Financial inclusion can lead to far-reaching changes for banking in India. Having pushed that agenda at ICICI Bank, managing director & CEO Chanda Kochhar shares her perspective on its implications and challenges
The private sector ICICI Bank (consolidated total assets Rs 6.7 lakh crore) has begun seeing the first major signs of success of an aggressive financial inclusion strategy rolled out three years ago. With a mix of on-ground presence, cutting edge technology and products, the bank now has 1.65 crore zero balance basic saving accounts and commands a 40 percent share in Aadhaar Enabled Payment Services.
Days after the Reserve Bank of India-mandated Nachiket Mor committee on financial inclusion turned in its report suggesting far-reaching changes, including having bank accounts for all adults in India by 2016, ICICI Bank’s managing director and CEO Chanda Kochhar, winner of the Forbes India Leadership Award 2013 for Best CEO-Private Sector, who spearheaded the bank’s financial inclusion strategy to complement her back-to-basics approach for the bank, talks about the progress and the road ahead. Excerpts:
Q. ICICI Bank has been rolling out a financial inclusion strategy aggressively over the past three years. What’s the scale it has achieved so far?
Currently, I look at it more in terms of reach and customer base, because the value of transactions is still pretty low. So if you look at it that way, we have 16.5 million ‘no-frills’ accounts, all built in a matter of two-and-a-half to three years. More than 50 percent of our branches are in rural and semi-urban areas. A lot of our recent increase in branches—in fact over 60 percent—is in rural areas, and in unbanked villages we have almost 450 branches. We’re present in about 15,000 villages. So all this, in terms of scope and scale, makes it pretty large. From here on, to build values in the transaction… that takes some time, but that’s the next step of the journey.
Q. And this coincides with your strategy of realigning the bank to the new realities and adopting a current account savings account (CASA)-based back-to-basics strategy. Was it a conscious decision to dovetail the financial inclusion strategy with the overall realignment of business?
Yes, absolutely. To get back to very granular, diversified growth. To create that granular presence and reach out to smaller customers and doing this kind of business directly rather than doing it through intermediaries.
I think in terms of the progress that we’ve made in expanding our reach, the products that we’ve created, the technology initiatives around the products—our tie-ups on remittances and government subsidies, electronic benefit transfers and such things… on all that I am actually very satisfied. But what needs to be done is to now make more and more of these accounts actually transactional, and actively transactional. Once in a way the subsidy also comes in, so that’s the first set of transactions. But after that, [what is important is] getting the customers used to the habit of saving, getting them to use formal channels for the remittance of money and then, through the way the money comes into the account, building some kind of credit analytics and making small loans and micro insurance available to them.
So the focus is that we should be able to do this for a larger and larger proportion of accounts that we’ve opened.
Q. Having seen this first spurt of activity, have you now set yourself fresh targets for the next phase?
In the initial years the targets were higher in terms of getting the number of accounts; now the targets are higher in terms of making them active and transactional.
Q. All this also requires substantial field force, is it not?
(This story appears in the 07 February, 2014 issue of Forbes India. To visit our Archives, click here.)