ICICI Bank: Reaching Global Markets through Technology

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ICICI Bank:

Reaching Global Markets through Technology

Amar KJR Nayak1

The story of ICICI Bank indeed is quite exciting as we look into how the company has

internationalized its business vis-a-vis the other banks from India. With the least number

of international bank branches as compared to many of the other Indian banks, it stands

tall in terms of its share of international business, especially in the foreign remittance

business. In a short period of time, it has grown to be the largest bank in the private sector

with a global foot print. Its share of international remittance business among the banks in

India has risen from 4% in 2003-04 to about 30% today while retaining over 75% of the

total online international remittance business in India. How did it grow so fast? Did it

face any challenges at home or outside to achieve these successes? What have been its

strategies in the internationalization process of its business? In other words, what have

been the secrets of its success?

Several pertinent questions come to mind when we look at the pace of growth of this

company in a highly turbulent and competitive world of international banking that has

been guarded for years by the well established, highly networked, international banks and

remittance business houses. Let us explore some of the following issues to understand the

company’s approach towards internationalization and how it broke through the old

guards of international banks and remittance business houses.

• Why did ICICI Bank want to internationalize its business?

• Why did ICICI Bank choose to get into remittance business?

• What are the various sources of foreign remittance?

• How did the company reach the customers without physical presence?

• What are the various products on remittance business?

• What have been the challenges working with international partners and markets

etc?

• What were the basic strategies of ICICI Bank to succeed in its international

operation?

1 Amar KJR Nayak, PhD., Strategic Management, Xavier Institute of Management, Bhubaneswar, India

Journal of Case Research Vol. 1 Issue ii

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• How critical was technology in the global remittance business?

• What are its problems of delivery in India?

• What are the technological challenges that the company faces?

Not only was the company faced with the challenge of competition from other

established players in the industry but also from potential customers for international

banking and remittance business. A few quotes below highlight this point.

My family lives in Ernakulam. Who other than SBI will get money to my parents?

--US respondent

Why should I choose a different bank when my family has been using SCB since 1990?

--US respondent

World Banking & Remittance Business:

The history of banking started with the transaction between goldsmith and people. As a

token of receiving gold the goldsmith used to issue a receipt. In this process the

goldsmith started issuing receipts for specific values of gold, and it became the first

banknotes. With the start of the industrial era goldsmiths turned into full-fledged bankers.

Indeed they have played a major role in the initial phase of industrialization. To further

increase their power and influence, these banking groups started influencing governments

or monarchies and strategically utilized the service of these governments or monarchies

for their self interest. And as a result only those politicians came to power who have

played according to the will of banking groups. In the twentieth century these banking

groups were able to discover a new way of money transformation, which identifies that

by periodically restricting the money supply, crashes within the emergent stock

exchanges of the world could easily be engineered, and one can examine this statement

from the example of famous Wall Street Crash of 1929. In economic terms it will be

categorized as transfer of wealth rather than destruction of wealth. In the later stage these

groups were concentrating on destabilizing a multitude of traditional cultures and

creating a series of homogenized trading blocks to replace them.

Banking has been the stronghold of established business houses. It was more so in the

foreign remittance business. Large Exchange Houses with huge banking and distribution


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networks gave little scope for other banks to enter this business. ICICI Bank, though

energetic did not have the nature of infrastructure to enter in to the international markets.

Even some of the Indian Banks had more overseas branches than ICICI Bank had. It had

only about six years of experience as a bank operating in the retail segment. Entering into

such an international banking and foreign remittance business was a tough call for ICICI

Bank in 2001. How did the company make inroads to such a global industry?

While the inflows in the world remittance business has grown by about 90% over the

period 2002-07, the inflow of remittance business in the developing countries has grown

by nearly 110% during the same period. Out of a total inflow of remittances of $ 318

billion in the world, developing countries accounted for $ 240 billion. The highest

growth of 136% has been in the upper middle income countries. Interestingly, on the

other hand, the outflows of remittances from the developing countries have been as high

as 226% during 2002-07 (see Exhibit 1). The market for remittance business to India

during 1975-2003 is best illustrated in Exhibit 1b.

India, Mexico and Philippines have been the top remittance receiving countries for over a

decade now. China, Spain, and many others have also shown significant growth during

the same period. Remittances received by India have grown from US$ 8,453 million to

US$ 27,607 million during the period 2002-06 (see Exhibit 2).

Why have been there such high growths in the developing countries? Is it the Diaspora of

the developing countries in the industrially advanced countries? Is the differential in

interest rates in the industrially advanced country the cause for the movement of foreign

capital to the developing countries? The annual rate of interest in Japan is the lowest with

around 1-2% for short term loans up to one year period. Similarly, the rate of interest in

USA, Europe, and Great Britain ranges between 3-6% as compared to 10-18% in several

developing countries like India (see Exhibit 3).

Indian business through export and Import has also grown several times over during the

last two decades. From a crisis of foreign exchange in 1991, India has moved far ahead

from it. From US$ 5.63 billion foreign currency reserve in 1991, the amount stood at US$

199.17 billion in March 2007. NRI deposit in India has also grown by over 300% during


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the same period (see Exhibit 4 & 5). See also Exhibit 6 for the inflows, outflows and local

withdrawal figures for the period 1999-2008. How have these factors contributed to the

foreign remittance business?

Indian Banking Industry:

In 1786, the first bank in India got established. The General Bank of India was set up in

the year 1786 and subsequently the Bank of Hindustan and Bengal Bank came into

existence. In 1809 East India Company established Bank of Bengal, Bank of Bombay in

1840, and Bank of Madras in 1843 as independent units and called it Presidency Banks.

Allahabad Bank was established in 1865, exclusively by Indians. The Reserve Bank of

India was established in the year 1935. The Government of India came up with the

Banking Companies Act, 1949 to streamline the functioning and activities of commercial

banks. This was later changed to Banking Regulation Act 1949 as per the amendment act

of 1965.

After independence the government took major steps in banking sector reforms. It

nationalized many banks and formed State Bank of India to act as the principal agent of

RBI to handle banking transactions all over the country. The Government instituted a

number of policies such as

(i) 1949: Enactment of Banking Regulation Act

(ii) 1955: Nationalization of State Bank of India

(iii) 1959: Nationalization of SBI subsidiaries

(iv) 1961: Insurance cover extended to deposits

(v) 1969: Nationalization of 14 major banks

(vi) 1971: Creation of credit guarantee corporation

(vii) 1975: Creation of regional rural banks

(viii) 1980: Nationalization of seven banks with deposits over INR 2000 million

As the Indian economy opened up, several foreign banks came to India. ATM stations,

phone banking and net banking were introduced in the country. Slowly the customers

were introduced to foreign exchange. Indian banking industry’s business has increased

from US$ 469.4 billion in 2002 to US$ 1171.29 billion in 2007. The aggregate deposits


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of Scheduled Commercial Bank have risen from 17.8 percent in 2005-06 to 25.2 percent

as on January 4, 2008. With all these achievements Indian banks started aspiring to

become global and have a global presence. Many Indian banks started to expand their

branches in foreign countries. Setting up subsidiaries and investing in joint ventures were

other modes for international expansion.

Remittance Business & Indian Banks:

Remittances include different kinds of monies that flow from migrants to their families.

These include regular amounts of money that are important for the family budget, money

sent for investment like the purchase of land or the building of a house, community

development like building of a temple, repayment of family debt, and gift money for

family celebrations. Remittances are unlike market flows of money for they are not

sensitive to interest rate movements and are relatively stable (RBI, 2004). This flow of

funds from migrant workers back to their families in their home country is an important

source of income in many developing economies. The recipients often depend on

remittances to cover day-to-day living expenses, to provide a cushion against

emergencies or in some cases as funding for small investments.

