through diverse distribution channels. The traditional
face of banks as mere financial intermediaries has since altered and risk
management has emerged as their defining attribute.

The Growth of Universal Banking

A universal bank is a supermarket for financial products. Under one roof,
corporate can get loans and avail of other services, while individuals can bank
and borrow. To convert itself into a universal bank, an entity has to negotiate
several regulatory requirements. Therefore, universal banks in the Indian context
have been in the form of a group offering a variety of services under an
umbrella brand such as ICICI or HDFC. In universal banking, large banks
operate extensive networks of branches, provide many different services, hold
several claims on firms (including equity and debt), and participate directly in
the corporate governance of firms that rely on the banks for funding or as
insurance underwriters.

14.4 ICICI BANK LTD

ICICI Bank is India’s second-largest bank with total assets of about Rs. 1
trillion and a network of about 540 branches and offices and over 1,000 ATMs.
ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and
through its specialized subsidiaries and affiliates in the areas of investment
banking, life and non-life insurance, venture capital, asset management and
information technology.

ICICI Bank’s equity shares are listed in India on stock exchanges at Chennai,
Delhi, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).

One of the biggest mergers in the Indian financial system has been the merger
of the ICICI with ICICI bank, which helped them move towards the universal
banking. The management was of the view that the merger of ICICI with
ICICI Bank would create the optimal legal structure for the ICICI group’s
universal banking strategy. The merger would enhance value for ICICI
shareholders through the merged entity’s access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the
payments system and provide transaction-banking services. The merger would
enhance value for ICICI Bank shareholders through a large capital base and
scale of operations, seamless access to ICICI’s strong corporate relationships
built up over five decades, entry into new business segments, higher market
share in various business segments including fee-based services and access to
the vast talent pool of ICICI and its subsidiaries.

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In October 2001, the Boards of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly owned retail finance subsidiaries,
ICICI Personal Financial Services Limited and ICICI Capital Services Limited,
Shareholders of ICICI and ICICI Bank approved the merger in January 2002,
the high court of Gujrat in March 2002 and the High Court of Judicature at
Mumbai and the Reserve Bank of India in April 2002. Consequent to the
merger, the ICICI group’s financing and banking operations, both wholesale and
retail are integrated as single entity.

14.5 RETAIL BANKING BUSINESS OF ICICI BANK

Retail banking is a key element of ICICI’s growth strategy. With upward
migration of household income levels, increasing affordability of retail finance
and acceptance of use of credit to finance purchases, retail credit has emerged
as a rapidly growing opportunity for banks that have the necessary skills and
infrastructure to succeed in this business. ICICI Bank has capitalized on the
growing retail opportunity in India and has emerged as a market leader in retail
credit. The dimensions of the retail strategy include innovative products, parity
pricing, customer convenience, strong processes and customer focus.

Cross-selling of the entire range of credit and investment products and banking
services to customers is a critical aspect of ICICI’s retail strategy. ICICI Bank
offers a wide range of retail credit products. It has expanded the market
significantly over the last few years by taking organized retail credit to a large
number of high-potential markets in India, by penetrating deeper into existing
markets and by offering customized solutions to meet the varying credit needs
of the Indian consumer.

ICICI Bank is one of the leading providers of mortgage loans, two-wheeler

loans, commercial vehicle loans and personal unsecured loans, and continues to
maintain leadership in automobile finance. ICICI Bank’s total retail
disbursements in fiscal 2003 are approximately Rs. 200 billion. Retail credit
constituted 18% of ICICI Bank’s balance sheet at March 31, 2003, compared
to only 6% at March 31, 2002.

Cross selling has emerged as one of the significant drivers of retail credit
growth. In fiscal 2003, cross selling accounted for about 20% of mortgage
loans and auto loans and about 25% of credit cards issued. In May 2003,
ICICI Bank acquired the entire paid-up capital of Transamerica Apple
Distribution Finance Private Limited (TADFL), which is renamed as ICICI
Distribution Finance Private Limited (IDFL). IDFL is primarily engaged in
providing distribution financing in the two-wheeler segment. The acquisition is
expected to supplement the Bank’s retail franchise, especially in the
two-wheeler segment.

