New Technologies for Small and Medium - Size Enterprise Financing
ICICI Bank - The e-Universal Bank Assets of US $ 21 bn Globally held (ADR, FII own 47% stake ) Second largest Bank in Indi...
A universal banking powerhouse... Retail Financial Services Corporate Financial Services Term Loans Project Finance Commer...
Establishing an international presence Canada UK UAE Singapore USA China Phase I  : Offices opened/to be opened shortly Ph...
Universal Banking Theme Smart Card Technology Empanelled expert for tax and accounting advice Web Trading Internet  Bankin...
SME Sector Higher productivity High quality- greater competitiveness Sustainable revenue models Use of  Technology Enables...
Financing options for SME Upto breakeven Long Sustainable  growth VC / Bank / Debt markets Bank Finance / Debt/ IPO Short ...
Financing for SMEs Financing for SMEs <ul><li>Unit Level - Standalone </li></ul>Cluster Financing <ul><li>Unique for clust...
Financing intervention for technology Financing intervention for technology can happen at 2 levels <ul><li>Unit Level </li...
Constraints in Financing SME’s.. <ul><li>Banks perception of SME’s </li></ul><ul><li>Lack of transparency of  </li></ul><u...
SME Financing Approaches to SME Financing Prudent Segmentation Cash flow based evaluation Multiple channels offerings by l...
Enabling Framework for Technology Financing Technology  Financing Financing Quality Initiatives Priority Sector Mandated L...
BIS 2 Proposals – Advantage SME <ul><li>Banks free to evolve capital allocation according  </li></ul><ul><li>to internal r...
ICICI Bank Initiatives SME Portal - Internet Banking Gateway for B2B  sites Supply Chain Financing on B2B loops Subsidiary...
 
Case Study I - Supply Chain B2B Solution Purchase  Order ERP  Interface Despatch  Invoices Dealer Overdraft Account ICICI ...
Case Study II - Smart card solution for FSCs  Bank Account/ Credit History Output Sale Collect Money   Farmer Service Cent...
Innovative Delivery  Mechanisms Innovations in Delivery Channels Sustainable Access for Rural India (SARI) project Partner...
Other initiatives - I e-banking in ICICI Bank ICICI Markets online FX, Debt, SME Portal Corporate Infinity online transfer...
Other Initiatives - II OTHER INITIATIVES Cluster Financing Fleet card for transporters Smart card for retailers Escrow pay...
Subsidiary network support technology financing ICICI Eco-Net Internet &  Technology Fund ICICI Infotech Services Limited ...
Our recommendations <ul><ul><li>Dedicated Institutions </li></ul></ul><ul><ul><li>Fiscal benefits to attract VC funds </li...
Road Ahead Liberalised norms  for tech transfer JV with foreign VC  Directed lending norms  to include all tech  intensive...
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Enterprise financing

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Enterprise financing

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  • 540 branches with over 1100 ATMs Assets of US $ 21 bn Deposits of US $ 6.55 bn Networth US $ 1.28 bn CAR 11.4% Net NPA Ratio 4.7% Cost to Income ratio &lt; 40% Well Diversified portfolio : 8% retail 23% project finance 23% corporate finance 34% cash &amp; reserves 12% investments &amp; other assets Achievements : Largest Private sector bank Featured amongst the best 15 bank web sites in the world reviewed Forbes Global Among Top 5 India’s Most Respected Companies - Conducted by Business World &amp; IMRB Mr. K. V. Kamath, MD &amp; CEO won the Asian Business Leader Award, organised by CNBC Asia Pacific and TNT. Best Presented Accounts by the Institute of Chartered Accountants of India for the third year Best Retail Bank in India from Asian Banker for the second year
  • Complete suite of products 1. Retail : Along the life cycle of an individual - student, employment (including self employment), marriage, car, housing, Life Insurance, General Insurance, Personal Investment products 2. Servicing the entire Wholesale Banking spectrum including Govt. &amp; Institutions, Large Corporates, SMEs, Banks &amp; other financial entities 3. End-to-End solutions for Corporates Project Finance, Working Capital, Trade Finance, Collections &amp; Payments Management, Lodging tools, Venture Capital, Insurance, Investment Banking
  • Fore runner in Internet Banking 80% of banks completely automated &amp; interconnected Above 1000 ATMs (largest ATM network in the country) Well established 24*7 / 365 call centre and phone banking (2000 workstations carrying across all retail / corporate product) Internet banking accounts - Corporate - 1560 a/cs Retail- 1.7 million a/cs
  • Employs 47% of national work force Contributes 50% to GDP 42% of exports by SMEs
  • PSU Banks engaged in unit level interventions (Project-UPTECH, Cluster financing) not sustained, not replicable limited benefits due to absence of linkage to other sectors no continued incentives to innovate with technology Thus system level intervention will have greatest impact POS Network for smart / change cards / charge cards etc Internet banking transactions through digital certifications
  • Employs 47% of national work force Contributes 50% to GDP 42% of exports by SMEs
  • Employs 47% of national work force Contributes 50% to GDP 42% of exports by SMEs
  • ABC Ltd is a leading Swiss FMCG player - aggressive market oriented company Clean overdraft (OD) limits provided to the dealers to facilitate quicker off-take of merchandise from the corporate Dealer accounts are connected online with the ERP system of the company. An automated file transfer system updates the unutilized balances in the dealer OD accounts directly into the records of the company, based on which the sales despatch system and invoicing is initiated. This data is re-transferred to the Bank’s system and the respective files are updated. On updating file, the OD accounts are debited for the amount of the new invoices and the Bank makes the corresponding payment to the Company.