For a remittance service to work, it needs to have some kind of network (access points

where funds can be captured and disbursed, and procedures to link those access points to

enable settlement and messaging). It is possible to divide remittance service into various

categories like unilateral, franchised, negotiated, and open. All these types are different

primarily according to how a network of access points is created and linked. The

categories have no absolute dividing lines but are useful for helping to clarify some of the

payment issues that arise with remittances.

India is the largest receiver of remittances in the world market with about US$ 28 billion

in 2006. This large amount of remittance came from various countries and regions like

USA, Europe, and the Middle East with a major share coming from USA. Indeed, foreign

remittances accounted for about 3% of India’s GDP, making it an area of interest across

domestic financial services sector. Private transfers that earlier contributed less than 1 %

of GDP in India, has contributed over 3% since 2001-02 (see Exhibit 7). Private transfers

have been routed to India through various means like inward remittances, local

withdrawals or redemptions from NRI deposits, gold and silver brought through


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passenger baggage, personal gifts, donations to charitable/religious institutions in India,

etc. There has been steady rise in all these various categories of private transfers (see

Exhibit 8).

The Indian remittance market comprises of multiple corridors, each with a distinct set of

customer segments that have diverse remittance needs and behavior. Indian immigrants

follow a varied profile across geographies providing cheap labour in the GCC countries

and to meet the needs of specialized software developers, doctors, engineers, and nurses

in US, Europe and Australia. This creates two distinct types of immigrant; blue-collar

workers and white-collar workers. According to the World Bank the value of migrant

remittance is increasing at a rate of 10% every year, which offers significant business

opportunities for banks and income through three ways, viz., remittance charges, forex

income & float income.

What has been driving the growth of private transfers including the foreign remittances to

India? Is it the huge Indian Diaspora spread across the world? Indians comprise about 58

% in Mauritius, 38% in Fiji, 37% in U.A.E, 19% in Bahrain, 10 % in Oman and 7% in

Singapore. Over a million Indians live in several of the industrially developed countries

like U.K. (2.2 million), Australia (1.9 million), U.S.A (1.68 million) and South Africa

(1.1 million). Many people from this large Indian Diaspora look forward to remit some of

their income back to India for various purposes. Indian banks are also well spread in

many foreign countries; 22 branches in U.K., 11 branches in Hong Kong, 9 each in Fiji

and Singapore (for details see Exhibit 9).

There are a large number of banks in India with wide networks, large deposits and huge

manpower to tap the opportunities in the foreign remittance business and other private

transfer business. For the statistics of banks in India see Exhibit 10. Several Indian banks

have branches in many foreign countries. Allahabad Bank has 40 foreign branches, State

Bank of India has 33 foreign branches, and Bank of India has 21 foreign branches (see

Exhibit 11). With rapid changes in the regulatory policies of the Government, India has

turned out to be a hot spot of business activity in the world. The regulatory changes in the

banking industry and the ever increasing demands of the global Indian compound the


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dynamics of business for the banks in India (see Exhibit 12 for the challenges that the

Indian banking industry have been facing). Competition among the Indian banks is also

well poised. Different banks have different strengths and have different strategies on

aspects like retail/product capability, customer base and delivery / technology platforms.

In the above context of worldwide banking, Indian banking industry, global Indians

spread across the continents, and studying the internationalization process of ICICI Bank

through the remittance business is exciting to analyze.

History & Evolution of ICICI Bank:

The Industrial Credit and Investment Corporation of India Limited (ICICI) was created in

the year 1955 with an joint initiative of the World Bank, the Government of India, and

representatives of Indian industry, for a common objective of creating a development

financial institution for providing medium-term and long-term project financing to Indian

businesses. Besides funding from the World Bank and other multi-lateral agencies, ICICI

was the major source of foreign currency loans to the Indian industry. Apart from this

ICICI was also among the first Indian companies to raise funds from international

markets. In 1977, ICICI sponsored the formation of Housing Development Finance

Corporation. ICICI was also the first Indian institution to receive ADB loans. In 1999,

through an issue of American Depository Shares, ICICI was listed on the New York

Stock Exchange.

With the new regulations in the banking industry and increasing opportunities for retail

banking, ICICI set up ICICI Bank in 1994. Later in 2000, ICICI Bank acquired Bank of

Madura and in 2002, ICICI Ltd., along with two other group companies, was merged

with ICICI Bank. Through these mergers, and reorganization, ICICI Bank emerged as a

formidable force in the banking industry. See Exhibit 13 and Exhibit 14 for the

evolutionary path of ICICI Bank. As on March 31, 2007, ICICI Bank had 17 subsidiaries.

N. Vagul had steadily built ICICI as a development financing institution through its early

years and subsequently ICICI had successfully set up ICICI Bank in 1994. With the

liberalization and privatization processes in India since 1991, the Indian banking industry

had taken a different turn during the period 1991-2000. When K.V. Kamath took over as


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the CEO of ICICI Bank in 1996, the banking industry in India was fast changing with

several banking deregulations underway and increasing competition in the market.

Around this time, the bank had a high employee turnover to the extent that it could

destabilize the operations of the bank. Kamath wondered how to manage the manpower.

He also wondered if technology was a solution to handle some of these problems and

would it also help in the company’s growth plans.

International Banking:

By June 2001, ICICI Bank with a total income of INR 14690 million and successful

domestic operation with a short span of its inception, the company was looking for

growth for the future. The top executives including K.V. Kamath, Bhargav Dasgupta and

Lalita Gupte wondered if they should enter the world markets and whether they would be

able to compete outside their domestic turf. If at all they entered the international

banking, in which products they should begin. With many large banks with large network

of branches in India and abroad, how should ICICI Bank invest to get a share of the

international banking business? Who should manage the international operations? Will

the existing manpower in the bank be sufficient and be able to handle both the domestic

and the international operations?

In order to achieve growth, the Board of ICICI Bank decided to expand into international

markets. The Board of ICICI Bank asked Lalita Gupte to lead the internationalization

process. Subsequently, Bhargav Dasgupta was invited to join Gupte to build the

international banking business of ICICI Bank. The management team of international

business deliberated on the international strategy of the firm. First, it looked into the

existing model, where the bank followed its customers, whether corporate or retail.

Second, it looked into the alternative modes of servicing the customers based in different

parts of the world. Third, it evaluated on how to leverage its banking and business

network to expand in the international markets.

Today, the International Business Group has grown significantly and the IB Group

consists of over 3000 people. It is further supported by nearly 300 technical people and

150 operational people. However, how did the company realize the plans it set forth for

itself. How did the managers succeed in implementing their plans and ideas?


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International Remittance Business:

Having scanned the world market on international banking with specific reference to

world remittance business, foreign remittance to India and the size of Indian Diaspora

spread across the globe, ICICI Bank focused on the international remittance business to

begin with. The world remittance business has several major corridors. However, the

company first focused to operate in the India corridor i.e., to provide remittance services

from anywhere to India.

The company undertook a detailed study of the leading players from India, type of

product/service and proposition and the mode of platform for the delivery of services.

During the period, 1996-2001, the State Bank of India with about 50 million customer

base had about 17% growth. With nearly 9000 branches and 100 ATMs it had a large

reach in the country. HDFC had over 200 ATMs, 130 branches, 1.4 million customers

and had grown at about 74%. Citi Bank with 1.8 million customers had about 130 ATMs

and 11 branches and grew at about 14%. ICICI Bank had over 5 million customers and

had grown at 76%. It had 400 branches and 600 ATMs (see Exhibit 15).

