Big Bank Theory

A secretary browses the web to check the weather conditions in the countries his boss has to visit. He then hops onto another site to mark out the best routes she should take. Another one scans every visiting card to make the list available online to her. Though tea is still served by human waiters, technology has become the foundation of everything else that happens at ICICI Bank.

Within seven years of its launch and three years since it started its retail lending business, ICICI Bank enjoys an enviable position: it does twice as much business as the runner-up in car finance; it does the highest volume of two-wheeler and commercial vehicle lending; it claims to have touched hdfc's volumes in home-related lending; it has the largest card (credit, debit and smart) business with over five million users and continues to issue over three lakh cards a month; it claims a deposit gathering rate next to only the State Bank of India.

The retail thrust indicates how the bank foresaw the future. Until the 1990s, ICICI (a financial institution which later merged with ICICI Bank) had access to sufficient government funds. "But now lesser government funds were being allocated to us while the opportunities to lend increased," explains Kalpana Morparia, executive director. "It dawned upon us that development financial institutions had a bleak future," adds S. Mukherji, executive director.

Post-liberalisation, life changed for the bank as the cost of funds went up and portfolio risks shot up. The old development lending business had to be re-understood. But the then-ICICI successfully created retail funds; it tapped the capital market. Later, it became apparent that it had to create retail credit too to balance this new liability. So, it bought out an nbfc with a Rs 500-crore portfolio and recruited professionals who understood the new business. "We saw it fairly early that retail would be the driver," says K.V. Kamath, managing director and ceo. That's how the idea of ICICI Bank was born in 1996.

Still, the bank was a late entrant and had to slug it out with age-old psu banks with thousands of branches, and nbfcs and foreign banks that used efficient technology. "Our challenge was to pick the strengths of the competition while learning from their weaknesses," says Chanda Kochhar, executive director. The bank decided on a four-point agenda: to have a large distribution network, to use technology, to develop relevant products and back them with efficient services.

Some smart ideas were thrown up. One was multi-channel distribution that would ensure reach without enormous investments in real estate. But five years back, the idea of ATMs, internet banking, and phone banking was received with scepticism. Would it really work? "We were convinced that once the customer sees the value of a service, he'd use it. We only had to show him that using the ATM is convenient because of its 24-hour availability and low cost of transaction," says Nachiket Mor, executive director.

Customers adapted to such innovations beyond the bank's expectation. Only 30 per cent of business is done in its 450 branches. The rest is conducted through its 1,700 ATMs, the internet and through the 1,500-seater call centre. This compares with international standards. To expand the retail lending business, ICICI Bank created a strong direct sales agent (DSA) force. This fleet-on-street went to the customer to dole out loans. It found there were critical points of contact when it's easy to clinch a deal. For instance, "if we could catch a customer at a white goods dealer's shop, we could close a sale right away," reasons Kochhar.

When you enter the business late, innovation is the name of the game. ICICI Bank created new products and new opportunities.It introduced the Quantum Optima—a service where the balance from your savings account is automatically swept into a fixed deposit. It exploited its historical corporate relationships to do salary deposits for them. ICICI Smart cards served as identity-library-ATM-canteen cards for students, and executives in firms like Infosys.

Technology was the backbone of all progress. "We took the risk of adopting global technology platforms when both analysts and the competitors strongly doubted whether the consumer would be willing to adapt," says Kamath. Kochhar notes that any investment in technology has typically paid off in a year by a corresponding improvement in productivity. Its centralised operations in Mumbai actually run like a shop floor where the processing moves seamlessly from one stage to another.

Customer needs are studied and technology is used to service it. An example: it was found that 60 per cent of teller time in the branches went towards reporting account balances to corporate clients who check several times a day. The technology-backed solution: create a software to post this information at regular intervals during the day to them. And the solution to optimise the use of technology: clients are given an option to get the account details the next day instead of the same day while the computers work through the night.

However, growing rapidly may lead to glitches in customer relations. Recently, there were rumours of a run on the bank. Customers in Gujarat started withdrawing their money fearing bankruptcy. Outlook spoke to a few customers whose grouses were a high penalty charge of Rs 250 for non-maintenance of balance and steep transaction charges (Rs 50 per cash transaction after the first three per quarter, Rs 25 per ATM transaction after the first six per quarter, Rs 50 per 25-leaf cheque book). A customer talks of salary accounts being credited only after 7-10 days. Some complain about plain rude behaviour and poor customer care skills at branches. "The rude response was just as it is in nationalised banks," says a customer of the bank's Vashi branch.

ICICI Bank's response-time to the rumours of bankruptcy was quick. As damage control tactics, the top brass came out in the media assuring depositors their money was safe. The RBI issued a statement to this effect. The bank responded to the other charges too. Service charges are levied on accounts in which the prescribed quarterly average balance is not maintained, to cover the cost of servicing such accounts. Most banks like hdfc Bank recover comparable service charges. Similarly, transaction charges are applicable to only those accounts in which the stipulated minimum balance is not maintained. Other banks do the same. Delay of seven to 10 days in salary accounts may take place only where the data supplied by the employer has to be checked manually.

The bank maintained that its staff is urged to be courteous and polite. Training programmes are conducted for all staff with a view to upgrading their product knowledge and improving their behavioural and communication skills. Any complaint about rude behaviour is viewed seriously and appropriate action taken in all such cases.

The truth is the bank has reinvented itself. From a five-office, 900-employee, 3,000-customer moneylender, it has metamorphosed into an organisation with six million consumers who are serviced by over 10,000 employees. Today, it is confident of its growth model. And this is an ongoing process as products get fine- tuned and more people join ICICI Bank.