A PROJECT REPORT

ON

A STUDY TO EVALUATE THE BANKING SERVICE

PROVIDED TO SME CUSTOMER BY ICICI BANK
 CONTENTS

1) Introduction of the study

2) Objective of the Study

3) Literature Review

4) Research Methodology

5) Research Hypothesis

6) Research Model

7) Research Plan

8) Sampling Plan

9) Research Procedure

10) Data analysis & Interpretation

11) Result & Discussion

12) Suggestions/Recommendation

13) Limitations and Scope of the Future Research

14) Conclusion

15) bibliography
Chapter 1: Introduction

Small Marketing is defined as any activity that includes the provision of Marketing services such
as credit, savings, and insurance to low income individuals which fall just above the nationally
defined poverty line, and poor individuals which fall below that poverty line, with the goal of
creating social value. The creation of social value includes poverty alleviation and the broader
impact of improving livelihood opportunities through the provision of capital for micro
enterprise, and insurance and savings for risk mitigation and consumption smoothing. A large
variety of actors provide small Marketing in India, using a range of small Marketing delivery
methods. Since the ICICI Bank in India, various actors have endeavored to provide access to
Marketingservices to the poor in creative ways. Governments also have piloted national
programs, NGOs have undertaken the activity of raising donor funds for on-lending, and some
banks have partnered with public organizations or made small inroads themselves in providing
such services. This has resulted in a rather broad definition of small Marketing as any activity
that targets poor and low-income individuals for the provision of Marketingservices. The range
of activities undertaken in small Marketing include group lending, individual lending, the
provision of savings and insurance, capacity building, and agricultural business development
services. Whatever the form of activity however, the overarching goal that unifies all actors in
the provision of small Marketing is the creation of social value.

1.1 Small Marketing Definition

According to International Labor Organization (ILO), “Small Marketing is an economic

development approach that involves providing Marketingservices through institutions to low
income clients”.

In India, Small Marketing has been defined by “The National Small Marketing Taskforce, 1999”
as “provision of thrift, credit and other Marketingservices and products of very small amounts to
the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and
improve living standards”.

"The poor stay poor, not because they are lazy but because they have no access to capital."
The dictionary meaning of ‘Marketing’ is management of money. The management of money
denotes acquiring & using money. Micro Marketing is buzzing word, used when financing for
micro entrepreneurs. Concept of micro Marketing is emerged in need of meeting special goal to
empower under-privileged class of society, women, and poor, downtrodden by natural reasons or
men made; caste, creed, religion or otherwise. The principles of Micro Marketing are founded on
the philosophy of cooperation and its central values of equality, equity and mutual self-help. At
the heart of these principles are the concept of human development and the brotherhood of man
expressed through people working together to achieve a better life for themselves and their
children.

Traditionally micro Marketing was focused on providing a very standardized credit product. The
poor, just like anyone else, (in fact need like thirst) need a diverse range of Marketinginstruments
to be able to build assets, stabilize consumption and protect themselves against risks. Thus, we
see a broadening of the concept of micro Marketing--- our current challenge is to find efficient
and reliable ways of providing a richer menu of micro Marketing products. Micro Marketing is
not merely extending credit, but extending credit to those who require most for their and family’s
survival. It cannot be measured in term of quantity, but due weightage to quality measurement.
How credit availed is used to survive and grow with limited means.

Who are the clients of micro Marketing?

The typical micro Marketing clients are low-income persons that do not have access to formal
Marketinginstitutions. Micro Marketing clients are typically self-employed, often household-
based entrepreneurs. In rural areas, they are usually small farmers and others who are engaged in
small income-generating activities such as food processing and petty trade. In urban areas, micro
Marketing activities are more diverse and include shopkeepers, service providers, artisans, street
vendors, etc. Micro Marketing clients are poor and vulnerable non-poor who have a relatively
unstable source of income.
Access to conventional formal Marketinginstitutions, for many reasons, is inversely related to
income: the poorer you are, the less likely that you have access. On the other hand, the chances
are that, the poorer you are, the more expensive or onerous informal Marketingarrangements.
Moreover, informal arrangements may not suitably meet certain Marketingservice needs or may
exclude you anyway. Individuals in this excluded and under-served market segment are the
clients of micro Marketing.
As we broaden the notion of the types of services micro Marketing encompasses, the potential
market of micro Marketing clients also expands. It depends on local conditions and political
climate, activeness of cooperatives, UTKARSH& NGOs and support mechanism. For instance,
micro credit might have a far more limited market scope than say a more diversified range of
Marketingservices, which includes various types of savings products, payment and remittance
services, and various insurance products. For example, many very poor farmers may not really
wish to borrow, but rather, would like a safer place to save the proceeds from their harvest as
these are consumed over several months by the requirements of daily living. Central government
in India has established a strong & extensive link between NABARD (National Bank for
Agriculture & Rural Development), State Cooperative Bank, District Cooperative Banks,
Primary Agriculture & Marketing Societies at national, state, district and village level.