For its international remittance business, the company offered two major routes, viz., the

Vostro Account and the Nostro Account. The Vostro system was essentially for

customers with Indian Rupee Account and Nostro was for other customers. Nostro

worked with the help of SMART software that is a middle ware called the Customer

Delivery Channel Interface (CDCI). The various banking services of the company and

the key features of each are provided in Exhibit 16. The commission/charges of the

company for the different types of remittances vary from 0.125% to 0.2%. The details of

the charges are provided in Exhibit 17. Does the company earn only from these

commissions or does it earns from other means? Did it benefit anything from the

currency float for sometime?

While the company did create different accounts to cater to the international remittance

and that there was possibly a good margin in the business, what were complexities that

the company had to resolve in order to operate in the international remittance business?

How could the technology be used seamlessly across the international borders?


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Transactions had to be done across different regulatory frameworks of different countries,

different time zones with different operating hours of people, different systems and

processes in different banks based in different countries, international partners with

different working styles. Further, with thousands of automated transactions in a day, the

issues of reconciliation because of various differences in different countries and minor

errors in data entry could block the whole transaction process. While banks are used to

deal with all these issues through their manual transactions in the domestic business, the

problems indeed were unlimited especially when technology was to be used to

intermediate most of these international transactions. Views of a few senior executives

from the International Business Division given below indicate the nature of complexities

involved.

“We needed to understand the clearing system in India and in other countries, regulatory

norms of different countries, understand the technological interfaces, adopt architectural

changes in our technology and develop several expertise to service our international

clients seamlessly.”

“Given the anti-money laundering issue in international money transfers understanding

the ‘Know your Customer’ norms in different countries were crucial for us to operate

safely in this business”

“It was indeed very different experience to work with our foreign partners. While we in

India followed a top-down approach for scaling up any of our business models, our

partners in USA and Europe used the bottom-up approach for scaling up. We had some

difficulties in the beginning and had to accept the different working styles in other

countries.”

Anchal Kapoor, DGM, IB Division

“Our major concern in the international remittance business has been the ‘reconciliation

of accounts’. With thousands of transactions every day registered from different

countries, minor manual data entry errors or technical errors could lead to severe

restrictions to overall transaction process. Often, problems of reconciliation has been

like a nightmare in this business”

Girish Nayak, GM, IB Division


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International Remittance Strategies:

ICICI as an organization is divided into six major product divisions like; Retail Banking,

International Banking, Rural, Micro-Banking and Agri-Business, Government Banking

and Corporate Centre. The ICICI Group strategy is summarized in Exhibit 18. The

company identified international banking as a key opportunity, aiming to cater to the

cross-border needs of clients and leveraging the domestic banking strengths to offer

products internationally.

ICICI Bank chalked out different strategies for different markets. In the traditional model,

it offered partner bank based products and bank branch based products. In the Innovative

Model, it offered the online Product web-based access and alliance partners. See Exhibit

19 for the details of each offer. The overall strategy of the Group can be put into an

analogy of a beautiful building with solid foundation and strong pillars supporting the

structures as illustrated in Exhibit 19 b. The top management of ICICI Bank seems to

have had a clear reason for the expansion of its business world-wide as can be seen from

the statement below.

“We believe that we have to serve our customers anywhere in the world”

K V Kamath, CEO

However, how would a young bank from a developing country develop the network to

challenge the existing well established highly networked international bank and exchange

houses? How did the company plan to leverage with the correspondence banks and to

leverage technology for its internationalization plans? With regard to these issues, the top

management team responsible for the international business had the following thoughts.

“We cannot physically be everywhere our clients are, so we will leverage our

correspondent relationship with other banks”

Lalita Gupte, First head of International Business Group (IBG)

“Adopting the alliances model, we have been able to garner presence and distribution

reach as we set up operations globally. Our Unique Selling Proposition/Point (USP) has


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been the use of technology as a differentiating factor to garner larger share of the NRI

remittance business,”

Bhargav Dasgupta, Former Director & Core Team Member of the initial IBG

The company had substantially used the alliances and partner model in the domestic

market and it tried to replicate the same in the international markets. In the domestic

market it had alliances with the airlines and travel houses. The objective was to target

NRI when they were either visiting or leaving India. It also had a focused marketing

approach in the domestic market, where it tied up with universities and companies from

where students and employees were likely to migrate to foreign countries for different

purposes. Exhibit 20 shows the details of the initiative that ICICI Bank had undertaken in

the domestic front during 1996-2001.

To tap the opportunities in the remittance market in India ICICI launched a remittance

product in association with US based Wells Fargo to enable non resident Indians in the

US to send money to India directly from their Wells Fargo account to their beneficiary’s

ICICI Bank account in India in just 24 hours. It also launched a partnership with Mees

Pierson, Fortis’ private banking arm to provide a full range of high net worth products

and services to ICICI’s clients in India and abroad.

Technology Issues:

While the standard mode of collection and transfers of foreign remittances were through

physical outlets of the banks or the exchange houses, ICICI Bank was very weak on this

type of resource base to compete with the well established exchange houses and banks.

The fixed cost of setting up a physical outlet and the variable cost of maintaining a set-up

have generally been very high both in India and more so in the industrially advanced

countries. The company adopted technology as a solution to most of its business

transaction, products and services. The company set up an internet portal for NRI to

transfer money to India. In the above context, if the company adopted the technology

route, what would be issues of implementing the technology for dealing with foreign

remittance business? What were the initial costs of investments in technology? How did


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the company target the customers? What kind of technology platforms would the

company use? Did the company have a technology policy? What were methods of

organization to introduce technology for various businesses? What were the major

challenges in technical support? What would be the next technological challenge for the

company?

Did the company have an advantage of having no experience of foreign remittance

business in the traditional mode? The company went in for using technology for carrying

out its remittance business. It spent about 10 million USD toward the initial cost of

technology investments in remittance business alone and today it spends about 30 - 40

million USD. When the company decided to enter the international market, it dedicated

only about 100 million USD to expand to seven countries.

Even though the company adopted the electronic route to transfer money, it needed the

collaborations with several correspondents, viz., the exchange houses, foreign banks, and

agents. How did they convince the foreign partners to agree to their mode of money

transfer? How did the company tie-up with the banks for serving the beneficiaries of the

remittances? While the people had no option but to send money in the traditional way, the

software professionals with easy access to internet were early to adopt the technology

solutions to money transfer that the company offered. Further the speed of delivery and

tracking facility were additional advantages in the mode proposed by the company.

Money could be delivered with in 3-7 days if correspondent was a foreign bank and

within 2-3 days if the correspondent was an Indian bank.

Setting up the technology platform was a critical issue. What would be the difficulty if

the company used different systems? Would java based Windows operating system,

Pramati layer as server, Oracle database management system and the Sun Solaris

Platform be compatible to each other? How critical were the issues of memory capacity

processing speed in the business?

With technology as the mode of remittance transfer, the business became round the clock

(24*7). How would the company handle this situation? Can the company work only on a

fire fighting basis or needed to root fix the technical problems? As per the NEFT routing


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norms and IBRD regulations of punching time that is between 2PM-4PM, the

pressures to carry out the transactions increased substantially. Further, ISB is yet another

key issue in the whole system. The need for highly skilled manpower, lean teams

operating round the clock, providing connectivity, session management, and parallel

operations could have been some ways to handle the challenges posed. Views from a few

senior executives from the Technology Group given below highlight various issues.

“Our challenge was to develop standard application programming interface (API) and

standard messaging protocols, taking into account the know your customer regulations in

different countries and incorporating fields for different types of data to capture all

relevant information to meet regulatory norms in different countries from where the bank

received remittance business.”

Indranil Ghosh, AGM, Technology Group

With regard to the technology policy of the company:

“The policy of the technology group has been to spend judiciously, get the best deal from

the vendors, and make full use of the servers to their optimal levels. Make full utilization

of the memory and the CPU capacity.”

