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A STRATEGIC ANALYSIS OF ICICI BANK
-: SUBMITTED BY:-
Mr. AKSHAY SABLE
BACHALOUR OF MANAGEMENT STUDIES
SYBMS DIV- B
Roll no-83
-: UNDER GUIDANCE OF:-
Mr.VINOD CHANDWANI
-: SUBMITTED TO:-
N.G BEDEKAR COLLEGE THANE
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CERTIFICATE Undertaken and completed the project work titled “STRATEGY OF
ICICI BANK” during the academic year 2012 – 2013 under the guidanceof MR.VINOD CHANDWANI
submitted by_ MR AKSHAY SABLE This is to certify that the
BACHELOR OF MANAGEMENT STUDIES, SEMISTER THIRD, have,
roll No: _83_ during Semester III of the bms This is a bonafide project
work and the information presented in it is true and original to the best
of our knowledge and belief.
Project Guide
(Prof.. VINOD CHANDWANI)
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CONTENTS
Executive Summary <<<<<<<<<<<..<<<<<<< Pg. 07
History of ICICI Bank <<<<<<<<..<<<<<<<<<.. Pg. 08
Timeline History of ICICI Bank <<<.<<<<<<<<<<.. Pg. 09
ICICI Bank present scenario
Financial Aspect <<<<<<<<<<<<<..<<<<< Pg. 11
Capital Structure <<<<<<<<<<<<<<<<<<. Pg. 12
Services Provided
Principal Services <<<<<<<<.<<<<<<<<...Pg. 13
Principal Credit Products <<<<<<<<<<..<<<Pg. 13
Commercial Banking for Corporate Customer<<<<.. Pg. 16
Other Fees & Commission based activities<<<<<<..pg. 17
Commercial Banking for International Customers<<<. Pg. 19
Commercial Banking for Agriculture & Rural CustomersPg. 20
Strategies
Focus on Quality Growth Opportunities<<<Pg. 22
Strengthen Insurance and Asset Management Businesses Pg. 23
Emphasize Conservative Risk Management Practices and Enhance
Asset Quality<<<<<<<<<<<<<<<<.. Pg. 24
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Strategic Analysis
TOWS MATRIX Analysis <<<<<<<<<<<<< Pg. 26
SERVICE GAP Analysis <<<<<<<<<<<<<<Pg. 28
Recommendations to ICICI Bank <<<<<..<<<..<Pg. 30
Suggestions to Other Financial & Banking Institutes <...Pg. 31
Bibliography <<<<<<<<<<<<<<<<<<... Pg. 33
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EXECUTIVE SUMMARY
ICICI Bank is a leading Indian private sector commercial bank offering avariety of products and services. It was incorporated in India in 1994. In
2002, ICICI, a non-bank financial institution, and two of its subsidiaries,
ICICI Personal Financial Services and ICICI Capital Services, were
amalgamated with ICICI Bank. As of March 31, 2007 ICICI Bank is the
largest private sector bank in India and the second largest bank in India,
in terms of assets. May 10, 2007, ICICI Bank has the largest market
capitalization among all banks in India.
ICICI Banks commercial banking operations span the corporate and the
retail sector. It offers a suite of products and services for both its
corporate and retail customers. ICICI Bank offers a range of retail credit
and deposit products and services to retail customers. The
implementation of its retail strategy and the growth in the commercial
banking operations for retail customers has had a significant impact on
its business and operations in recent years. At year-end fiscal 2007, retail
finance represented 63.8% of its total loans and advances compared to
62.9% at year-end fiscal 2006 and 60.9% at year-end fiscal 2005. ICICI
Bank has approximately 24.0 million retail customer accounts. Its
corporate customers include India’s leading companies as well as
growth-oriented small and middle market businesses, and the products
and services offered to them include loan and deposit products and fee
and commission-based products and services. Through its treasury
operations, it manages its balance sheet and strives to optimize profits
from the trading portfolio by taking advantage of market opportunities.
ICICI Bank believes that the international markets present a major
growth opportunity and have, therefore, expanded to countries other
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than India to serve its customers’ cross border needs and offer its
commercial banking products to international customers.
At year-end fiscal 2007 its principal network consisted of 710 branches,
45 extension counters and 3,271 automated teller machines, or ATMs,
across several Indian states. Pursuant to the amalgamation of Sangli
Bank with ICICI Bank, its network of branches and extension counters
increased by 198. ICICI Bank offers its customers a choice of delivery
channels, and they use technology to differentiate there products and
services from those of its competitors. ICICI Bank remains focused onchanges
HISTORY OF ICICI
ICICI was formed in 1955 at the initiative of the World Bank, the
Government of India and Indian industry representatives. The principal
objective was to create a development financial institution for providing
medium-term and long-term project financing to Indian businesses.
Until the late 1980s, ICICI primarily focused its activities on project
finance, providing long-term funds to a variety of industrial projects.
With the liberalization of the financial sector in India in the 1990s, ICICI
transformed its business from a development financial institution
offering only project finance to a diversified financial services provider
that, along with its subsidiaries and other group companies, offered a
wide variety of products and services. As India’s economy became more
market-oriented and integrated with the world economy, ICICI
capitalized on the new opportunities to provide a wider range of
financial products and services to a broader spectrum of clients.
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ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI
Bank’s initial equity capital was contributed 75.0% by ICICI and 25.0%
by SCICI Limited, a diversified finance and shipping finance lender of
which ICICI owned 19.9% at December 1996. Pursuant to the merger ofSCICI into ICICI, ICICI Bank became a wholly-owned subsidiary of
ICICI. Effective March 10, 2001, ICICI Bank acquired Bank of Madura, an
old private sector bank, in an all-stock merger.
