basak icici bank orissa sme pres.3 24-5-05

8/6/2019 Basak Icici Bank Orissa Sme Pres.3 24-5-05

1/31

Bhubaneswar

May 24, 2005

Innovation to SME Financingby ICICI Bank


2/31

2


3/31

3


4/31

4

Individuals asConsumers

Individuals asConsumers

Individuals inBusiness Partnership &

Family OwnedBusinesses

Partnership &Family Owned

Businesses

Small &Medium Sized

Companies

Small &Medium Sized

Companies

Top TierLocal and

Global

Corporates

Top TierLocal and

GlobalCorporates

Small and Medium EnterprisesCorporateBanking

ConsumerBanking

The Customer Spectrum for Banks

SME segment is an essential part of

the customer spectrum for banks

Large LocalCorporates

Large LocalCorporates


5/31

5

Indian experience in SME Banking

SMEs are vulnerable

Information about SMEs is scarce

SMEs are geographically disbursed

SMEs are transaction intensive

Poor entrepreneurial attitude


6/31

6


7/31

7

Evaluation of creditrisk

Evaluation of creditrisk

Cost to acquire andserve

Cost to acquire andserve

Other challengesOther challenges

High cost of acquisition of new

client

High cost of credit processing,

services & delivery coverage

Challenges to Banks in SME Financing

Lack of transparent creditinformation, access to credithistoryLimited sectoral dataLow capitalisation and collateral-

high impairment propensity

Poor legal framework forcollateral enforcementDealing with poor entrepreneurial

attitudeNo secondary market for SME

loansNo clear exit route for private

equity


8/31

8

Global best practises

Wells Fargo,Citibank

Wells Fargo,Citibank

Market segmentation Aligned with retail strategies ,

channels Integrated private & business

banking

Wells Fargo,Barclays,

Amex,Banc One

Wells Fargo,Barclays,

Amex,Banc One

Multi-channel acquisition(including call centre)

Credit score based creditassessment

Wells Fargo,J P MorganWells Fargo,J P Morgan

Intensive use of technology ,automation

Market intermediaries / feet onstreet to multiply capacity


9/31

9


10/31

10


11/31

11


12/31

12

SEG - Coverage model

Businesssegment

CorporateLinked Business(CLB)

CorporateLinked Business(CLB)

Cluster BankingGroup (CBG)

Cluster BankingGroup (CBG)

Business Focus

Channel finance

needs of WBG

Selective targeting ofhomogenous client

segments

Business approach

Corporate specificumbrella financeproposal

Program basedlending with industry

experts

BusinessBanking Group(BBG)

BusinessBanking Group(BBG)

Liability led strategy Liability led backedby parameterisedproducts


13/31

13


14/31

14

ICICI Bank in Orissa

Presence In Orissa

-23ATMs

-6Branch

BERHAMPUR

ROURKELA


15/31

15

Orissa: a focus state for ICICI Bank

Minerals Share %

Bauxite 59.5%

Chromite 98.4%

Manganese 67.60%

Nickel 91.80%

Graphite 71%

Branches coming up at Angul, Keonjhar and Balasore

CD Ratio of 205% Highest deposits of important minerals in the Country Power surplus state (Installed Cap.: 4178.5 MW)

The mining sector isexpected to be the main

driver to the States futuregrowthMineral stock is a high

220 mn. tonnes out of theestimated all-India figureof 231 mn tonnes (1999-00).


16/31

16

Some SME customers in Orissa

FUND-BASED Assistance

Emerson Network, BhubaneswarDEALERS of L&T and IOCL, Sambalpur

DEALERS of NALCO, Lafarge & Finolex, Cuttack

NON-FUND BASED AssistanceNeepaz Metallics, RourkelaJai Balaji Sponge, Rourkela

DERIVATIVES

Neepaz Metallics, RourkelaJai Balaji Sponge, Rourkela


17/31

17

The most basic of all human needs is the need tounderstand and be understood..

The best way to understand yourcustomer is to listen to him

We listened to our customer, weunderstood and together we keepgrowing

We continue to listen.
http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=http://clipart.com/en/close-up?o=809452&memlevel=A&a=c&q=ear%20to%20ground&s=1&e=30&show=&c=&cid=&findincat=&g=&cc=&page=


18/31

Thank you


19/31

19

BBG - Strategy

CoverageCoverage

Present in 79 centresComprehensive mapping of SEG

SMs to each branchAcquisition through outbound

call Centre & feet on street

MarketingMarketingRoad showsDirect marketingMass media inbound calls

Focus on fee incomeFocus on fee incomeTrade finance services and

productsCross sell retail products

Parameterised assetproducts

Parameterised assetproducts

Parameterised asset products

for complete share of wallet


20/31

20


21/31

21

Twelve clusters covered...