“The top management identifies the technology edge and estimates the enterprise wide

technology requirements. The technology policy is aligned to our business requirements.

Based on the needs of business groups, annual budgetary proposals are made by the

Technology Group. These proposals are then given to the Managing Director for

approval. There are about 5-6 Group Heads of technology and each Group Head leads

3-4 team leaders. Each team of technical experts works on a specific problem.”

M.S. Seetharaman, DGM, Technology Group

If the company were to move from ‘anywhere to India route’ to ‘anywhere to anywhere

route’ in the remittance business, what would be the technological challenges? How does

the company handle the issue of scalability? Today the average number of transaction is

about 8000 per day in the India corridor, how would this change if the company were to

go ‘anywhere to anywhere transaction’. Will the Unix system serve its future capacity

requirement?


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Operational Issues:

The company had two types of accounts viz., Vostro INR Account and Nostro Account.

Further, three different types of Nostro Accounts were initially created that are for NRI

Accounts, Credit Services, and Treasury. About 180 correspondents operate through the

Vostro Account and about 40 correspondents operate through the Nostro Account. For

every transaction, a swift code is generated and that is then passed on to the Finacle Core

Banking system of ICICI Bank. Instead of a one to one transaction, ICICI Bank

accumulates all the remittances and carries out a bulk transaction at one go. The

automatic process involves talking of different systems with each other. The SWIFT

message with remittance details from the correspondents, the core banking system

(Finacle) of ICICI Bank, foreign exchange rate system, and the NEFT system have to

process and clear the data for completion of a transaction and receipt of money (INR) at

ICICI Bank in Mumbai. On an average, the company today handles about 8000

remittance transactions a day and about 100,000 remittance transactions a year.

The issue of concern in the operations is when there is non-straight through transaction

resulting in non reconciliation of accounts. On an average there has been as much as 60-

65% non-straight through process (STP) transactions in the Nostro system in the

beginning. Today, ICICI Bank still gets about 20% non-STPs in the Nostro system and

about 8% non-STP occurs in the Vostro system. With a 24*7 hours operating system in

the global remittance business, how will the operations be managed?

While an appropriate design of the architect and platforms with largely compatible

technology may be adopted to meet the memory capacity and processing speed, what

would be the typical operational issues when dealing with foreign transactions that might

originate in any of the foreign countries (with a set of banking rules and regulation) and

need to be remitted in India? ICICI Bank can receive payments from different banks and

the payments to the beneficiary of the remittance may be remitted in a different bank.

How would the company deal with these complexities? The company deals with nearly

8000 transactions a day that come from different countries and from different banks and

it gets about 2 hours to punch in the client and beneficiary details for routing transfers to


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India through the NEFT. What kind of operational problems will the company face? A

NRI could choose to transact through Money2India, the foreign remittance portal of the

ICICI Bank (see Exhibit 21 for the steps to transaction). Would the operational issues be

resolved through such portals for foreign remittance transactions?

How much can the integration of the various systems of SWIFT, Finacle, Foreign

Exchange Rate, and NEFT solve the problems of non STPs? What if other correspondent

banks or agents are not using the same systems? How much of errors occur because of

human error in data entry? The number of non ICICI Banks that used NEFT has risen

from 13,000 a few years ago to 40,000 today. Name matching is also used to bypass

syntax errors in data entry. Integrating systems within ICICI Bank is another issue. The

basic Finacle Core Banking system has been developed by Infosys Technologies.

However, this has been modified and upgraded to meet the needs of ICICI Bank.

“We have leveraged our good relationship with Infosys to develop the Finacle Core

Banking system to meet our needs and to fully integrate our core banking system with the

SWIFT system. We are trying to integrate our Finacle Core Banking system with the

other systems that we interact with. We are also trying to convert non electronic

transaction like the transaction through demand draft to electronic transaction and we

have been fairly successful in reducing the volume of demand draft transactions from 25-

30% to 13%.”

Jegannath Shreenivas, GM, Operations Group

Why would a customer prefer demand draft (DD) to electronic fund transfer? With DD a

beneficiary can credit the money to any of his or her accounts in India. Further, DD is

easy to deliver to beneficiaries based in remote and rural India that are unconnected with

the electronic systems.

A strong team of about 150 operational professionals are dedicated to remittance business

in the company. Eighty of them are based in Mumbai (in Western India) and seventy are

based in Hyderabad (in Southern India). The operations team works closely with the

remittance business group. When a new product is proposed by the Business Group, the


116

technology, operations and the legal teams meet to assess the support requirement. The

product and process needs to be approved by the Product and Process Committee before

any product is undertaken to the product launch stage.

The operation group has periodic reviews with International Business group. The

operations group has more intensive reviews and dialogues. In the initial years, the

operations group and the technology group had Technology Forums every quarter.

However, for the last three years, since 2006, Technology Forums are organized every

month. The Finacle Customer Relationship Management system helps the operations

group to lodge their requirements/complaints to the technology group and the daily

Management Information System (MIS) further aids the dialogue process between

operations and technology groups.

ICICI Bank & Remittance Business Today:

ICICI Bank has grown in size and strength within a short span of time. It is the largest

bank among the private sector banks in India. It has built a large number of subsidiaries

which add to the networking and business strength of the company (see Exhibit 22 for list

of subsidiaries). ICICI Bank today has a global foot print with subsidiaries in the United

Kingdom, Russia and Canada, bank branches in Singapore, Bahrain, Hong Kong, Sri

Lanka, Dubai International Finance Centre and Qatar Financial Centre and representative

offices in the United States, United Arab Emirates, China, South Africa, Bangladesh,

Thailand, Malaysia, and Indonesia. As per the current statistics, ICICI Bank has more

than 450,000 NRI customers managed by or serviced by the branches in locations like

London, Leicester, Manchester, Southall, Wembley, Birmingham, Belgium,

Scarborough, Toronto Downtown, Toronto East, Brampton, Vancouver, Surrey, Moscow

and Kaluga. ICICI Bank, UK has received regulatory approvals for establishing a branch

in Frankfurt, Germany. See Exhibit 23 for the company’s global presence. The company

has also had a huge growth and has had healthy financial position (see Exhibit 24). The

company has been looking forward for engaging fully with the growth of the Indian

economy. The future plans and strategy of the company can be read through the

comments (given below) of the top management:


117

“ICICI Bank is seeking to participate in India’s growth process by leveraging its strong

competencies in various segments of the business. We are continuing our focus on retail

banking. We are partnering Indian companies by providing the right product and

advisory skills to aid their rising global aspirations. Rural India continues to be

significantly untapped market and presents a major growth opportunity, which we are

seeking to address through innovative products and delivery mechanisms. We seek to

support this strategy with financial and human capital, as we move to the next level in

terms of scale of operations. Looking ahead, we see ourselves as the premier provider of

financial services in India and to Indian customers overseas, partnering our customers

and the nation in achieving growth and prosperity.”

N. Vaghul, Chairman

“Looking ahead, we believe that India will sustain high growth rates for the foreseeable

future, driven by the knowledge economy and industrial resurgence, to which rural

growth could bring an additional new dimension. As an Indian financial services group,

we seek to facilitate and participate in this growth process by making a wide range of

financial products and services available on a large scale, accessing capital to support

growth when necessary. Achieving size and scale aligned to the needs of a fast growing

modern economy, with relevance in the global context, will be a key success factor as

India grows and globalizes.”

“The bank expects one-fourth of its balance sheet from the overseas business and also

aiming to make a position among the top ten banks of the world within next five years.”

K.V. Kamath, Chief Executive Officer

“The last fiscal saw a significant scale-up of our international operations and expansion

of our global footprint to 18 countries. We are now a preferred international bank,

offering best-in-class products to Indian corporations going global and the Indian

Diaspora by leveraging our international presence and strong technological capabilities.