Conversion into a bank offered ICICI the ability to accept low-cost
demand deposits and offer a wider range of products and services, andgreater opportunities for earning non-fund based income in the form of
banking fees and commissions. ICICI Bank also considered various
strategic alternatives in the context of the emerging competitive scenario
in the Indian banking industry. ICICI Bank identified a large capital base
and size and scale of operations as key success factors in the Indian
banking industry. In view of the benefits of transformation into a bank
and RBI’s pronouncements on universal banking, ICICI and ICICI Bank
decided to merge.
At the time of the merger, both ICICI Bank and ICICI were publicly
listed in India and on the New York Stock Exchange. The amalgamation
was approved by each of the boards of directors of ICICI, ICICI Personal
Financial Services, ICICI Capital Services and ICICI Bank at their
respective board meetings held on October 25, 2001. The amalgamation
was approved by ICICI Bank’s and ICICI’s shareholders at their
extraordinary general meetings held on January 25, 2002 and January 30,
2002, respectively. The amalgamation was sanctioned by the High Court
of Gujarat at Ahmedabad on March 7, 2002 and by the High Court of
Judicature at Bombay on April 11, 2002. The amalgamation was
approved by RBI on April 26, 2002. The amalgamation became effective
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on May 3, 2002. The date of the amalgamation for accounting purposes
under Indian GAAP was March 30, 2002.
TIME LINE HISTORY OF ICICI
1955:
:
1956:
1960:
1961:
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,
with the objective of creating a development financial institution
for providing medium-term and long-term project financing toIndian businesses. Mr.A.Ramaswami Mudaliar elected as the
first Chairman of ICICI Limited.
ICICI emerges as the major source of foreign currency loans to
Indian industry. Besides funding from the World Bank and other
multi-lateral agencies, ICICI also among the first Indian
companies to raise funds from International markets.
ICICI declared its first Dividend at 3.5%.
ICICI building at 163, Backbay Reclamation was inaugurated.
The first West German loan of DM 5 million from Kredianstalt
was obtained by ICICI.
ICICI made its first debenture issue for Rs.6 crore, which was
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1967:
1969:
1972:
1977:
1982:
1986:
:
:
oversubscribed.
First two regional offices in Calcutta and Madras were opened.
Second entity in India to set-up merchant banking services.
ICICI sponsors the formation of Housing Development Finance
Corporation. Managed its first equity public issue.
Becomes the first ever Indian borrower to raise European
Currency Units.
ICICI commences leasing business.
ICICI first Indian Institution to receive ADB Loans. First public
issue by an Indian entity in the Swiss Capital Markets.
ICICI along with UTI sets up Credit Rating Information Servicesof India Limited, (CRISIL) India's first professional credit rating
agency.
ICICI promotes Shipping Credit and Investment Company of
India Limited. (SCICI)
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:
1987:
1988:
1993:
:
1994:
1996:
:
:
The Corporation made a public issue of Swiss Franc 75 million in
Switzerland, the first public issue by any Indian equity in the
Swiss Capital Market.
ICICI signed a loan agreement for Sterling Pound 10 million with
Commonwealth Development Corporation (CDC), the first loan
by CDC for financing projects in India.
ICICI promotes TDICI - India's first venture capital company.
ICICI sets-up ICICI Securities and Finance Company Limited in
joint venture with J. P. Morgan.
ICICI sets up ICICI Asset Management Company.
ICICI sets up ICICI Bank.
ICICI becomes the first company in the Indian financial sector to
raise GDR.
ICICI announces merger with SCICI.
Mr.K.V.Kamath appointed the Managing Director and CEO of
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1997:
:
:
1998:
:
1999:
:
2000:
:
ICICI Ltd
ICICI was the first intermediary to move away from single primerate to three-tier prime rates structure and introduced yield-
curve based pricing.
The name "The Industrial Credit and Investment Corporation of
India Limited" was changed to "ICICI Limited".
ICICI announces takeover of ITC Classic Finance.
Introduced the new logo symbolizing a common corporate
identity for the ICICI Group.
ICICI announces takeover of Anagram Finance.
ICICI launches retail finance - car loans, house loans and loans
for consumer durables.
ICICI becomes the first Indian Company to list on the NYSE
through an issue of American Depositary Shares.
ICICI Bank becomes the first commercial bank from India to list
its stock on NYSE.
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0
5000
10000
15000
20000
25000
30000
35000
2003 2004 2005 2006 2007
2001:
2002:
:
ICICI Bank announces merger with Bank of Madura.
The Boards of ICICI Ltd and ICICI Bank approved the merger of
ICICI with ICICI Bank.
Moodys' assign higher than sovereign rating to ICICI.
Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI
Personal Financial Services Limited with ICICI Bank.
ICICI BANK PRESENT
FINANCIAL ASPECTS (As on 31st March 2007)
A Net P.A.T of Rs. 31,102.2 million, a growth of 22.45% from 2006.
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1068.121,252.29
1,676.59
2,513.89
3,446.58
0
500
1000
1500
2000
2500
3000
3500
4000
1 2 3 4 5
26.84
2003 2004 2005 2006 2007
Net ProfitAfter Tax
12,061.8 16,371.0 20,052.0 25,400.7 31,102.2
Assets worth Rs.
3,446.58
billion – 2007.
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CAPITAL STRUCTURE (Rs. billion)
A. Authorised Capital
1,275 million Equity Shares of Rs. 10/- each
15 million Preference Shares of Rs. 100/- each
350 Preference Shares of Rs. 10 million each
12.75
1.50
3.50
B. Issued, Subscribed and Paid-Up Capital
899.38 million Equity Shares of Rs. 10/- each 8.99
C. Issued, Subscribed and Paid up Preference Share
Capital
350 Preference Shares of Rs. 10 million each
3.50
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SERVICES PROVIDED
Overview of its Operations
ICICI Bank offer products and services in the areas of commercial
banking to corporate and retail customers, both domestic and
international. ICICI Bank also undertakes treasury operations and offertreasury related products and services to its customers. Its subsidiaries
are engaged primarily in insurance, asset management, investment
banking and venture capital and private equity fund management.