Retail Deposits
During fiscal 2003, ICICI continued its focus on retail deposits. This has
reduced its funding cost and has enabled it to create a stable funding base,
with over 4.7 million deposit customers. Following a life stage segmentation
strategy, ICICI Bank offers differentiated liability products to various categories
of customers depending on their age group (Young Star Accounts for children
below the age of 18 years, Student Banking Services for students, Salary
Accounts for salaried employees, Roaming Current Accounts for businessmen,
Private Banking for high net worth individuals and Senior Citizens Accounts for
individuals above the age of 60 years). ICICI Bank has further micro-
segmented various categories of customers in order to offer products catering
to specific needs of each customer segment, like defence banking services for
5
Sectoraldefence
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personnel.This strategy has contributed significantly to the rapid Case Study:
Serving the Global Indian
growth in the retail liability base.

Credit Cards
ICICI Bank is also the largest incremental issuer of cards (including both debit
and credit cards) in India. At March 31, 2003, ICICI Bank had issued over 3.4
million debit cards and 1.0 million credit cards. Its multi-channel distribution
strategy provides its customers 24%7 accesses to banking services. This
distribution strategy not only offers enhanced convenience and mobility to the
customer but also supports its customer acquisition and channel migration
efforts.

Electronic Channels
During the year, ICICI has expanded its electronic channels and migrated large
volumes of customer transactions to these channels. Seventy percent of
customer induced transactions take place through electronic channels.

ATMs
During fiscal 2003, the Bank significantly strengthened its ATM network, taking
the total number of ICICI Bank ATMs to 1,675. ICICI Bank has also
pioneered the concept of mobile ATMs to reach out to remote/rural areas.
Other facilities offered through multilingual screen ATMs include bill payments
and prepaid mobile card recharge facility. ICICI bank is also planning to share
the network with other key players in financial services market to give a wider
access to its customers.

Internet Banking
ICICI Bank has about 3.4 million customers with Internet banking access, who
can undertake all their banking transactions (other than physical cash
transactions) on the Internet. ICICI Bank’s Internet banking customers can also
pay their bills for more than 45 billers and shop on 85 online shopping portals.

Phone Banking
ICICI Bank considers phone banking to be a key channel of service delivery
and cross-sell. ICICI Bank’s 1,750-seat call centre, the largest domestic call
centre in India, can now be accessed by customers in over 355 cities across
the country. The call centre handles more than 2.5 million customer contacts
per month. The call centre services all retail customers across the ICICI group.
The call center uses state-of-the-art voice-over-Internet-protocol technology and
cutting-edge desktop applications to provide a single view of the customer’s
relationship.

Mobile Banking
ICICI Bank’s mobile banking services provide the latest information on account
balances, previous transactions, credit card outstanding and payment status and
allow customers to request a cheque book or account statement. ICICI Bank
has now extended its mobile banking services to all cellular service providers
across the country and NRI customers in the United States, United Kingdom,
Middle East and Singapore.

Service Delivery through Multi Channel Distribution Network

With the foundation of a strong multi-channel distribution network, it has
successfully developed a robust model for distribution of third party products
like mutual funds, Reserve Bank of India (RBI) relief bonds, and insurance
products, with market leadership in these areas. This model also allows it to
6
meet all customer needs by offering the customer the complete basket of
financial products, while leveraging its distribution capability to earn fee income
from third parties.

Online Trading
ICICI direct (www.icicidirect.com) is the market leader in Internet based share
trading, with complete end-to-end integration for seamless electronic trading on
stock exchanges. ICICIdirect has a rating of “TXA1” from CRISIL, indicating
highest ability to service broking transactions. During the year, ICICIdirect
launched online trading in the derivatives segment of the NSE.

14.6 CORPORATE BANKING BUSINESS OF ICICI

BANK
ICICI Bank provides innovative financial solutions to its corporate clients,
tailored to meet their requirements, while diversifying its revenue streams and
generating adequate return on risk capital through risk-based pricing models and
proactive portfolio management.

Its focus in the financial year 2003 is on technology-driven enhancement of

delivery capabilities to offer improved service levels to clients. It set up centralized
processing facilities for back office operations where technology is leveraged to
benefit from economies of scale arising out of large transaction volumes.
During the year it continued to expand the scope of its Web-based services.