Our products and services for the NRIs were supplemented by offerings to the local

customers, furthering our transformation into a global bank. Indian corporations are

today undertaking large projects, big-ticket overseas acquisitions and rising huge capital

from international markets. Our corporate banking strategy takes a unified global view


118

of our clients and offers them a comprehensive suite of commercial and investment

banking products apart from the working capital loans and project finance.”

“We are now India’s biggest bank in terms of overseas business is concerned and from

here we are aiming at a contribution of 25 per cent from international business in 2008.”

Chanda Kochhar, Joint MD and Chief Financial Officer2

2 The designations of executives given in the case were as when the case was being studied and written in the year 2008.


119

Questions for Discussion

1. What are the major issues of internationalization that the above case throws up? 2. What were the challenges faced by ICICI Bank while entering new markets? 3. What are the international strategies of ICICI Bank that would be applicable to other

Indian companies going international? 4. What are the international strategies of ICICI Bank that are unique and are not

applicable to other Indian companies? 5. How did ICICI Bank successfully operationalize its international strategy?


120

Exhibit 1: World Remittance Trends 2007 (in $ billion) Change Change Inflows 2002 2003 2004 2005 2006 2007e 06-07 02-07

Developing Countries 116 144 161 191 221 240 8% 107%

East Asia and the Pacific 29 35 39 47 53 58 10% 97% Europe & Central Asia 14 17 21 29 35 39 10% 175% Latin America & the Caribbean 28 35 41 49 57 60 6% 115% Middle-East & North Africa 15 20 23 24 27 28 7% 86% South Asia 24 30 29 33 40 44 10% 81% Sub-Saharan Africa 05 06 08 09 10 11 5% 116% Low Income Countries 32 39 40 46 56 60 9% 88% Middle Income Countries (MICs) 84 105 121 145 166 179 8% 114% Lower MICs 55 68 76 90 102 112 10% 103% Upper MICs 29 37 45 55 63 67 6% 136% High Income OECD countries 53 60 67 68 72 74 3% 40% High Income non-OECD countries 01 02 03 04 04 04 1% 298%

World 170 206 231 263 297 318 7% 87%

Change Change Outflows 2002 2003 2004 2005 2006 2007 06-07 02-07

Developing Countries 20 24 31 36 44 - 23% 226% High Income OECD 88 100 113 124 136 - 10% 64% High Income non-OECD 23 23 22 24 27 - 15% 20% World 131 147 166 183 207 - 13% 74%

Source: Remittance Trends 2007 by World Bank


121

Exhibit 4b: The Market for Remittances to India

Source: Reserve Bank of India, 2004


122

Exhibit 2: Workers’ Remittances – Major Remittance Receiving Countries*

Sr. No. Country 1996 2004 2005 2006

1 2 3 4 5 6 7 8 9 10

India* Mexico Philippines China Spain Indonesia Romania Morocco Egypt Pakistan

8, 453 4, 224

569 1, 672 2, 749

796 10

2, 165 3, 107 1, 284

20, 012 16, 613 8, 617 4, 627 5, 196 1, 700

18 4, 221 3, 341 3, 943

23, 518 20, 035 10, 668 5, 495 5, 339 5, 296 3, 754 4, 589 5, 017 4, 277

27, 607 23, 054 12, 481 6, 830 6, 057 5, 560 5, 506 5, 454 5, 330 5, 113

*figures are in US $ million Source: RBI Monthly Bulletin, February 2008

Exhibit 3: Rate of Interest (%)* – Country wise & Period wise

SL NO Period USD GBP EURO JPY

1 7 days to 30 days - - - -

2 31 days to 90 days 3.14 5.54 4.19 0.64

3 91 days to 180 days 3.35 5.81 4.62 1.12

4 180 days to 1 year # 3.77 6.26 5.11 1.67

* Subject to revision without further notice # Subject to cap on maturity date to October 31, 2008 Source: ICICI Bank Website, Business Banking


123

Exhibit 4: Total Imports and Exports from India ($ million)

Exports Imports

Year Total Total

1989-90 16612.5 21219.2 1990-91 18145.2 24072.5 1991-92 17865.4 19410.5 1992-93 18537.2 21881.6 1993-94 22238.3 23306.2 1994-95 26330.5 28654.4 1995-96 31794.9 36675.3 1996-97 33469.7 39132.4 1997-98 35006.4 41484.5 1998-99 33218.7 42388.7 1999-00 36822.4 49670.7 2000-01 44560.3 50536.5 2001-02 43826.7 51413.3

2002-03 52719.4 61412.1 2003-04 63842.6 78149.1 2004-05 83535.9 111517.4 2005-06 103090.5 149165.7 2006-07 126331.1 190566.0

Source: Reserve Bank of India, Export, Import figure


124

Exhibit 5: Foreign Currency Reserves and NRI Deposits in India

As of Foreign Currency Reserve NRI Deposit

March 1991 5.83 13.72 March 1992 9.22 12.82 March 1993 9.83 13.98 March 1994 19.25 15.69 March 1995 25.19 17.16 March 1996 21.69 17.43 March 1997 26.42 20.39 March 1998 29.37 20.37 March 1999 32.49 20.50 March 2000 38.04 21.68 March 2001 42.28 23.07 March 2002 54.10 25.17

March 2003 76.10 28.52 March 2004 112.95 33.26 March 2005 141.51 32.97 March 2006 151.62 36.28 March 2007 199.17 41.24

*figures are in $ billion Source: Reserve Bank of India

Exhibit 6: Inflows and Outflows from NRI Deposits and Local Withdrawals

Year Inflows Outflows Local Withdrawals

1999-00 2000-01 2001-02

2002-03 2003-04 2004-05 2005-06 2006-07

2007-08 (Apr-Sep) 2006-07 (Apr-Sep)

7.405 8.988

11.435

10.214 14.281 8.071

17.835 19.914 10.768 8.431

5.865 6.672 8.681

7.236 10.639 9.035

15.046 15.593 10.846 6.221

4.120 4.727 8.546

6.644 10.585 8.907

12.454 13.208 8.300 5.123



125

Exhibit 7: Select Indicators of Private Transfers to India

Year Amount (US $ billion)

Share in Current Receipts (Percent)

Private Transfer (Percent to GDP)

1990-91 1995-96 1999-00 2000-01 2001-02

2002-03 2003-04 2004-05 2005-06 2006-07

2.1 8.5

12.3 13.1 15.8

17.2 22.2 21.1 25.0 29.0

8.0

17.1 18.3 16.8 19.4

18.0 18.5 13.6 12.8 11.9

0.7 2.4 2.7 2.8 3.3

3.4 3.7 3.0 3.1 3.2

Source: RBI Monthly Bulletin, February 2008

Exhibit 8: Trends and Composition of Private Transfers to India

Year Inward remittance for family

maintenance

Local withdrawals/

redemptions from NRI deposits

Gold and Silver brought through

passenger baggage

Personal gifts/ donations to

charitable/ religious institutions in India

Total

1990-00 2000-01 2001-02

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(Apr-Sep) 2006-07

(Apr-Sep)