Commercial Banking Products and Services for Retail Customers
Its commercial banking operations for retail customers consist of retail
lending and deposits, credit cards, depositary share accounts,
distribution of third-party investment and insurance products, other fee-
based products and services and issuance of unsecured redeemable
bonds.
Retail Lending Activities
ICICI Bank offer a range of retail asset products, including home loans,
automobile loans, commercial vehicle loans, two wheeler loans, personal
loans, credit cards, loans against time deposits and loans against shares.
ICICI Bank also fund dealers who sell automobiles, two wheelers,
consumer durables and commercial vehicles. ICICI Bank have
capitalized on the growing retail opportunity in India and believe that
ICICI Bank have emerged as a market leader in retail credit, with an
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outstanding retail finance portfolio of Rs. 1,292.81 billion at year-end
fiscal 2007.
Its principal retail credit products are:
Home Finance
Its home finance business, and the business of its subsidiary ICICI Home
Finance Company, involves giving long-term housing loans to
individuals and corporations and construction finance to builders. These
loans are secured by a mortgage of the property financed. These loans
are extended for maturities generally ranging from five to 20 years and a
large proportion of these loans are at floating rates of interest. This
reduces the interest rate risk that ICICI Bank assumes, since its funding
is generally of shorter maturity. Any change in the benchmark rate to
which the rate of interest on the home loan is referenced is passed on to
the borrower on the first day of the succeeding quarter or succeeding
month, as applicable. Any decrease in the rate of interest payable on
floating rate home loans is affected by an acceleration of the repaymentschedule, keeping the monthly installment amount unchanged. Any
increase in the rate of interest payable on floating rate home loans is
effected first by a prolongation of the repayment schedule, keeping the
monthly installment amount unchanged, and based on certain criteria,
by changing the monthly installment amount.
Automobile Finance and Two Wheeler Loans
Automobile finance generally involves the provision of retail consumer
credit for an average maturity of three to five years to acquire specified
new and used automobiles. Automobile loans are secured by a charge
on the purchased automobile. ICICI Bank has a strong external
distribution network and a strong in-house team to manage the
distribution network which has been instrumental in achieving this
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leadership position. ICICI Bank also has strong relationships with
automobile manufacturers and is a “preferred financier” with several
automobile manufacturers in India. ICICI Bank also provides two
wheeler loans.
Commercial Business
ICICI Bank fund commercial vehicles, utility vehicles and construction
and farm equipment sold through manufacturer-authorized dealers. The
finance is generally for a maximum term of five to seven years through
loans, hire purchase agreements or a lease.
Personal Loans
Personal loans are unsecured loans provided to customers who use
these funds for various purposes such as higher education, medical
expenses, social events and holidays. Recently ICICI Bank has
experienced rapid growth in its portfolio of personal loans. Its portfolio
of personal loans includes micro-banking loans, which are relatively
small value loans to lower income customers in urban areas.
Credit Cards
ICICI Bank has a credit card base of over 7.5 million cards. As the Indian
economy develops, ICICI Bank expect that the retail market will seek
short-term credit for personal uses, and its offering of credit cards will
facilitate further extension of its retail credit business. ICICI Bank also
earns fee incomes from card transactions as the issuing bank and as the
acquiring bank where the transaction occurs on a point of sale terminal
installed by us
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Dealer Funding
ICICI Bank fund dealers who sell automobiles, two wheelers, consumer
durables and commercial vehicles. These loans are generally given for a
short term. ICICI Bank has played a leading role in the growth and
development of the securitization market in India. ICICI Bank also focus
on selling down its loans to better utilize capital, manage portfolio
concentrations and provide additional flexibility and liquidity.
Lending to Small Enterprises
ICICI Bank is seeking to extend its reach to the growing small
enterprises sector through segmented offerings. ICICI Bank provides
supply chain financing, including financing of selected customers of its
corporate clients. ICICI Bank also provide financing on a cluster-based
approach that is financing of small enterprises that have a homogeneous
profile such as apparel manufacturers, auto ancillaries, pharmaceuticals
and gems &jewellery. ICICI Bank has launched smart business loans to
meet the working capital needs of small businesses. ICICI Bank also
provides short term loans to small businesses for a period of up to 36
months. The funding under this facility is unsecured and the loan
amount varies from more than Rs. 0.2 million to Rs. 2.5 million per
customer.
Retail Deposits
Its retail deposit products include the following:
• Time deposits including:
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Recurring deposits, which are periodic deposits of a fixed amount over a
fixed term that accrue interest at a fixed rate and may be withdrawn
before maturity by paying penalties; and certificates of deposit;
• Savings accounts, which are demand deposits that accrue interest at a
fixed rate set by RBI (currently 3.5% per annum) and upon which
cheques can be drawn; and
• Current accounts, which are non-interest bearing demand deposits. In
addition to deposits from Indian residents, ICICI Bank accept time and
savings deposits from non-resident Indians, foreign nationals of Indian
origin and foreign nationals working in India. These deposits areaccepted on a repatriable and a non-repatriable basis and are maintained
in rupees and select foreign currencies.
Following a strategy focused on customer profiles and product
segmentation, ICICI Bank offer differentiated liability products to
various categories of customers depending on their age group, such as
Young Star Accounts for children below the age of 18 years, StudentBanking Services for students, Salary Accounts for salaried employees
and Senior Citizens Account for individuals above the age of 60 years.
During fiscal 2007, ICICI Bank launched special term deposit products
for durations of 390, 590 and 890 days. ICICI Bank have also segmented
various categories of customers to offer targeted products, like Private
Banking for high net worth individuals, Defence Banking Services for
defence personnel, Special Savings Accounts for trusts and RoamingCurrent Account for businessmen.