ICICI Bank provides corporate internet banking services through

ICICIebusiness.com, a single point web-based interface for all corporate
products. The portal enables clients to conduct their banking business with
ICICI Bank through the Internet in a secure environment. ICICI Bank offers
online foreign exchange and debt securities trading services.

A dedicated product and technology group develops and manages back-office

processing and delivery systems. Dedicated relationship groups for corporate
clients and the government sector focusses on expanding the range and depth
of its relationships in these sectors. In the corporate segment, it focusses on
leveraging its relationships to expand the range of products and services to
channel finance, transaction banking and non-fund based products.

ICICI Bank has strong relationships with several large public sector companies
and state governments and it is leveraging these relationships to expand the
range of transaction banking services. It has already been empanelled for
collection of sales tax in eight states. It continued to focus on corporate lending
transactions including working capital finance to highly rated corporate,
structured transactions and channel financing. It also focused on leveraging its
skills in originating and structuring transactions as well as on its ability to take
large exposures to adopt an originate-and-sell-down strategy.

This not only increased the risk-adjusted return on the capital employed but also
enabled it to offer a comprehensive solution to its corporate clients. ICICI
Bank’s dedicated structured finance, credit and markets group, with expertise in
financial structuring and related legal, accounting and tax issues, actively supports
the business groups in designing financial products and solutions. This group is
also responsible for managing the asset portfolio by structuring portfolio buy outs
and sell-downs with a view to increase the risk-adjusted return on the capital.

During fiscal 2003, ICICI Bank focused on the agri-financing segment and
developed several innovative structures for agri-business, including dairy 7
Sectoralfarming,
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farmerfinancing and warehouse-receipt-based financing. It achieved Case Study:
Serving the Global Indian
robust growth in this segment and is working with state governments and agri-
based corporate to evolve viable and sustainable systems for financing
agriculture. It has also integrated its rural banking, micro-finance and agri-
financing activity to offer integrated banking services in rural areas.

Treasury
The principal responsibilities of the Treasury included management of liquidity
and exposure to market risks, mobilization of resources from domestic
institutions and banks and international multilateral and bilateral institutions and
banks, and proprietary trading. Further, the treasury leveraged its strong
relationships with financial sector players to provide a wide range of banking
services in addition to its liability products. In fiscal 2003, the balance sheet
management function within treasury, managed interest-rate sensitivity by
actively using rupee-interest-rate swaps as well as by adjusting the duration of
the Government securities portfolio held for compliance with Statutory Liquidity
Reserve (SLR) norms. Further, efforts are undertaken to make the banking-
book-interest-rate positions more liquid by selling illiquid loans and substituting
them with marketable securities.

The focus of trading operations was active, broad-based market making in key
markets including corporate bonds, government securities, interest-rate swap and
foreign exchange markets. A focus area in fiscal 2003 is the delivery of market
solutions to corporate clients in various areas such as foreign exchange, fixed
income and swaps. There is a significant increase in both the volumes and
profits from foreign exchange transactions, swaps and loan syndication. As one
of the largest players in the corporate debt market, it offered two-way quotes
for many corporate debt papers, thereby increasing the liquidity and depth of
the market. Effective fiscal 2004, it has restructured its treasury operations to
separate the balance-sheet management function (which now forms part of the
finance group), the corporate markets business (which has been integrated into
the structured finance, credit & markets group) and the proprietary trading
activity (which is now housed in a separate proprietary trading group).

14.7 ORGANIZATION STRUCTURE OF ICICI BANK

ICICI Bank’s organizational structure is designed to support its business goals,
and is flexible while at the same time seeking to ensure effective control,
supervision, and consistency in standards across business groups. The
organization structure is divided into five principal groups namely Retail Banking,
Wholesale Banking, Project Finance & Special Assets Management,
International Business and Corporate Centre.
The Retail Banking Group comprises ICICI Bank’s retail assets business
including various retail credit products, retail liabilities (including own deposit
accounts and services as well as distribution of third party liability products),
and credit products and banking services for the small enterprises segment.
The Wholesale Banking Group comprises ICICI Bank’s corporate banking
business including credit products and banking services, with dedicated
groups for corporate clients, Government sector clients, financial institutions
and rural and micro-banking and agri-business. Structured finance, credit
portfolio management and proprietary trading also form part of this group.
The Project Finance Group comprises our project finance operations for
infrastructure, oil & gas and manufacturing sectors. The Special Assets
Management Group is responsible for large non-performing and restructured
loans.
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 The International Business Group is responsible for ICICI Bank’s
international operations, including its entry into various geographies as well
as products and services for non-resident Indians (NRIs).
The Corporate Centre comprises all shared services and corporate functions,
including finance and balance sheet management, secretarial, investor
relations, risk management, legal, human resources and corporate branding
and communications.