  • ICICI Bank has been a pioneer of Farmer Service Centres (FSCs) FSC provides one stop solution to the farmer Agri extension support Inputs and other services Credit Market linkage Rural infrastructure Remote Account Operation of Corporate Linked Agricultural Loans Web-based farmer financing with corporate linkage Zero-hassle operation for the corporate / bank Automation and bulk handling of accounts Reduced TAT Scalability Outsourcing of document management for better efficiency
  • Technology intensive units to be included in direct lending targets IT, Biotech/ telecom to be provided infrastructure industry status for tax, capital gains, benefit purposes cheaper re-finance to banks to lending to this sector Banks to be permitted to invest in specialised VC funds within 5% ceiling JV with Foreign Pension funds/ VC funds / companies for setting up VC funds/ technological incubation funds Liberalised sweat equity norms to encourage technocrats to become entrepreneurs Revitalising OTCEI as technology capital market with special products like Index funds to encourage popular investments Credit derivatives and structured products to encourage development of value/ supply chains in IT Bio-tech , Telecom Use of franchisee vehicle to transfer technology / tax incentives Direct public sector purchasing power to tech intensive SME Encourage technology in semi urban / rural markets (mobile,ATMs, WLL) Industrial clusters to conduct technology audits to find technological bottlenecks / obsolescence Banks to use non-banks as frontal face to deliver services
  • Enterprise financing

    1. 1. New Technologies for Small and Medium - Size Enterprise Financing
    2. 2. ICICI Bank - The e-Universal Bank Assets of US $ 21 bn Globally held (ADR, FII own 47% stake ) Second largest Bank in India - Technology Leader Rated by Moodys above sovereign rating First Indian Bank to be listed on NYSE
    3. 3. A universal banking powerhouse... Retail Financial Services Corporate Financial Services Term Loans Project Finance Commercial Bank Investment Bank Venture Capital Genl. Insurance IT Services Car Loans Mortgages Credit Cards Personal loans Deposits Life Insurance Mutual funds
    4. 4. Establishing an international presence Canada UK UAE Singapore USA China Phase I : Offices opened/to be opened shortly Phase II : Geographies under advanced stage of evaluation
    5. 5. Universal Banking Theme Smart Card Technology Empanelled expert for tax and accounting advice Web Trading Internet Banking Mobile Banking Call Centre B2B Solutions Portals e-Commerce initiatives Leveraging Technology to enhance delivery capabilities
    6. 6. SME Sector Higher productivity High quality- greater competitiveness Sustainable revenue models Use of Technology Enables virtuous cycle of technology, innovation, competitiveness, openness to market economy and globalisation Virtuous cycle Single largest employer Fastest to adopt innovation Ensures equitable wealth distribution Importance of SME Sector in Technology
    7. 7. Financing options for SME Upto breakeven Long Sustainable growth VC / Bank / Debt markets Bank Finance / Debt/ IPO Short term Growth Loan/ Debt/ IPO Mid Term Creation Promoters Long Seed capital / Subsidy SME Lifecycle Suitable type Duration of financing required Suitable Channel Start up VC / Angel investor / Subsidy/ Tax incentive Long VC / Promoters Maturity Public Debt/ Capital Market Short term VC / Angel investor / Subsidy/ Tax incentive/ VC/ Angel Investor / Promoters VC / Bank / Promoters Capital Market/ Debt markets
    8. 8. Financing for SMEs Financing for SMEs <ul><li>Unit Level - Standalone </li></ul>Cluster Financing <ul><li>Unique for cluster </li></ul><ul><li>Productised </li></ul>
    9. 9. Financing intervention for technology Financing intervention for technology can happen at 2 levels <ul><li>Unit Level </li></ul><ul><li>Direct Finance to SME by </li></ul><ul><li>VC </li></ul><ul><li>Equity </li></ul><ul><li>Loans </li></ul><ul><li>Capital Markets </li></ul><ul><li>Cluster & System Level </li></ul><ul><ul><li>Cluster financing </li></ul></ul><ul><ul><li>B2B models </li></ul></ul><ul><ul><li>Internet payments in closed </li></ul></ul><ul><ul><li>user groups </li></ul></ul><ul><ul><li>Smart cards in closed loops </li></ul></ul><ul><ul><ul><li>Technology based </li></ul></ul></ul><ul><ul><ul><li>financing solutions </li></ul></ul></ul>
    10. 10. Constraints in Financing SME’s.. <ul><li>Banks perception of SME’s </li></ul><ul><li>Lack of transparency of </li></ul><ul><li>information </li></ul><ul><li>Low technology </li></ul><ul><li>Low capitalization / Collaterals </li></ul><ul><li>Vulnerable to market changes </li></ul><ul><li>High risk sector </li></ul><ul><li>Low profitability </li></ul><ul><li>SME’s perception of Banks </li></ul><ul><li>No special schemes for </li></ul><ul><li>technology financing </li></ul><ul><li>Inadequate and delayed </li></ul><ul><li>credit </li></ul><ul><li>Cumbersome procedures </li></ul><ul><li>Insistence on collaterals and </li></ul><ul><li>guarantees </li></ul><ul><li>High rates of interest </li></ul>