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Bond Issues
ICICI Bank offer retail liability products in the form of a variety of
unsecured redeemable bonds. RBI has prescribed limits for issuance of
bonds by banks. During the financial year ended March 31, 2007, ICICI
Bank did not issue any bonds to retail investors. While ICICI Bank
expects that deposits will continue to be its primary source of funding,
ICICI Bank may conduct bond issues in the future.
Fee-Based Products and Services
Through its distribution network, ICICI Bank offer government of India
savings bonds, insurance policies from ICICI Prudential Life Insurance
Company and ICICI Lombard General Insurance Company and
distribute public offerings of equity shares by Indian companies. ICICI
Bank also offers a variety of mutual fund products from ICICI
Prudential Asset Management Company and other select mutual funds.
ICICI Bank also levies services charges on deposit accounts. ICICI Bank
offer fee-based products and services including foreign exchange
products, documentary credits and guarantees to small and medium
enterprises. As a depositary participant of the National Securities
Depository Limited and Central Depository Services (India) Limited,
ICICI Bank offer depositary share accounts to settle securities
transactions in a dematerialized mode. Further, ICICI Bank are one of
the banks designated by RBI for issuing approvals to non-resident
Indians and overseas corporate bodies to trade in shares and convertible
debentures on the Indian stock exchanges.
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Commercial Banking for Corporate Customers
ICICI Bank provide a range of commercial banking products and
services to India’s leading corporations and growth-oriented middle
market companies, including loan products, fee and commission-based
products and services, deposits and foreign exchange and derivatives
products. ICICI Bank serves its corporate clients through two corporate
relationship groups, the Global Clients Group and the Major Clients
Group. The Global Investment Banking Group and the Global Project
Finance Group focus on origination and execution of investment
banking and project finance mandates. The Transaction Banking Group
focuses on transaction banking and product development and sales. The
Global Markets Group provides foreign exchange and other treasury
products to corporate as well as small enterprise clients.
Corporate Loan Portfolio
Its corporate loan portfolio consists of project and corporate finance
(including structured finance and cross border acquisition financing)
and working capital financing.
Project and Corporate Finance
Its project finance business consists principally of extending medium-term and long-term rupee and foreign currency loans to the
manufacturing and infrastructure sectors. ICICI Bank also provides
financing by way of investment in marketable instruments such as fixed
rate and floating rate debentures. ICICI Bank generally has a security
interest and first charge on the fixed assets of the borrower. ICICI Bank
also focus on the application of securitization techniques to credit
enhance its traditional lending products. ICICI Bank leverages itsinternational presence to offer debt financing and other products and
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services to its corporate customers. ICICI Bank offer foreign currency
loans to Indian corporates that wish to raise debt in offshore markets
under the External Commercial Borrowings guidelines of RBI. ICICI
Bank offer bilateral facilities and also arranges the financing from theoffshore syndicated loan market. Foreign currency credit is arranged
through commercial loans, syndicated loans, bonds and floating rate
notes, lines of credit from foreign banks and financial institutions, and
loans from export credit agencies. These loans are typically denominated
in US dollars and their maturity varies from three to seven years. ICICI
Bank seeks to leverage its international presence to originate and
syndicate financing mandates. In addition to taking credit exposures,
ICICI Bank earns fee incomes from its corporate and project finance
activities.
Working Capital Finance
Its working capital financing consists mainly of cash credit facilities and
bill discounting. Under the cash credit facility, a line of credit is
provided up to a pre-established amount based on the borrower's
projected level of inventories, receivables and cash deficits. Up to this
pre-established amount, disbursements are made based on the actual
level of inventories and receivables. The facility is generally given for a
period of up to 12 months, with a review after that period. Its cash credit
facility is generally fully secured with full recourse to the borrower. In
most cases, ICICI Bank has a first charge on the borrower's current
assets, which normally are inventory and receivables. Bill discounting
involves the financing of short-term trade receivables through
negotiable instruments. These negotiable instruments can then be
discounted with other banks if required, providing us with liquidity
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Other Fee and Commission-Based Activities
Letters of Credit and Guarantees
ICICI Bank provides letter of credit facilities to its customers both for
meeting their working capital needs as well as for capital equipment
purchases. Lines of credit for letters of credit are approved as part of a
working capital loan package provided to a borrower. These facilities,
like cash credit facilities, are generally given for a period up to 12
months, with review after that period. ICICI Bank provides guarantees,
which can be drawn down any number of times up to the committed
amount of the facility. ICICI Bank issue guarantees on behalf of its
borrowers in favor of corporations and Government authorities.
Guarantees are generally issued for the purpose of bid bonds,
guaranteeing the performance of its borrowers under a contract as
security for advance payments made to its borrowers by project
authorities and for deferral of and exemption from the payment ofimport duties granted to its borrowers by the Government against
fulfillment of certain export obligations by its borrowers. The term of
these guarantees is generally up to 36 months though in specific cases,
the term could be higher. In addition, as a part of its project financing
activity, ICICI Bank issue guarantees to foreign lenders, export credit
agencies and domestic lenders on behalf of its clients.
Other Fee-Based Activities
ICICI Bank also offer cash management services (such as collection,
payment and remittance services), escrow, trust and retention account
facilities, online payment facilities, custodial services and tax collectionservices on behalf of the government of India and the governments of
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Indian states. Under cash management services, ICICI Bank offer its
corporate clients custom-made collection, payment and remittance
services allowing them to reduce the time period between collections
and remittances, thereby streamlining their cash flows. Its cashmanagement products include physical cheque-based clearing in
locations where settlement systems are not uniform, electronic clearing
services, central pooling of country-wide collections, dividend and
interest remittance services and Internet-based payment products. ICICI
Bank also act as bankers to corporates for their dividend pay out to their
shareholders, as also for interest pay out to the company’s investors and
depositors which results in interest-free float balances for us. ICICI Bank
also offers custodial services to clients. At year-end fiscal 2007, total
assets held in custody on behalf of its clients (mainly foreign
institutional investors, offshore funds, overseas corporate bodies and
depositary banks for GDR investors) were Rs. 910.49 billion. As a
registered depositary participant of National Securities Depository
Limited and Central Depository Services (India) Limited, the two
securities depositaries operating in India, ICICI Bank also provide
electronic depositary facilities to investors. Further, ICICI Bank
generates fee income from its syndication and securitization activities.
