Internet is likely to change the future of Indian banking industry and will help to increase the market share of tech savvy banks. State owned banks are likely to lag behind in the absence of their technology initiative. The key benefit of the Internet banking is that increasing proportion of non branch transactions will reduce the transaction costs.
ICICI Bank is best placed among the Indian banks to ride the wave of Internet. The bank is continuously focussing on IT to deliver efficient services. It is one of the first Indian banks to offers banking on the Internet. The Forbes Global magazine has rated the Bank’s web site to be extremely user friendly and ranked it among the top 15 banking web sites in the world. For the Internet banking services the bank uses 128-bit encryption secure socket layer technology, digital certificates and multiple firewalls to provide the security to the transaction.
ICICI Bank’s business model is likely to result in increasing its market share. The bank is focussing on e-finance with multichannel distribution network. A distribution channel combining e-finance with physical banking will help the bank in widening its product portfolio across various delivery chains. Its recent e-initiatives include:
Launched B2B payment gateway facilitating funds and inventory management. It will link corporates with suppliers and dealers.
Corporate infinity which allow corporates to bank on the internet.
Advanced banking facilities in tie up with MTNL, BSES and 11 cellular operators.
Personal financial services to the individual like online mutual funds and credit card offerings.
In progress to offer WAP enabled mobile banking.
The bank also offers international banking services through 35 selected branches. It will able to increase its customer base with increasing net penetration. The bank’s strategy of setting up an optimally sized network of ATMs and bank branches in the top 55 centres where most of the banking business are concentrated will enable it to compete effectively with state owned, private and foreign banks.
During the year 1999, the bank could not take advantage of its renewed growth strategy due to capital constraints. Its recent ADR issue has helped the bank to solve its capital constraints problem enabling it to improve capital adequacy ratio.
At the current market price of Rs 214, ICICI Bank trades at Price/Book value ratio of 3.7 times as compared to 7.9 times enjoyed by HDFC Bank. The bank’s renewed lending and borrowing strategy, its strong capital base, multichannel distribution network with focus on e-banking is likely to re-rate the stocks.
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