7.423 7.747 6.578

9.914 10.379 9.973

10.455 13.561

9.434

6.607

4.120 4.727 8.546

6.644 10.585 8.907

12.454 13.208

8.300

5.123

13 10 13

18 19 27 16 27

17

11

734 581 623

613 1.199 2.168 2.026 2.155

1.241

992

12.290 13.065 15.760

17.189 22.182 21.075 24.951 28.951

18.992

12.733



126

Exhibit 9: Country-wise size of Indian Diaspora and number of Indian Bank

branches

Country CP IDP % ID BIB

Australia 18,700,000 1, 90,000 1.02 1 Bahrain 688,345 130,000 19 3 Fiji 893,354 336,829 38 9 France 60,656,178 65,000 - 2 Germany 82,431,390 35,000 - 1 Hongkong 6,898,686 50,500 1 11 Israel 6,276,883 45,400 1 1 Japan 126,600,000 10,000 - 4 Kenya 33,829,590 102,500 - 4 Maldive Island 269,000 9000 3.35 1 Mauritius 1,230,602 715,756 58 8 Oman 3,001,583 312,000 10 4 Singapore 4,425,720 307,000 7 9 South Africa 44,344,136 1,099,000 2 2 Thailand 65,444,371 85,000 - 1 U. A. E 2,563,212 950,000 37 8 United Kingdom 60,441,457 2,200,000 4 22 U. S. A 281,421,906 1,678,765 1 6 Others 441,142,738 1,091,224 - 22

Note: CP: Country Population IDP: Indian Diaspora Population ID: Indian Diaspora BIB: Branches of Indian Banks

Source: Government of India, Indian Diaspora Web, Reserve Bank India, 2007


127

Exhibit 10: Statistics of Banks in India (2006-07)

SL NO

Bank No of Offices

No of Employees

Investment Business Per

Employee

Profit Per Employee

Deposits

20 SBI 9556 185388 149149 357.00 2.37 435521

12 ICICI 713 33321 91258 1027.00 9.00 230510

17 Canara 2689 46359 45226 548.76 3.24 142381

19 UBI 2285 27536 27982 509.21 3.25 85180

10 Indian Overseas 1824 23861 23974 467.23 4.04 68740

1 HDFC 638 21477 30565 607.00 6.13 68298

14 OBC 1253 14730 19808 742.64 5.61 63996

13 Allahabad 2104 20379 18746 456.00 3.97 59544

8 UTI 501 9980 26897 1024.00 7.59 58786

3 Corporation 922 11880 14417 637.00 4.79 42357

4 Andhra 1202 13831 14301 536.06 4.14 41454

11 SBP 787 11329 12358 599.54 3.24 39184

5 Citibank 39 5194 16021 1360.48 17.33 37875

9 Vijaya 1033 10765 12018 455.17 3.04 37604

7 Standard Chartered 87 7321 11902 924.20 19.62 34174

15 SBT 717 11607 9562 506.13 2.96 30984

16 SBM 651 9604 6990 398.00 2.60 22022

6 PNB 841 9325 6693 328.59 2.34 19319

2 ABN AMRO 28 3549 6407 1011.88 11.36 15998

18 Karnataka 426 4456 5048 523.86 3.97 14037

*figures are in INR 10 million

Note: PNB: Punjab National Bank, UTI – Now Axis Bank, SBP – State Bank of Patiala SBM – State Bank of Mysore, OBC – Oriental Bank of Commerce, SBT – State Bank of Travancore, UBI – Union Bank of India, SBI – State Bank of India

Source: Reserve Bank of India, Authors’ research


128

Exhibit 11: Branches of Indian Banks out side India

Name of the Country

SBI

AHB

BoB

BoI

Canara Bank

Indian Bank

IOB

PNB

Syndicate Bank

UCO Bank

ICICI Bank

UTI Bank

Total

Afghanistan — — — — — — — 1 — — — — 1

Australia 1 — — — — — — — — — — — 1

Bahamas 1 — 1 — — — — — — — — — 2

Bahrain 2 — — — — — — — — — 1 — 3

Bangladesh 4 — — — — — — — — — — — 4

Belgium 1 — 1 — — — — — — — — — 2

Cayman Island

— — — 1 — — — — — — — — 1

Channel Islands

— — — 1 — — — — — — — — 1

China 1 — — 1 — — — — — — — 2

Fiji — — 9 — — — — — — — — — 9

France 1 — — 1 — — — — — — — — 2

Germany 1 — — — — — — — — — — — 1

Hongkong 1 1 — 2 1 — 2 — — 2 1 1 11

Israel 1 — — — — — — — — — — — 1

Japan 2 — — 2 — — — — — — — — 4

Kenya — — — 4 — — — — — — — — 4

Maldive Island

1 — — — — — — — — — — — 1

Mauritius — — 8 — — — — — — — — — 8

Oman 1 — 3 — — — — — — — — — 4

Seychelles — — 1 — — — — — — — — — 1

Singapore 1 — 1 1 — 1 1 — — 2 1 1 9

South Africa

1 — 1 — — — — — — — — — 2

South Korea

— — — — — — 1 — — — — — 1

Sri Lanka 3 — — — — 2 1 — — — 1 — 7

Thailand — — — — — — 1 — — — — — 1

United Arab

Emirates 1(DIFC) — 6 — — — — — — — 1(DIFC) — 8

United Kingdom

6 — 8 6 1 — — — 1 — — — 22

United States

of America 3 — 1 2 — — — — — — — — 6

Total 33 1 40 21 2 3 6 1 1 4 5 2 119

Notes: AHB – Allahabad Bank, IOB – Indian Overseas Bank, BoB – Bank of Baroda, PNB – Punjab National Bank, BoI – Bank of India, DFIC – Dubai International Financial Centre

Source: Department of Banking Operations & Development, Reserve Bank of India.


129

Exhibit 12: Indian Banking Challenges & ICICI Bank

• With a chain of more than 65,000 branches, Indian Banking system is one of the largest banking networks in the world

• The retail-banking sector contributes 1/5th of the overall bank credit.

• The Indian retail-banking sector is growing at a rate of 122% per annum.

• The retail-banking sector of India will reach a worth of $310 billion by the year 2010, predicted by the experts.

• During the year 2000-2005, the entire assets of the banking industry increased with a compound annual growth rate of 14% touching a worth of $523 billion from $ 271 billion.

• The profits of Indian banking industry jumped at a compound annual rate of 26% touching a worth of $ 5.2 billion from $ 1.55 billion.

• Banking industry in India is undergoing a major transformation due to changes in economic conditions and continuous deregulation.

• Continuous deregulation has made the banking market extremely competitive with greater autonomy, operational flexibility and decontrolled interest rate and liberalized norms for foreign exchange.

• Marketplace has been redefined with new rules.

• Banks need to access low cost funds and simultaneously improve the efficiency.

• Customers have become demanding and the loyalties are diffused.

• The competency gap needs to be addressed otherwise there will be missed opportunities.

• Investing in state of the art technology as the backbone to ensure reliable service delivery.

• Innovating products to capture customer ‘mind share’ to begin with and later the wallet share.

• Implementing organization wide initiatives involving people, process and technology to reduce the fixed costs and the cost per transaction.

• The banks need some transformation initiatives in various fields for the emerging challenges. These initiatives includes areas like; Strategy, Brand, Organization Restructuring, Re-engineering of the key business processes, Cost efficiency, Right Sizing and matching of skills, Creating a high performing organization, Change management and creating a new mind set.

• ICICI Bank set-up an International Banking Group to implement a focused strategy for its international banking business.

• ICICI was the first Indian institution to be licensed by Qatar Financial Centre (QFC).

• As on December 31, 2006 ICICI Bank had an asset base of around US$ 67 billion.

• In 2006 ICICI Bank has shown a continuous growth in its profit.

Source: RNCOS Report, ECS Limited, Authors’ research


130

Exhibit 13: Evolutionary Path of ICICI Bank

Year Milestone

1955 The Industrial Credit and Investment Corporation of India Limited (ICICI) incorporated at the initiative of the World Bank, the Government of India and representatives of Indian Industry.