Corporate Deposits
ICICI Bank take deposits from its corporate clients with terms rangingfrom 15 days (seven days in respect of deposits over Rs. 1.5 million) to
10 years but predominantly from 15 days to one year. RBI regulates the
term of deposits in India, but not the interest rates, with some minor
exceptions. Banks are not permitted to pay interest for periods less than
seven days. Also, pursuant to the current regulations, ICICI Bank are
permitted to vary the interest rates on its corporate deposits based upon
the size range of the deposit so long as the rates offered are the same for
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every customer of a deposit of a certain size range on a given day. Its
deposit products for corporations include:
• Current accounts — non-interest-bearing demand deposits;
• Time deposits — fixed term deposits that accrue interest at a fixed rate
and may be withdrawn before maturity by paying penalties; and
• Certificates of deposit — a type of time deposits.
ICICI Bank also acts as a banker to the market offerings of select
companies on account of raising of equity or debt; buy back of equity
and takeovers. These companies are required to maintain the
subscription funds with the bankers to the offering until the allotment of
shares/buy back of shares and the refund of excess subscription is
completed. This process generally takes about 15 to 30 days, resulting in
short-term deposits with us. ICICI Bank act as a banker to corporates fortheir dividend payout to their shareholders and interest payout to
investors and depositors, which results in mobilizing interest-free, float
balances to us.
Customer Foreign Exchange
ICICI Bank provides customer specific products and services and risk
hedging solutions in several currencies to meet the trade and service-
related requirements of its corporate clients. The products and services
offered include:
• Spot foreign exchange for the conversion of foreign currencies without
any value restrictions;
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• Foreign exchange and interest rate derivatives.
ICICI Bank earns commissions on these products and services from itscorporate customers. Forward Contracts, Interest Rate Swaps and
Currency Swaps ICICI Bank provide forward contracts to its customers
for hedging their short-term exchange rate risk on foreign currency
denominated receivables and payables. ICICI Bank generally provides
this facility for a term of up to six months and occasionally up to 12
months. ICICI Bank also offer interest rate and currency swaps to its
customers for hedging their medium and long-term risks due to interestrate and currency exchange rate movements. ICICI Bank offers these
swaps for a period ranging from three to 10 years. Its customers pay a
commission for this product that is included in the price of the product
and is dependent upon market conditions. ICICI Bank also hedges its
own exchange rate risk related to its foreign currency-trading portfolio
with products from banking counter-parties. Its risk management
products are currently limited to foreign currency forward transactions
and currency and interest rate swaps for selected approved clients. ICICI
Bank believes, however, that the demand for risk management products
will grow, and are building the capabilities to grow these products.
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Credit Derivatives
Its offshore branches and subsidiaries are allowed to invest in credit
derivatives. Its branches have been making investments in credit
derivatives including credit default swaps (CDS), credit linked notes
(CLN) and collateralized debt obligations (CDO). At year-end fiscal
2007, the outstanding investments in credit derivatives included Rs.
14,684.2 million (March 31, 2006: Rs. 12,938.3 million) in funded
instruments and Rs. 59,096.9 million (March 31, 2006: Rs. 23,514.4
million) of notional principal amount in unfunded instruments. The
exposures through these derivatives are governed by its investment
policy, which lays down the position limits and other risk limits.
Commercial Banking for Rural and Agricultural Customers
ICICI Bank believes that rural India offers a major growth opportunity
for financial services and has identified this as a key focus area. Till fiscal
2007, RBI’s directed lending norms required us to lend 18.0% of its net
bank credit on the residual portion of its advances (i.e., its total advances
excluding the advances of ICICI at year-end fiscal 2002) to the
agricultural sector. Effective fiscal 2008, RBI has linked the directed
lending targets for all banks to their adjusted net bank credit (net bank
credit plus investments made by banks in non statutory liquidity ratio bonds included in the held to maturity category) or credit equivalent
amount of off balance sheet exposure, whichever is higher at the
previous year-end. The guidelines have capped eligible direct
agriculture finance to non-individuals, (i.e. partnerships, corporates and
institutions) at Rs. 10.0 million per borrower. Rural banking presents
significant challenges in terms of geographical coverage and high unit
transaction costs. Its rural banking strategy seeks to adopt a holistic
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approach to the financial needs of various segments of the rural
population, by delivering a comprehensive product suite encompassing
credit, transaction banking, deposit, investment and insurance. ICICI
Bank provides corporate banking products and services to corporateclients engaged in agriculture-linked businesses. ICICI Bank are seeking
to grow its rural individual and household lending portfolio by
developing and scaling up credit products to various segments of the
rural population, whether engaged in agriculture or other economic
activity. Its rural credit products for individuals and households include
loans to farmers for cultivation, post-harvest financing against
warehouse receipts, and loans for purchase of tractors, working capital
for trading and small enterprises, loans against jewellery and micro-
finance loans for various purposes. ICICI Bank is seeking to roll-out its
rural strategy and reach out to rural customers through partnerships
with micro-finance institutions and companies active in rural areas. Its
rural delivery channels include branches, micro-finance institutions,
third-party kiosks and franchisees.