14.8 THE GLOBAL GROWTH STRATEGIES OF

ICICI BANK
Mr. Dasgupta was looking at the future proposition of earning one third of the
total revenue from the international business operations by the year 2008. There
are four alternative strategies available for ICICI bank to provide financial
services to the global Indian.

The first strategy is to build a regional base in neighboring countries like Nepal,
Bangladesh and Sri Lanka. Some of the banks have followed this strategy in
the past. Standard Bank had used this strategy to expand its business in Africa,
but the neighbours around India are not economic powerhouses for which the
opportunity to grow in these markets are limited.

The second strategy is to enter growth markets aggressively through the

process of acquisitions. Mr Rana Talwar of Standard Chartered Bank followed
this strategy by buying banks in Asia and Latin America. There is a risk
involved in the acquisition process in the foreign country from two points. The
legal procedures for acquisitions varies from country to country and secondly
the issue of non performing assets of the existing banks may create problem to
the ambitious growth plan of the bank. But he was sure some of these banks
may serve as gold mine with higher return potential in developing nations. This
also needs a bigger balance sheet that the current balance sheet of ICICI bank
for a high level of acquisition.

The third strategy is to take a strong product and make it global. Identification
of a core competitive advantage and then building a strategy on this particular
advantage may also bring success to the banks global vision. Citibank expanded
in the recent decades by following such a strategy of building the credit card
business as its core competency for entering in to new markets. The complex
financial service mix as well as the rapid change in level and type of technology
as the enabler to the service provider brings doubt about such a strategy.
However, ICICI bank has a set of successful products but they do not have a
solid financial product as the unique selling proposition for the global market.

The fourth strategy is to follow the customer. Many Spanish banks followed
this strategy to enter in to the Latina American market. The non resident
Indian business is growing in countries like Dubai and Bahrain, there is a Sino-
Indian trade boom which can be financed from the Shanghai operations, the
growing link with the ASEAN nations can be serviced from Singapore. There
are also traditional business interests in countries like USA and UK but there
are also potential risks involved in the form of operating with international
partners for some period until they establish the offshore subsidiaries. Similarly
selected market coverage may limit the scope and image of the bank as a
global financial service provider.

Mr. Dasgupta has to consider other issues. ICICI bank is still the number two
bank in the country with ample scope for growing its business in the domestic
market. The internationalization of other global players have come only after
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Sectoralsecuring
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the homebusiness and channelizing the liquid funds from the domestic Case Study:
Serving the Global Indian
market for international operations. HSBC bank moved out of Hong Kong when
it had a substantial position in the domestic market for international shores.

Many financial experts are still of the opinion that the balance sheet of ICICI
bank is still weighed down by problem loans to industries such as textiles, steel
and telecom. The NRI as a business proposition has to be evaluated. The
recent spike in the NRI deposits is because of the higher interest rates in India
compared to global rates. As Reserve Bank of India is cutting down the
interest rates to make it at par with global rates, it may hit the whole business
proposition. Mr. K.V. Kamath, the CEO of the company thinks that the global
Indian consumer is not bothered about the exchange rate risks and NRI
remittances can be a good business proposition with a mix of portfolio
management to mortgages rather than ordinary deposits.

Mr. Dasgupta believes that it is right time to go global as major economies are
still recovering from a recession. Therefore, an opportunity for cheaper deals
and quality recruitment exists for the bank. The decisions to enter in to
International operation seem very complex for the bank. In addition, he has to
decide about the strategies to handle global risk in the business and the
structure of the global organization, as he has to operate in a multi cultural
environment. He was sure that one of the strategic options explained above
could take ICICI bank to the global platform as a financial service provider. He
was not sure which one.