1960 ICICI building at 163, Backbay Reclamation, inaugurated.

1967 ICICI made its first debenture issue for INR 60 million, which was oversubscribed

1969 The first two regional offices in Calcutta and Madras set up

1977 ICICI sponsored the formation of Housing Development Finance Corporation. Managed its first equity public issue.

1986 ICICI became the first Indian institution to receive ADB Loans

1993 ICICI Securities and Finance Company Limited in joint venture with J.P. Morgan set up

1994 ICICI Bank set up Through the merger of Industrial Credit and Investment Corporation of India Ltd (ICICI) and Shipping Credit and Investment Corporation of India Ltd (SCICI) by their initial capital contribution of 75:25 respectively.

1997 The name The Industrial Credit and Investment Corporation of India Ltd. Changed to ICICI Ltd and ICICI Ltd announced the takeover of ITC Classic Finance.

1999 ICICI Bank was listed on the NYSE through an issue of American Depositary Shares.

2000 ICICI Bank announces merger of Bank of Madura

2001 The Boards of ICICI Ltd. and ICICI Bank approved the merger of ICICI with ICICI Bank.

2002 ICICI Ltd. merged with ICICI Bank

2003 ICICI Bank announced the setting up of its first ever offshore branch in Singapore The first offshore banking unit (OBU) at Seepz Special Economic Zone, Mumbai, launched ICICI Bank’s representative office inaugurated in Dubai Representative office set up in China ICICI Bank’s UK subsidiary launched ICICI Bank subsidiary set up in Canada

2004 Mobile Banking Service in India launched in association with Reliance Infocomm India’s first multi-branded credit card with HPCL and Airtel launched

2005 First Indian company to make a simultaneous equity offering of $ 1.8 billion in India, the United States and Japan Acquired Ivestitsionno Kreditny Bank of Russia ICICI Bank became the largest bank in India in terms of its market capitalization

2006 ICICI Bank subsidiary set up in Russia Representative offices opened in Thailand, Indonesia and Malaysia

2007 Sangli Bank amalgamated with ICICI Bank ICICI Bank signed a multi-tranche dual currency US$ 1.5 billion syndication loan agreement in Singapore ICICI Bank Eurasia LLC inaugurated its first branch at St Petersburg, Russia

2008 ICICI Bank enters US, launches its first branch in New York ICICI Bank enters Germany, opens its first branch in Frankfurt ICICI Bank announces in May 2008 to open 4 new offices in USA

Source: ICICI Bank Ltd.


131

Exhibit 14: Development of ICICI Bank

Industrialization (1955 – 1964), ICICI was among the World’s first development banks in the private sector, to quickly emerge as an important source of foreign currency loans in the country, to facilitate import of industrial machinery and technology. During this period ICICI was assisted with over 400 companies. Reorganization (1965 – 1974), A phase of Green Revolution and an emerging need in the various sectors. To cater these needs ICICI has started export finance, concessional funding in industrially backward areas and loans for small enterprisers. Consolidation (1975 – 1984), ICICI had consolidated and broad based the financial system by setting up state level financial and technical institutions and the countries first finance institution with housing specialization. This was the period when obstacles like oil stock came into picture. Liberalization (1985 – 1994), A phase, India began to open up which leads to the private enterprise and free play of market forces and ICICI saw the opportunity to diversify to meet the requirements of the new paradigm, and set up country’s first rating agency, first venture capital company and entered into asset management and banking. Globalization (1995 – 2004), Created both challenges and opportunities, because of the India’s move towards global economy. But ICICI enabled consumption-led growth by accelerating the availability and affordability of retail finance and bringing world class technology to banking, and by this it became the first Indian bank to list on the New York Stock Exchange and emerged as a leading universal bank in India.


132

Exhibit 15: Share of different Indian Banks in NRI Market, 1996-2001

Indian Public Sector Banks

Indian Private Sector Banks

Foreign Banks in

India

Leading Players

State Bank of India

ICICI Bank HDFC Bank Citibank

Retail/Product capability and franchise in

India

Basic product suite 50 mm customers Growth – 17%

Full range of products & services 5 million customers Growth – 76%

Full range of products services 1.4 million customers Growth – 74%

Full range of products and services 1.8 million customers Growth – 13.6%

NRI proposition

Basic proposition with many product and service gaps Aided by large reach in India

Core products and service elements in place for strong proposition

Not a focus area at the moment

Strong product and service offer focused on HNW customer Limited by network in India

Technology platform

Branch based banking 9, 000 branches 100 ATMs

Networked branches 400 branches 600 ATMs IVR/call centers Mobile banking Internet banking

Networked branches 130 branches 200 ATMs IVR/call centers Mobile banking Internet banking

Networked branches 11 branches 130 ATMs IVR/call centers Internet banking

Source: ICICI Bank, Internal Documents, 2001


133

Exhibit 16: International Banking Services

Services Key Features

Automated INR Payment Services

1. Web/SWIFT messaging facility 2. Routing of payment through our internal electronic network if the

account is with any of our branches 3. If accounts are with other banks, distribution is achieved through

bank drafts/ cheques by courier 4. Cover funding through INR account/ or through foreign currency

accounts 5. On-line access to INR account if maintained 6. MT 950/940 facility 7. Dedicated helpdesk for backup and tracking 8. Convenience in funding/providing cover

VOSTRO Accounts

1. Access to our network spread across all major centres 2. Internet access to account 3. Web based messaging facility/SWIFT based 4. Customised MIS 5. Funding convenience 6. Competitive tariff

Cross Border Trade Services

1. Advising and confirming of documentary letters of credit 2. Confirmation/reassurance of standby LCs and guarantees 3. Documentary collections/open account transactions 4. Payment processing and distribution 5. Advising and confirming of documentary credits 6. Negotiation of documents 7. Computerised processing ensuring speedy services

Trust and Retention Account Services

1. Waterfall management of cash flows 2. Acting as paying and receiving agent 3. Foreign Exchange agent 4. Safekeeping and Custody for the underlying 5. Account administration 6. Cash escrows and post construction management of cash flows 7. Investment services 8. Regulatory Liaison 9. Advisory Services 10. Electronic reporting via the Internet or specialist on-line system;

Customised MIS reporting

INR Agency Clearing Services

1. Clearing of customer cheques through our code as a sub member 2. Facility to issue demand drafts payable across all our branches by

your branch/branches 3. Collection of Cheques/instruments through our network 4. Funds transfer service from other centres to your branch/branches

through our network 5. Facility to issue bankers cheque with our sort code 6. Customised MIS and a dedicated helpdesk

Source: ICICI Bank Website, 2008


134

Exhibit 17: ICICI Bank Remittance Charges

Type of Transaction Commission/Charges

Remittances – Inward (Inward remittances received in foreign currency) TTs, MTs, draft on us in respect of which cover has been received in the nostro account or

cover to be obtained by drawing on remitting bank/their agents

Where the credit is to accounts maintained with any of our branches Where the payment is to be made to other banks located in places where our branches are present.