Commercial Banking for International Customers
Many of the commercial banking products that ICICI Bank offer to
international customers, such as trade finance and letters of credit, are
similar to the products offered to its corporate customers in India. Some
of the products and services that are unique to international customers
are:
• Money2India: ICICI Bank is a large player in the Indian remittance
market. According to Reserve Bank of India data, the aggregate private
transfers to and from India during fiscal 2006 were US$ 24.6 billion. For
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easy transfer of funds to India, ICICI Bank offer a suite of online as well
as offline money transfer products featured on its website
www.money2India.com. These speedy, cost effective and convenient
products enable non-resident Indians to send money to any bank at over18,000 locations in India. During the nine months ended December 31,
2006, ICICI Bank had a market share of over 25.0% in all inward
remittances to India.
• Trade Way: an Internet-based documentary collection product to
provide correspondent banks access to real-time on line information onthe status of their export bills collections routed through us.
• Remittance Tracker: an Internet-based application that allows a
correspondent bank to query on the status of their payment instructions
and also to get various information reports online.
• Offshore banking deposits: multi-currency deposit products in US
dollar, pound sterling and euro.
• Foreign currency non-resident deposits: foreign currency deposits
offered in four main currencies—US dollar, pound sterling, euro and
yen.
• Non-resident external fixed deposits: deposits maintained in Indian
rupees.
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• Non-resident external savings account: savings accounts maintained in
Indian rupees.
• Non-resident ordinary savings accounts and non-resident ordinary
fixed deposits.
Its organization structure for international operations comprises the
International Retail Banking Group, the International Financial
Institutions Group and the geographic regions of Europe, NorthAmerica and Russia; the Middle-East and Africa; and Asia. The
International Retail banking Group is jointly responsible with the three
regions for retail banking products and services across markets. It
focuses primarily on non-resident Indians and direct banking currently.
Through branches and subsidiaries in the three geographic regions
ICICI Bank also deliver products and services to its corporate clients.
ICICI Bank leverages its international presence to offer debt financing
and other services to its corporate customers. ICICI Bank currently have
subsidiaries in the United Kingdom, Canada and Russia, branches in
Singapore, Dubai International Finance Centre, Sri Lanka, Hong Kong
and Bahrain and representative offices in the United States, China,
United Arab Emirates, Bangladesh, South Africa, Thailand, Indonesia
and Malaysia. ICICI Bank has received approval from RBI and Qatar
Financial Centre Regulatory Authority to establish a branch in the Qatar
Financial Centre for which operations would commence shortly. Its
subsidiaries in the United Kingdom, Canada and Russia offer local
banking products and services in those countries. Its subsidiary in
United Kingdom has also opened a branch in Antwerp, Belgium in May
2006. In Canada and the United Kingdom, ICICI Bank have also
launched direct banking offerings using the Internet as the access
channel.
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STRATEGIES
ICICI Bank objective is to enhance its position as a provider of banking
and other financial services in India and to leverage its competencies in
financial services and technology to develop an international business
franchise. The key elements of its business strategy are to:
Focus on Quality Growth Opportunities
Maintaining and Enhancing its Strong Retail Franchise
With upward migration of household income levels andacceptance of use of credit to finance purchases, retail credit has
emerged as a growing opportunity for banks that have the necessary
skills and infrastructure to succeed in this business. While recent
increases in interest rates and asset prices as well a larger base have
resulted in moderation in growth rates, ICICI Bank believes that the
Indian retail financial services market has the potential for sustained
growth. Cross selling of the entire range of credit, deposit and
investment products and banking services to its customers is a key
aspect of its retail strategy. ICICI Bank securitizes a portion of the retail
assets originated by it self.
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Maintaining and Enhancing its Strong Corporate Franchise
ICICI Bank is focusing on leveraging its corporate
relationships to increase its market share in project finance, cross border
finance, non-fund-based working capital products and other fee-based
services. Corporate lending activities will continue to focus on
structured project and corporate finance and working capital lending to
highly rated corporations. The focus on infrastructure development and
the repositioning and emerging global competitiveness of the Indian
industry offer growth opportunities in the area of project financing.
ICICI Bank believe that a number of Indian companies in both the publicand private sector have significant investment plans for setting up
infrastructure facilities as well as industrial production capacities. The
international expansion of Indian companies also provides a major
opportunity. ICICI Bank is seeking to build a global corporate and
investment banking franchise focused on Indian companies, covering
advisory, origination, structuring, execution and syndication. It will
continue to focus on leveraging its expertise in structuring and projectfinancing, syndicating the financing required and actively managing its
project finance portfolio to reduce portfolio concentration and manage
portfolio risk. ICICI Bank aim to provide comprehensive and integrated
services, and to increase the cross-selling of its products and services
and maximize the value of its corporate relationships through the
effective use of technology, speedy response times, quality service and
the provision of products and services designed to meet specificcustomer needs.
Build an International Presence:
ICICI Bank believes that the international markets present a
major growth opportunity. ICICI Bank have therefore expanded to
countries other than India to cater to its customers’ cross border needs
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and offer its commercial banking products in select international
markets. It is also building an international private banking franchise
and leveraging its technological capabilities and relative cost efficiencies
by offering direct banking in select international markets. ICICI Bankaims to expand its offering of local banking products and services to
non-resident Indians as well as to the broader local market.
Build a Rural Banking Franchise:
ICICI Bank believes that serving the rural markets is a key
element in driving future growth for the Indian economy and for it self.
ICICI Bank rural banking strategy seeks to adopt a holistic approach tothe financial services needs of various segments of the rural population,
by delivering a comprehensive product suite encompassing credit,
transaction banking, deposit, investment and insurance, through a range
of channels. Its rural delivery channels include branches, internet kiosks,
franchisees and micro-finance institution partners.
Strengthen Insurance and Asset Management Businesses
ICICI Bank believes that the insurance and asset management sectors
have significant growth potential. It also believes that its subsidiaries,
ICICI Prudential Life Insurance Company Limited, ICICI Lombard
General Insurance Company Limited and ICICI Prudential Asset
Management Company has built a platform for continued growth, high
market share and profitability in the medium term based on extensive
distribution efforts, brand recall and underwriting and portfolio
management capabilities. According to statistics published by the
Insurance Regulatory & Development Authority, ICICI Prudential Life
Insurance Company had a market share of 28% in the private sector and
an overall market share of approximately 10% based on new business
premiums (on a weighted received premium basis) during fiscal 2007.