Apparel

Automotive

Retail trade

Construction Pharmaceuticals

Educational Institutions Transporters

Tenkasi-Timber Diagnostic centres

Software & IT

services

Gems n JewelryTravel & Tourism
http://h/ORISSA%20SME%20Pres.3.ppt


22/31

22

CBG program lending approach

Multipleassessment

process

Multipleassessment

process

A combination of the followingGo/ No- Go criteriaScoring model

Comprehensive assessment &portfolio controls

Client pre-selection

Client pre-selection

Targeting pre-selected and pre-defined customer groups

Focus on sustainable market/corporate linkages

Trade referencesTrade references

360 degrees references from Competitors Suppliers Customers Financial partners


23/31

23

CBG appraisal process

Target

customer

Target

customer

ICICI Bankcustomer

Scoring model

Go - No Gocriteria

Comprehensiveassessment

Three step assessment


24/31

24

Portfolio controls

Exposure toindividualborrowers

Exposure to non-corporate entities

Regionalexposure

Group exposure

Term loanexposure

Cluster

Banking

Group

Cluster

Banking

Group

Review by risk on a biannual basis


25/31

25

Monitoring of the borrower

Borrower/Promoter

Change in equity, change in promotersnetworth, market enquiry/ reports

Type ofrisk

Parameter

SM

Respon-sibility

Yearly

Frequency

BusinessSales fluctuations, changes in product /customer profile, creditor/ debtor terms SM

Yearly

FinancialTOL/TNW, Sales growth, PBDIT/ Sales,PAT/ Sales, Current ratio etc

SMYearly

Collateral

Changes in collateral value, changes in

guarantor profile SMYearly

Transact-ional

Limit utilization, credit/ debitsummations against sales turnover,TOD/ irregularities

CCMTand SM

Monthly

All accounts to be monitored by SM with support from CCMT team

CCMT: Centralised credit monitoringteam


26/31

26

Continuous monitoring reports

Nat u re o f Repo r t s Freq uency SM s Head-SEGRepaym ent Overd ue St atu s Weekly Lim it Renew al Overd ue st at us Weekly Lim i t Due f o r renew al (w i th in nex t 2 m t hs) Week ly

TLs -Rep aym en t s (In t + In st l ) f al l in g d ue M o nt h ly Ir reg u lar it y Repo r t s M on t h ly M o nt h ly Selec t Op er at io nal In f or m at io n M o nt h ly Cr it ical a/cs M on t h ly

Ren ew al St at u s (Lim it + In su ran ce+ LA D ) M o nt h ly Por t f o l io A nalysis Repo r t Quar t er ly

Close monitoring and frequent reporting to identify early warningsignals of stress in accounts.


27/31

27

Minimum vintage of 5 years

Gross sales turnover > Rs.100.0 million

Net-worth > Rs.25.0 million

Gross fixed assets > Rs.25.0 million PAT >=2% (last 2 years) and profitable

current year projectionsContractors /Sub-

contractors

Key target market norms (Go-No Go)

Association with large principal

contractors for more than 3 years

Existing projects to be spread over

minimum 2 different

contractors/employers

Labour contractors to be excluded


28/31

28

BusinessOrder book, project diversity, track record, clientprofile

Category Parameters of evaluation

25 %

Weightage

FinancialTurnover, networth, PAT margins, investment in P&M,interest coverage, TOL/TNW

30 %

PromotersConstitution, vintage, trade references, promotersnetworth

20 %

TransactionHistory

Payment record, Limits utilisation, Compliance withsanction terms, credit/debit summations

10 %

Security Cash collateral and other collateral 15 %

Credit scoring model

Credit screens for term loans are based on customer segment, nature offunding in tune with differential risks


29/31

29

Comprehensive Assessment

Assessed bank finance

Cash flow analysis

Assessed bank finance

Cash flow analysis

360 degree assessment- Customers

- Suppliers- Financiers- Competitors

360 degree assessment- Customers

- Suppliers- Financiers- Competitors

Amount of assistance

End use of assistance

Establish repaymentcapacity

Amount of assistance

End use of assistance

Establish repaymentcapacity

ObjectivesObjectives

Conventional methodsConventional methods

Unconventional methodsUnconventional methods


30/31

30


31/31

31

basak icici bank orissa sme pres.3 24-5-05

Documents