    11. 11. SME Financing Approaches to SME Financing Prudent Segmentation Cash flow based evaluation Multiple channels offerings by leveraging Technology Migration to non-branch channels Key aspects Measurement of risk and mitigation Reduction in cost of transactions Delivery – cost and reach
    12. 12. Enabling Framework for Technology Financing Technology Financing Financing Quality Initiatives Priority Sector Mandated Lending Specialised Stock-markets Competitive pressure to encourage innovation Protection to nascent technical units Technical education/ skilled manpower Fiscal Measures, System and Infrastructure Cluster Development VC/ Angel incubators Institutional framework of nodal agencies for refinance/ guarantees Industrial extension services Enabling technology transfer incentives
    13. 13. BIS 2 Proposals – Advantage SME <ul><li>Banks free to evolve capital allocation according </li></ul><ul><li>to internal rating based approach </li></ul><ul><li>SME’s with turnover less than EUR 50 mn will </li></ul><ul><li>have explicit lower capital charge </li></ul><ul><li>Small businesses with loan size less than EUR 1 mn </li></ul><ul><li>with collateral will get beneficial capital allocation </li></ul><ul><li>Recognition to collaterals, credit derivatives, </li></ul><ul><li>guarantees for allocating capital </li></ul>Risk sensitive capital framework holds promise that the regulatory framework will support SME lending by banks
    14. 14. ICICI Bank Initiatives SME Portal - Internet Banking Gateway for B2B sites Supply Chain Financing on B2B loops Subsidiary network role in technology financing
    15. 16. Case Study I - Supply Chain B2B Solution Purchase Order ERP Interface Despatch Invoices Dealer Overdraft Account ICICI Bank SME Dealer ABC Ltd
    16. 17. Case Study II - Smart card solution for FSCs Bank Account/ Credit History Output Sale Collect Money Farmer Service Center <ul><li>Credit </li></ul><ul><li>Debit </li></ul><ul><li>e-purse </li></ul>Merchant Store Input Online update of Bank accounts
    17. 18. Innovative Delivery Mechanisms Innovations in Delivery Channels Sustainable Access for Rural India (SARI) project Partners: MIT Media Labs, Harvard University, I-Gyan, <ul><ul><li>Providing reliable Internet access through Kiosks using corDECT WiLL </li></ul></ul>100 kiosks managed by entrepreneurs to be set-up <ul><ul><li>Providing e-governance, and information services </li></ul></ul>Delivering banking services through Internet kiosks
    18. 19. Other initiatives - I e-banking in ICICI Bank ICICI Markets online FX, Debt, SME Portal Corporate Infinity online transfer/ settlement system Bill Junction Utility bill payments Roaming Current Account web interface ICICI Direct and ICICI Select Pay Seal electronic payment system
    19. 20. Other Initiatives - II OTHER INITIATIVES Cluster Financing Fleet card for transporters Smart card for retailers Escrow payment services Facilitating e-Sales Tax/ Octroi payments Shopping Mall arrangements
    20. 21. Subsidiary network support technology financing ICICI Eco-Net Internet & Technology Fund ICICI Infotech Services Limited ICICI Information Technology Fund ICICI Web Trade Limited ICICI OneSource Limited ICICI Equity Fund <ul><li>Business process outsourcing </li></ul><ul><li>Call Centre Activities </li></ul><ul><li>Internet based broking services </li></ul><ul><li>Software consulting development </li></ul><ul><li>IT enabled services </li></ul><ul><li>IT infrastructure </li></ul><ul><li>Investment in equity </li></ul><ul><li>Investment in securities of medium sized IT companies </li></ul><ul><li>Investment in equity </li></ul><ul><li>Investment in unlisted internet & technology companies </li></ul><ul><li>Investment in equity </li></ul><ul><li>Investment in medium sized IT companies </li></ul>
    21. 22. Our recommendations <ul><ul><li>Dedicated Institutions </li></ul></ul><ul><ul><li>Fiscal benefits to attract VC funds </li></ul></ul><ul><ul><li>Lifecycle approach to determine which channel to fund SME requirement </li></ul></ul><ul><ul><li>Public-private partnership </li></ul></ul><ul><ul><li>Banks to be permitted to use non-bank infrastructure to deliver services </li></ul></ul>
    22. 23. Road Ahead Liberalised norms for tech transfer JV with foreign VC Directed lending norms to include all tech intensive SME Re-finance , guarantees, subsidies, VC funds Tax incentives Infrastructure status to IT, Bio-tech, telecom Public - Private Partnership
    23. 24. Thank You
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