ICICI Lombard General Insurance had a market share of 34% among the
private sector and a total market share of approximately 12% during the
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year fiscal 2007. ICICI Prudential Asset Management Company had a
market share of 11.5% in assets under management of the mutual fund
industry at March 31, 2007. ICICI Bank seeks to leverage the synergies it
has with its insurance and asset management subsidiaries.
Emphasize Conservative Risk Management Practices and Enhance
Asset Quality
ICICI Bank believes that conservative risk management policies,
processes and controls are critical for long-term sustainable competitive
advantages in its business. ICICI Banks Risk Management Group is
independent and centralized group responsible for establishing andimplementing company-wide risk management policies, with a focus on
enhancing asset quality. It’s independent and centralized Compliance
Group, Internal Audit Group and Middle Office Groups monitor
adherence to regulations, policies and procedures. ICICI Bank continues
to build on its credit risk management procedures, credit evaluation and
rating methodology, credit risk pricing models, proprietary analytics
and monitoring and control mechanisms. It seeks to control credit risk in
the retail loan portfolio, the small enterprises loan portfolio and the
agricultural financing portfolio through carefully designed approval
criteria and credit controls and efficient collection and recovery systems.
ICICI Bank has also established standards and investigative verification
procedures for selection of its marketing and processing agents.
Following the frauds in its rural warehouse receipt financing product, it
has undertaken a comprehensive review of its products and process for
rural and agricultural financing. ICICI Bank seeks to improve the credit
risk profile of the project and corporate loan portfolio through the use of
financing structures based on a security interest in the cash flows
generated from the business of the borrower and increased collateral,
including additional security in the form of liquid assets, such as
investment securities and readily marketable real property. It is also
trying to mitigate project risk through the allocation of risk to various
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project counterparties, such as construction contractors, operations and
maintenance contractors and raw material and fuel suppliers, by
entering into rigorous project contracts with those counterparties. ICICI
Bank expect to enter new product markets only after conductingdetailed risk analysis and pilot testing programs.
Use Technology for Competitive Advantage
ICICI Bank seeks to be at the forefront of technology usage in the
financial services sector. Information Technology is a strategic tool for its
business operations to gain a competitive advantage and to improve
overall productivity and efficiency of the organization. All of itstechnology initiatives are aimed at enhancing value, offering customer
convenience and improving service levels while optimizing costs. ICICI
Bank expects to continue with its policy of making investments in
technology to achieve a significant competitive advantage. The key
objective behind its information technology strategy continues to be:
• Building a cost-efficient distribution network to accelerate the
development of its retail and rural franchise;
• Enhancing cross selling and client segmenting capability by using
analytical tools and efficient data storage and retrieval systems;
• Improving credit risk and market risk management;
• Improving product and client profitability analysis; and
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• Leveraging its technology competencies and cost efficiencies in
international markets.
Attract and Retain Talented Professionals
ICICI Bank believes a key to its success will be its ability to continue to
maintain and grow a pool of strong and experienced professionals. ICICI
Bank have been successful in building a team of talented professionals
with relevant experience, including experts in credit evaluation, risk
management, retail consumer products, treasury, technology and
marketing. Recruitment is a key management activity and ICICI Bank
continues to attract graduates from the premier Indian business schoolsas well as employees with other professional qualifications. Recruitment
and assimilation of talented professionals from other organizations is a
key element of its strategy. ICICI Bank believes it has created the right
balance of performance bonuses, stock options and other economic
incentives for its employees so that they will be challenged to develop
business, achieve profitability targets and control risk. ICICI Bank
intends to continuously re-engineer its management and organizational
structure to allow it to respond effectively to changes in the business
environment and enhance its overall profitability.
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STRATEGIC ANALYSISTOWS MATRIX
STRENGTHS WEAKNESSES
O
P
P
O
R
T
U
N
I
T
I
E
S
S – O Strategies
Strength: Large Capital base.
Opportunity: Market Expansion.
Strategy: Deep Penetration into
Rural Market.
W – O Strategies
Weakness: Workforce
Responsiveness.
Opportunity: Outsourcing of Non -
Core Business.
Strategy: Outsource Customer Care
& other E-Helps.
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T
H
R
E
A
T
S
S – T Strategies
Strength: Low operating costs
Threat: Increased Competition
from others Pvt. Banks.
Strategy: Steps to Ensure Loyalty
by old Customers.
W – T Strategies
Weakness: Not Equal to
International Standards.
Threat: Entry of many Foreign
Banks.
Strategy: Consider additional
benefits
Detailed Analysis:
i. Strength - Opportunity Analysis.
Strength: It is well know that ICICI Bank has the largest Authorised
Capital Base in the Banking System in India i.e. having a total
capacity to raise Rs. 19,000,000,000 (Non – Premium Value)
Opportunity: Seeing the present financial & economic development
of Indian Economy and also the tremendous growth of the Indian
companies including the acquisition spree followed by them, it
clearly states the expanding market for finance requirements and also
the growth in surplus disposal income of Indian citizens has given a
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huge rise in savings deposits – from the above point it is clear that
there is a huge market expansion possible in banking sector in India.
Strategy: From the analysis of Strength & Opportunity the simple
and straight possible strategy for ICICI Bank could be - to penetrate
into the rural sector of India for expanding its market share as well as
leading all other Pvt. Banks from a great gap.
ii. Strength - Threat Analysis.iii. Strength: ICICI Bank is not only known for large capital but also for
having a low operations cost though having huge number of
branches and services provided.