One thing he was sure about the future of the International operations. ICICI
bank is going to concentrate on India related business in all these places rather
than competing with global players with higher financial muscles and better
service offers. ICICI is there to look after the Indian companies that are
rapidly globalizing their operations. The motto should be to serve the customers
at anywhere in the world with a correspondent relationship with other banks.

14.9 DISCUSSION QUESTIONS

1. What problem Mr. Bhargava Dasgupta is facing in this case?
2. What are the strategic alternatives available for Mr. Dasgupta to serve the
Global Indian Consumer?
3. What do you mean by originate-and-sell-down strategy?
4. Explain the financial service mix portfolio of ICICI bank in retail sector? In
corporate sector?
5. What recommendations will you make to Mr. Bhargava Dasgupta? Should
he go global? Give your reasons.

14.10 APPENDIX
ICICI Bank: Sales and Profit Analysis

Operating Net
Year Sales Profit Profit
1998 1666.40 723.70 421.00
1999 6972.20 867.00 732.60
2000 8730.00 1465.10 1107.00
2001 14745.90 2908.70 2014.20

10 2002 69340.40 4556.00 8685.00

 Ratio Analysis of ICICI and Other Players

Bank SBI ICICI HDFC UTI Bank

CAPITAL 13.50 11.10 11.12 9.00
ADEQUACY RATIO
EARNING RATIOS
Fund based 91.75 93.37 89.91 92.26
income as a %
of Op Income
Fee based income 8.24 6.62 10.08 7.73
as a % of Op
Income
PROFITABILITY RATIOS
Cost of Funds 6.91 9.63 4.83 6.46
Ratio
Net Profit 8.43 9.62 15.53 10.23
Margin
Return on Net 18.05 17.49 17.21 21.09
Worth
DEPOSIT RATIOS
Demand Deposit 15.11 7.65 22.12 14.65
of Total Deposits
Saving Deposit 22.21 7.87 20.83 8.38
of Total Deposits
Time Deposit of 62.66 84.46 57.03 76.95
Total Deposits
Deposits within 97.54 100.00 100.00 100.00
India as % to
Total Deposits
PER BRANCH RATIOS
Operating Income 40.28 120.39 105.70 133.95
Per Branch
Operating Profit 8.83 45.78 33.08 32.79
Per Branch
Net Profit Per 3.42 27.80 16.73 13.84
Branch
Personnel 6.26 6.04 6.58 6.09
Expenses Per
Branch
Borrowings 10.25 100.43 98.90 51.38
Per Branch
Deposits Per 326.09 1,325.87 968.66 1,211.77
Branch
PER EMPLOYEE
RATIOS
(Rs. in Units)
Operating Income 1,749,960.13 11,285,851.51 5,096,576.92 8,021,214.71
Income Per
Employee
Operating Profit 383,526.38 2,370,995.47 1,594,907.12 1,963,259.20
Per Employee
Personnel 272,189.95 380,211.89 317,157.17 364,542.34
Expenses Per
Employee
Deposits Per 14,168,713.69 45,442,741.79 46,704,383.22 72,560,821.21
Employee
11
12
P Product Mix Width (Personal Finance)
r Banking Loans Online Services NRI Service Investments Cards Demat Mobile Banking
Savings Account Home Loan Bill Payment Rupee Savings ICICI Bank Bonds Credit Credit Banking Alerts
Sectoral Applications-I

o
Account
d
Fixed Deposit Personal Loan Shopping High interest GI Bonds Debit cum Credit Card Alert
u Fixed Deposits ATM card
c Easy FD Car Loan Share Trading Account for Mutual Funds
Returning Indians
t
Recurring Deposit Two Wheeler Loan Charity Money2India IPO
Private Banking Commercial Anywhere Banking Donate2India
L Vehicle Loan
i Roaming Current Loans against Home Loans
n Account Securities