INR 500

0.2% or min INR 1000

Remittances – Outward

On all Foreign Currency Remittances

Other than for payment of imports Towards advance payment for imports Towards payment of bills directly received by imports

0.15% minimum INR 1500 0.15% minimum INR 1500 0.15% minimum INR 2000

Remittance-Outward

Commission on lieu of Exchange

Where remittance is made to the debit of same currency account Where cover is reimbursed in the same currency Any other case where the bank doesn’t earn any exchange margin

0.125% minimum INR 1000 0.125% minimum INR 100

0.125% minimum INR 100

Forward foreign exchange contracts

For booking sale/purchase contracts Extension/early deliveries/cancellation (in full or part)

INR 2000 INR 2000

• All Charges are exclusive of the service tax plus cess and service is to be charged as per the applicable service tax laws

Source: ICICI Bank Website, e-business, 2008


135

Exhibit 18: ICICI Group Strategy

Domestic Retail

Banking

Enhance share of retail deposits and sustain

leadership position in credit franchise

S H A R E H O L D E R

V A L U E

Global Corporate

& Investment Banking

Leverage corporate relationships, structuring

expertise, balance sheet and global syndication capability

International Retail

Banking

Leverage NRI opportunity and technology

capabilities

Rural Banking

Invest for future growth

Insurance & Asset

Management

Enhance and leverage market leadership position

Source: ICICI Bank, Internal Document, 2001

Exhibit 19: ICICI Strategies for Different Markets

T

rad

itio

nal

Mo

del

s

Partner bank based Products

Network of Partner banks in key origination markets, enable Wires and Check processing for initiation

Bank Branch based

Products

Remittance initiation using Bank’s overseas branches, internet banking, for offshore account holders

I

nn

ov

ativ

e M

od

els

Online Product-Web-

based access

Web-based interface with online account debit, checks, wires, cards for initiation and a wider choice for distribution of remittances

Alliance Products

Specialized transfer products in various geographies in alliance with key banks through both online and offline modes.

Source: CashTech Solutions, 2007


136

Exhibit 19 b: ICICI Bank’s Growth Plan, 2001

Overseas

Platform

Product

Proposition

Targeting the opportunity

� Market Potential

� Competition

Strong domestic customer acquisition support


137

Exhibit 20: Initiatives of ICICI Bank in the domestic front, 1996-2001

Potential partners/targets

Objective Potential services

Alliances

Airlines Travel houses

Target NRIs when they are leaving/coming back to India

Co-branded credit cards Discount on travel services

Focused marketing

Universities with high potential from NRI perspective Software companies Festivals Diwali Christmas

Target students who are likely to go overseas Target employees going overseas Target NRIs when they are more likely to come back/need services

Student loans Bridge cards Gift services

Source: ICICI Bank, Internal Document, 2001


138

Exhibit 21: Foreign Remittance Steps: New York – Mumbai*

• “X” a remitter, must register himself as a user with Money2India Web site

• “X” can opt to transfer money through the Automated Clearing House, which is the clearing network for electronic funds transfer in the US.

• “X” needs to provide detail such as his US bank account number, the type of account that he holds and the 9 digit routing number (a number given by the US Fed to identify every branch in the US)

• ICICI Bank will validate the account for security reasons within 3 days. It does this by making two small deposits and a withdrawal.

• Once the validation is done, “X” will be informed about this and he can initiate the process of transferring money.

• After logging on to the Money2India website, he must provide the details of the beneficiary such as Name, Address, Bank Account, Currency etc.

• The money is transferred from his US bank account after 1 to 2 working days to ICICI Bank, New York.

• ICICI Bank in Mumbai receives the payment instruction from ICICI bank New York via SWIFT.

• In the event of the beneficiary having a different bank account (non-ICICI Bank) it may take another day.

*The dollars are converted in Mumbai and the rupee equivalent is credited to the ICICI Bank account of the beneficiary on the 5th working day after transfer from the US bank account Source: Business Line, Aug. 03, 2006


139

Exhibit 22: Subsidiaries of ICICI Bank

Domestic International

1. ICICI Securities Limited1 2. ICICI Securities Primary Dealership

Limited2 3. ICICI Prudential Life Insurance

Company Ltd. 4. ICICI Lombard General Insurance Co.

Ltd. 5. ICICI Prudential Asset Management Co.

Ltd.4 6. ICICI Prudential Trust Limited 6 7. ICICI Venture Funds Management Co.

Ltd. 8. ICICI Home Finance Company Limited 9. ICICI Investment Management Company

Ltd. 10. ICICI Trusteeship Services Limited

1. ICICI Bank UK Plc. 2. ICICI Bank Canada 3. ICICI Wealth Management Inc.3 4. ICICI Bank Eurasia Limited

Liability Co. 5. ICICI Securities Holdings Inc.5 6. ICICI Securities Inc.7 7. ICICI International Limited

1. Formerly known as ICICI Brokerage Services Limited. 2. Formerly known as ICICI Securities Limited 3. ICICI Wealth Management Inc. was incorporated as a subsidiary of ICICI Canada in fiscal 2007. It has not

yet been capitalized and is yet to commence operations. 4. Formerly known as Prudential ICICI Asset Management Company Limited. 5. Subsidiary of ICICI Securities Limited 6. Formerly known as Prudential ICICI Trust Limited 7. Subsidiary of ICICI Securities Holdings Inc.


140

Exhibit 23: Global Foot Prints of ICICI Bank, 2008

USA

UK

Australia

Fiji

GCC

Mauritius

Indian Diaspora: 336,829 Indian Diaspora: >1,392,000

Indian Diaspora: 714,718

Indian Diaspora: 1,678,765

Indian Diaspora: 2,200,000

Indian Diaspora: 190,000


141


142

Exhibit 24: ICICI Bank: Financial Details (in INR 10 million)

Mar98 Mar99 Mar00 Mar01 Mar02 Mar03 Mar04 Mar05 Mar06 Mar07

12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths 12mths

Total Income 347.623 642.80 1048.10 1469.09 2762.28 12533.37 12069.23 12949.57 19368.34 29957.23

PAT net of P&E

50.26 63.45 105.43 161.23 253.04 -2.66 1598.41 1861.19 2492.97 2995.00

GFA 218.76 261.56 315.15 589.68 4494.30 4812.98 5090.21 5525.65 5968.56 6298.57

Net Worth 266.75 308.33 1149.51 1312.62 6594.96 7283.31 8360.56 12899.98 22555.99 24663.26

Borrowings 192.23 367.89 659.47 1200.80 58969.97 44051.95 39846.11 41753.40 48666.30 70661.14

PBDITA/Total Income (%)

77.82 83.47 79.58 75.64 69.39 64.00 78.03 73.70 72.66 71.55

PAT net of P & E /Tot inc (%)

14.45 9.86 10.05 10.97 9.37 10.66 13.61 15.66 13.15 10.42

RONW 22.39 22.03 14.45 13.09 6.53 17.38 20.93 18.86 14.33 13.17

ROCE 16.08 11.91 9.44 8.70 0.80 2.17 3.44 4.06 4.25 3.93

Investments - - - - 35891.08 35462.30 43435.52 50487.35 71547.40 91257.83

Equity shares - - - - 2516.83 2424.54 3107.92 3981.47 4918.55 6009.49

Debt instruments

- - - - 29158.67 31238.49 35450.07 37343.50 53012.71 70127.56

Group companies

- - - - 608.18 782.13 1423.65 2066.69 2860.70 4072.23

Non-group companies

- - - - 8345.01 7332.33 7233.37 4768.81 3861.88 4400.08

GFA: Gross Fixed Asset, RONW: Return on Net Worth, ROCE: Return on Capital Employed

Source: CMIE Data Base


143

References:

1. Company Annual Reports, http://www.icicibank.com

2. SANSCO Data Base, Xavier Institute of Management, Bhubaneswar

3. CMIE Data Base, Xavier Institute of Management, Bhubaneswar

4. ISI Emerging Markets, Xavier Institute of Management, Bhubaneswar

5. http://www.nriinternet.com

6. Business Line – August 03, 2006

7. http://www.bis.org/review/r050321g.pdf

8. http://www.unescap.org/drpad/publication/fin_2206/part4.pdf

9. http://www.iupindia.org/books/GoingGlobal-Strategies_ovw.asp

10. ICICI’s Global Expansion, Tarun Khanna & Ramana Nanda, 9-706-426, September 27,

2006, Harvard Business School

11. ICICI Bank, Path to Globalization, Boris Typsin & Ashok Som, 306-507-1, ESSEC

Business School, ECCH

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