Download - Chanda Kochhar Slides
-
7/28/2019 Chanda Kochhar Slides
1/28
June 17, 2008
Consumer Banking in India:The ICICI Experience
-
7/28/2019 Chanda Kochhar Slides
2/28
2
Contents
ICICI Bank: Consumer Finance Experience
India: Consumer Banking Landscape
Risk Management in Consumer Finance
Learnings for International Banking
-
7/28/2019 Chanda Kochhar Slides
3/28
3
Changing Consumer Demographics....
Increasingly affluent, with a bulgingmiddle class
The youngest population in the world
65% of population below 35 years of age
Increasing literacy levels
Higher adaptability to technology
Urbanisation is a continuing trend
Increasing "consumption" mindset inIndia
ConsumerDemographic
s of India
-
7/28/2019 Chanda Kochhar Slides
4/28
44
driven by a growing consuming
class
1. Est imates based on NCAER data. Cons um ing
c lass com pr ises m idd le and high incom ehouseholds
Consumingclass
populationestimated atabout 260 mn1
Consumingclass
populationestimated at
about 350 mn1
2000: Per capitaGDP US$ 500
2007: Per capitaGDP US$ 1,000
35%
growth
From per capita GDP of US$ 1,000 to US$ 1,500:consuming population to grow manifold
Consumingclass population
estimated atabout 600 mn1
2015: Per capitaGDP US$ 1,500
70%
growth
-
7/28/2019 Chanda Kochhar Slides
5/28
5
with an upward migration of
incomes..
FY1996 FY2002
Middle income
High income
33 50
1 3
Rising affluence and growth of the consuming class
NCAER data for top 24 cities in India showsmigration to higher income levels growing at over40% per annum
FY2010
Estimate
98
10
(households in million)
Middle inc ome : US$ 2,100 -11,670 per household p.a.
High income : > US$ 11,670 per household p.a.
-
7/28/2019 Chanda Kochhar Slides
6/28
6
..and low market penetration..
Retail Credit / GDP at 13% ascompared to 60%* in Malaysia& 90%* in the US
113 mn people are likely toretire by 2016
Need for retirement planningnow
Life insurance penetration & per capita (2006)
33
1,617
34189
1,480
1,790
2,4562,829
5,140
13.1%
4.1%
8.3%
4.0%
9.2%
7.9%
3.2%
1.7%
5.4%
0
1000
2000
3000
4000
5000
6000
UK Jap an H ong Ko ng U S Sing ap ore Ko rea M alaysi a Chi na Ind ia
Insurance
percapita
(US
D)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Insurance
penetration
Source: Swiss Re
Life Insurance Penetration Mutual Funds Penetration
4%
21% 19% 19%
8%
0%
10%
20%
30%
40%
50%
60%
China Japan HK Korea India
MutualFundsasa%of
GDP
Source McKinsey
62%
49%
37%
7%
17%
38%
0%
20%
40%
60%
80%
USA HK Eur op e Sing China Ind ia
Mortgagesas
a%o
fGD
Mortgage Market Penetration
Source McKinsey
* At th e end o f 2005, Sour ce IMF
-
7/28/2019 Chanda Kochhar Slides
7/287
-
25.00
50.00
75.00
100.00
125.00
2005 2006 2007
Housing Loans Credit Card Auto Loans Others
..offering banks a huge opportunity..
Robust growth in consumer credit in India
Across product segments
Growth to moderate to 12-15% due to the large base effect
62
88
114
40%
30%
Source: Reserve Bank of India
US$ bn
-
7/28/2019 Chanda Kochhar Slides
8/288
..and resultant Economic growth
Risingconsumption
Risingincome
Risingproduction
Multiplier
effect
GDP growth
India on a high growth trajectory with an averageGDP growth rate of 8.7% over the last four years
Expected growth rate of 8-8.5% during FY 09
-
7/28/2019 Chanda Kochhar Slides
9/289
Contents
ICICI Bank: Consumer Finance Experience
India: Consumer Banking Landscape
Risk Management in Consumer Finance
Learnings for International Banking
-
7/28/2019 Chanda Kochhar Slides
10/2810
Retail finance: the ICICI experience
ICICI Limited : 1955 to 1999
One of Indias leading Financial Institutions
Single Product - Focused on project finance
Well recognised brand in the corporate segment
No presence in the consumer segment
-
7/28/2019 Chanda Kochhar Slides
11/2811
Key challenges at the time of entry intoconsumer finance
Well entrenched competition Change in mindset required
Focus on decentralisation & empowerment
No experience in consumer finance
Finding the right way to approach the market was a
key challenge
Lack of scale
Low relevance for intermediaries and vendors
High cost of funds
Creating a retail organisation
-
7/28/2019 Chanda Kochhar Slides
12/2812
ICICI Banks consumer finance strategy
Soundselling
strategy
Multiproductofferings
Multichannelofferings
Pan-Indiaprovider offull suite of
retail
products
Efficientoperations
S
tron
g
Br
and
Leveraging corporate& channelrelationships
Focus on cross selling
The one stop financialshop
Product differentiation
Technology leddelivery of products
Superior servicequality at optimumcost
Aspirations
Marketleadership
&
Scale
-
7/28/2019 Chanda Kochhar Slides
13/2813
Establishing new paradigm in consumercredit distribution
Doorstep delivery
Agents taking productto the customer
Availability of credit atthe customers home or
office
Point-of-sale delivery
Strong channel partnernetwork
Manufacturers,dealers, realtors
Availability of credit atpoint-of-sale of product
Enhanced customer convenience the key selling
proposition
-
7/28/2019 Chanda Kochhar Slides
14/2814
Before 1995Particulars
6Branches/ Offices
3,000Customer Base
Single productProduct Portfolio
ATMs -
and achieving economies of scale.