e Young Stars Farm Equipment Home Search

Loans
Bank@campus Construction Online Stock
L
Salary Account Office Equipment Investment
e
Women Medical Customer Service
n
EEFC (Exchange) Consumer Tax queries
g Durables and answered
t Resident Foreign
Currency
h
(Domestic)
Case Study:
Serving the Global Indian
 Product Mix Width (Corporate Finance)
P
Transaction Treasury Solutions Invesment Capital markets Securities International Agri business Corporate &
r Banking Solutions Management Banking Services business Structured
Services Finance
o Cash management Forex markets Central Government Collecting Bankers Equities Automated INR Working capital Working Capital
services Securities Payment Services finance Financing
d
General Banking Bond markets Treasury Bills – Escrow & Paying Equity Derivatives VOSTRO Accounts Term loans Auto Loan
u (T-Bills) Bankers Receivables
Trade finance Commodity markets Call Money/Notice Initial Public Offer GDR/ADR/Euro Cross Border Forex Credit Card
c Money, Term (IPO) Funding Issues and Trade Services Receivables
Money and Fixed arbitrage
t Deposit
Lending rates Repos/Reverse Clearing & Debt Trust & Retention Fertilizer Subsidy
Repos Settlement Bankers Account Services Receivables
L Bonds and Bank Guarantees SGL settlements INR Agency Export Receivables
Debentures through Clearing Services
i Constituent
account with
n ICICI Bank
Inter Corporate Overdraft Against Dealer financing
e
Deposits Shares
Certificates of DVP Funding EPC Contract
Deposit Financing
L Commercial Paper Intra Day Funding Investment
Monetisation
e
Bills Rediscounting Temporary Trade financing
n Scheme (BRDS) Overdrafts (long term)
(REIT) / (REMIC)
g structures

t Brand financing
Vendor financing,
h Transporter
financing

13
Sectoral Applications-I PROFIT AND LOSS ACCOUNT Case Study:
Serving the Global Indian
Schedule (Rs.in '000s) As on 31.03.2002
I. INCOME

Interest earned 13 93,680,561 21,519,297

Other Income 14 19,677,741 5,746,598
Profit on sale of shares of
ICICI Bank Ltd held
by erstwhile ICICI Ltd 11,910,517 -

TOTAL 125, 268, 819 27, 265, 895

II. EXPENDITURE

Interest expended 15 79,439,989 15,589,235

Operating expenses 16 20,116,900 6,225,770
Provisions and contingencies 17 13,650,139 2,867,900

TOTAL 113, 207, 028 24, 682, 905

III. PROFIT/LOSS

Net profit for the year 12,061,791 2,582,990

Profit brought forward 195,614 8,294

TOTAL 12, 257, 405 2, 591, 284

IV. APPROPRIATES/TRANSFERS

Statutory Reserve 3,020,000 650,000

Transfer from Debenture Redemption Reserve (100,000) --
Capital Reserves 2,000,000 --
Investments Fluctuations Reserve 1,000,000 160,000
Special Reserve 500,000 140,000
Revenue and other Reserves 600,000 960,000
Proposed equity share Dividend 4,597,758 --
Proposed preference share Dividend 35 --
Interim dividend paid -- 440,717
Corporate dividend tax 589,092 44,953
Balance carried over to Balance sheet 50,520 195,614

TOTAL 12, 257, 405 2, 591, 284

Significant Accounting Policies and

Notes to Accounts 18
Cash Flow statement 19

Earning per share (Refer Note B.9)

Basic (Rs.) 19.68 11.61

Diluted (Rs.) 19.65 11.61

14
 BALANCE SHEET

Schedule (Rs.in '000s) As on 31.03.2002

CAPITAL AND LIABILITIES

Capital 1 9,626,600 9,625,472

Reserves and Surplus 2 63,206,538 56,324,080
Deposits 3 481,693,063 320,851,111
Borrowings 4 343,024,203 492,186,592
Other liabilities and provisions 5 170,569,258 162,075,756

TOTAL 1, 068, 119, 662 1, 041, 063, 011

ASSETS

Cash and balance with Reserve Bank of India 6 48,861,445 17,744,682

Balances with banks and money at call and
short notice 7 16,028,581 110,118,817
Investments 8 354,623,002 358,910,797
Advances 9 532,794,144 470,348,661
Fixed Assets 10 40,607,274 42,393,443
Other Assets 11 75,505,216 41,546,611

TOTAL 1, 068, 119, 662 1, 041, 063, 011

Contingent liabilities 12 894,385,070 394,465,858

Bills for collection 13,367,843 13,234,184
Significant Accounting Policies and
Notes Accounts 18
Cash Flow Statement

15