Threat: After showing a significant growth overall, India is able to
attract many international financial & banking institutes, which are
known for their state of art working and keeping low operation costs.
Strategy: To ensure that ICICI Bank keeps going on with low
operation cost & have continuous business it should simply promote
itself well & provide quality service so as to ensure customer loyalty,
therefore guaranteeing continuous business.
iv. Weakness - Opportunity Analysis.
Weakness: It is well known that workforce responsiveness in banking
sector is very low in Indian banking sector, though ICICI Bank has
better responsible staff but it still lacks behind its counterparts likeHSBC, HDFC, CITI BANK, YES BANK etc.
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Opportunity: In the present world, India is preferred one of the best
places for out - sourcing of business process works and many more.
Strategy: As international companies are reaping huge benefits after
out-sourcing there customer care & BPO’s, this same strategy should
be implemented by ICICI Bank so as to have proper customer service
without hindering customer expectations.
v. Weakness - Threat Analysis.Weakness: Though having a international presence, ICICI Bank has
not been able to keep up the international standards in providing
customer service as well as banking works.
Threat: In recent times, India has witnessed entry of many
international banks like CITI Bank, YES Bank etc which posses an
external entrant threat to ICICI Bank – as this Banks are known for
their art of working and maintain high standards of customer service.
Strategy: After having new entrants threat, ICICI Bank should come
up with more additional benefits to its customer or may be even
reduce some fees for any additional works of customers.
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SERVICE GAP ANALYSIS
Detailed Analysis:
GAP 1: No Strong R & D for finding hidden needs of customers.
Though ICICI Bank has been investing in R&D, but the
investments are not that high as well as the R&D of ICICI Bank is not
strongly equipped so as to analysis the deep hidden needs of customers
as well as employees.
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GAP 2: Not able to provide the desired services due to regulations.
Though knowing some of the desired services of customers or
having some innovative schemes all this schemes are not implemented
by ICICI Bank, as all banks in India are under the regulation of Reserve
Bank of India.
GAP 3: Improper Implementation by Employees.
Many schemes are launched by ICICI Bank to ensure old customer
loyalty as well as new customer base after compiling with RBI approval;
still these schemes are not implemented properly by the bank staff and
mostly agents of banks because of less understanding of schemes or
because of no faith in them.
GAP 4: Problems faced by customers are spread rapidly, affecting the
new customer decision.
It is well noted in India that mouth to mouth publicity is the fastest
way of publicity whether it is positive or negative, under such situations
any problem or inconvenience faced by any customer of ICICI Bank
spreads like rapid fire and effects the decision of old as well as new
customer directly & indirectly.
GAP 5: Services as promised by the agents are not delivered either on
time or not at all provided.
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In order to get better pay, the agents of ICICI Bank usually give
false promises to there customers regarding the quality of service or new
schemes so as to lure them. In such cases the final loser is not just the
customers but the ICICI Group as whole as it effects all there businesses.
RECOMMENDATIONS
i. A Major revamp of its Customer care.
A complete over hauling of its customer care department is
required so as to reduce complaints of customer in turn which may
affect its working.
ii. Penetration into Rural Market with E – Commerce Facility.
Though it is one of the strategies of ICICI Bank to enter deeply into
rural sector, but this step has to be taken up seriously and as soon
as possible so as to tap the market the rural market easily and
these services should be well equipped with E – Commerce
features mainly like Tele – banking and ATM’s etc.
iii. Introduction of Smart Cards for New as well as Old Credit Card
Holders.
ICICI Bank should come up with the concept of smart cards were
the data regarding all the accounts & credit cards details of a
individual customer is placed in a single cards hence reducing the
burden of carrying all credit cards & other necessary items
required for banking transaction.
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iv. Concentrate on Building Brand Image.
ICICI Bank is very well known institution for investing purposes
and as well as for its practices involving anti – social elements;
therein affecting its name and Brand value of its self and also ICICIgroup as a whole.
v. Formulation of a Win - Win Situation to reduce Non Performing
Assets.
It has become a necessity for ICICI Bank to reduce its NPA’s which
have risen tremendously after the merger with ICICI Limited.
vi. Completely separation of other alike Businesses like Insurance,
Mutual Funds etc.
It is usually seen the ICICI Bank branches are over crowded with
ICICI staff though they don’t belong to that branch or does not
even belong to the ICICI Bank, they usually are the agents of its
other businesses like Insurance, Mutual funds etc – this annoys the
customer and creates a bad impression.
vii. Major re-look at working of their Agents.
The easiest way to reach to customers is through agents; and the
agents of ICICI Bank are highly skilled in this field but they do it at
the cost of customer’s innocence. There are many incidences where
in the information provided by the agents is false. Its time for
ICICI Bank to look into the matter and rework on its agents
policies.
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viii. Reduction of Penalty Fees & Special Service Fees.
The penalties & special service imposed by ICICI Bank is very high
as compared to public sector banks; this some times adds a
negative perspective to ICICI Bank.
SUGGESTION TO OTHER FINANCIAL INSTITUTIONS AND PVT.
BANKS
i. Better flexibility in schemes should be provided as done by ICICI
Bank to lure mass customer base.
ii. Better banking hours is need of the hour of Indian bankingcustomer and in this race ICICI Bank has moved a step ahead; to
ensure not to lose out all financial institutions and banks should
extend there bank working hours.
iii. Concentration on small working groups rather than just corporate
for business – this suggestion is basically for Pvt. Banks
operational in India, as they focus more on corporate rather then
huge base of small traders, self employed and other small &
medium business.iv. Go for packaged schemes for accounts – many banks in India are
not providing package schemes for customers except few Banks
like ICICI bank, CITI Bank etc in some cases. The availability of
packaged schemes can become turning points for there business
growth
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BIBLOGRAPHY
www.icicibank.com
www.google.co.in
News Papers
Magazines
Red herring prospectus of ICICI Bank 2007