Employee Base 1,000
Internet customers -
Now
>1,300
31 Mn
complex retail &corporate finance
products
~4,000
>40,000
18.3 Mn
-
7/28/2019 Chanda Kochhar Slides
15/2815
Usage
20081,2
7%Branches2
Usage
20001
94%
37%ATMs & POS
terminals 3%
21%Internet 2%
30%Call centre &
mobile banking 1%
Channel
1. Fo r s av in gs ac co unts .
2. Exc lud ing 5% o f t ransac ti ons p rocessed at
centralised o perations centres
by leveraging technology channels
ICICIDirect The Onl ine trading platform caters to morethan 1.4 mil l ion cus tomers hand l ing about 3,50,000 trades a
day
-
7/28/2019 Chanda Kochhar Slides
16/28
16
with a focus on cross-sell
Deposits
Pvt. banking
Credit card
Debit cards
Bonds
Insurance
Loans
Mutual funds
Walk in
customers
Private banking
customers
Salary account
customers
Corporate
banking
customers
Customer service &sales force automation
Campaign managementsolutions Live data warehouse
To ach ieve market leadersh ip in
consum er f inance in India
-
7/28/2019 Chanda Kochhar Slides
17/28
17
The ICICI Group today
Largest private sector life insurer
Largest private sector general insurer
Leading asset management company
Largest private equity & venture fund
Leading securities and broking company
Largest private sector bank in India
Conso l idated banking assets of
US$121 bn; market cap o f US$ 20bn
Largest consumer credit provider
-
7/28/2019 Chanda Kochhar Slides
18/28
18
Contents
ICICI Bank: Consumer Finance Experience
India: Consumer Banking Landscape
Risk Management in Consumer Finance
Learnings for International Banking
-
7/28/2019 Chanda Kochhar Slides
19/28
19
Risk Management Practices
Robust Credit Assessment & Practices
Customer identification (KYC) a regulatoryrequirement
Stringent credit practices for customer assessment
Income documents used to assess ability to pay
Fixed Obligation to Income Ratio as % of monthlysalary a key parameter
Loan to Value ratios to ensure customer equity
Bureau checks - No lending to people with bad credithistory
Validation of information by physical and telephonicchecks
Upfront communication of Most Important Terms i.e.interest rate, tenure, etc..
-
7/28/2019 Chanda Kochhar Slides
20/28
20
Risk Management Practices (Contd..) Strong Credit Policies
Non existence of negative amortization products /
interest only products Portfolio controls using risk analytics
Collection processes & policies
Focus on Customer Service
Compliance with Banking Codes and Standards Board
of India (BCSBI) Alternative mechanisms for dispute resolution
DISHA
Customer education on SafeBanking
Regulatory requirements
Risk weights on most retail assets higher than Basel IIrequirements
High requirements for general provisions
General provisions on unsecured loans at 2%
-
7/28/2019 Chanda Kochhar Slides
21/28
21
Contents
ICICI Bank: Consumer Finance Experience
India: Consumer Banking Landscape
Risk Management in Consumer Finance
Learnings for International Banking
-
7/28/2019 Chanda Kochhar Slides
22/28
22
International Opportunity : Key Drivers
Use of technology to support
business growth at minimum
incremental cost
Agnostic approach: no mainframes Substantially lower technology costs
than global banks
LeveragingTechnology
Capital
Leveraging Indian skill and cost
advantages for globalcompetitiveness
Seeking ethnic familiarity and Indialinkage, but with internationally-benchmarked products and services
Leveragingthe Indiabase
-
7/28/2019 Chanda Kochhar Slides
23/28
-
7/28/2019 Chanda Kochhar Slides
24/28
-
7/28/2019 Chanda Kochhar Slides
25/28
-
7/28/2019 Chanda Kochhar Slides
26/28
26
Our global presence
Canada
UAE
Singapore
ChinaUSA
UK
Sri Lanka
Bangladesh
Russia
South Africa
Bahrain
Subsidiary Representative Office
Mumbai
Hong Kong
Malaysia
Thailand
Indonesia
Belgium
Qatar
Overseas Branch
Largest internat ional balance
sheet among Ind ian banks
Germany
-
7/28/2019 Chanda Kochhar Slides
27/28
-
7/28/2019 Chanda Kochhar Slides
28/28
Thank you