The Need in India

 India is said to be the home of one third of the world’s poor; official estimates range from
26 to 50 percent of the more than one billion population.
 About 87 percent of the poorest households do not have access to credit.

 The demand for microcredit has been estimated at up to $30 billion; the supply is less
than $2.2 billion combined by all involved in the sector.

Due to the sheer size of the population living in poverty, India is strategically significant in the
global efforts to alleviate poverty and to achieve the Millennium Development Goal of halving
the world’s poverty by 2015. Small Marketing has been present in India in one form or another
since the 1970s and is now widely accepted as an effective poverty alleviation strategy. Over the
last five years, the small Marketing industry has achieved significant growth in part due to the
participation of commercial banks. Despite this growth, the poverty situation in India continues
to be challenging.
Some principles that summarize a century and a half of development practice were encapsulated
in 2004 by Consultative Group to Assist the Poor (CGAP) and endorsed by the Group of Eight
leaders at the G8 Summit on June 10, 2004:

 Poor people need not just loans but also savings, insurance and money transfer
services.
 Small Marketing must be useful to poor households: helping them raise income, build
up assets and/or cushion themselves against external shocks.

 “Small Marketing can pay for itself.” Subsidies from donors and government are
scarce and uncertain, and so to reach large numbers of poor people, small Marketing
must pay for itself.

 Small Marketing means building permanent local institutions.

 Small Marketing also means integrating the Marketingneeds of poor people into a
country’s mainstream Marketingsystem.

 “The job of government is to enable Marketingservices, not to provide them.”

 “Donor funds should complement private capital, not compete with it.”

 “The key bottleneck is the shortage of strong institutions and managers.” Donors
should focus on capacity building.

 Interest rate ceilings hurt poor people by preventing small Marketing institutions from
covering their costs, which chokes off the supply of credit.

 Small Marketing institutions should measure and disclose their performance – both
financially and socially.

Small Marketing can also be distinguished from charity. It is better to provide grants to families
who are destitute, or so poor they are unlikely to be able to generate the cash flow required to
repay a loan. This situation can occur for example, in a war zone or after a natural disaster.

Marketingneeds and Marketingservices

In developing economies and particularly in the rural areas, many activities that would be
classified in the developed world as Marketingare not monetized: that is, money is not used to
carry them out. Almost by definition, poor people have very little money. But circumstances
often arise in their lives in which they need money or the things money can buy.

In Stuart Rutherford’s recent book The Poor and Their Money, he cites several types of needs:

 Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding,

widowhood, old age.
 Personal Emergencies: such as sickness, injury, unemployment, theft, harassment or
death.

 Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing of
dwellings.

 Investment Opportunities: expanding a business, buying land or equipment, improving

housing, securing a job (which often requires paying a large bribe), etc.

Poor people find creative and often collaborative ways to meet these needs, primarily through
creating and exchanging different forms of non-cash value. Common substitutes for cash vary
from country to country but typically include livestock, grains, jewellery and precious metals.

As Marguerite Robinson describes in The Small Marketing Revolution, the 1980s demonstrated
that “small Marketing could provide large-scale outreach profitably,” and in the 1990s, “small
Marketing began to develop as an industry”. In the 2000s, the small Marketing industry’s
objective is to satisfy the unmet demand on a much larger scale, and to play a role in reducing
poverty. While much progress has been made in developing a viable, commercial small
Marketing sector in the last few decades, several issues remain that need to be addressed before
the industry will be able to satisfy massive worldwide demand.

The obstacles or challenges to building a sound commercial small Marketing industry include:

• Inappropriate donor subsidies

• Poor regulation and supervision of deposit-taking MFIs
 • Few MFIs that mobilize savings

• Limited management capacity in MFIs

• Institutional inefficiencies

• Need for more dissemination and adoption of rural, agricultural small Marketing
methodologies

Role of Small Marketing:

The micro credit of small Marketing progamme was first initiated in the year 1976 in Bangladesh
with promise of providing credit to the poor without collateral , alleviating poverty and
unleashing human creativity and endeavor of the poor people. Small Marketing impact studies
have demonstrated that

Ø Small Marketing helps poor households meet basic needs and protects them against risks.

Ø The use of Marketingservices by low-income households leads to improvements in household

economic welfare and enterprise stability and growth.

Ø By supporting womens economic participation, small Marketing empowers women, thereby

promoting gender-equity and improving household well being.

Ø The level of impact relates to the length of time clients have had access to Marketingservices.

The Origin of Small Marketing

Although neither of the terms microcredit or small Marketing were used in the academic
literature nor by development aid practitioners before the 1980s or 1990s, respectively, the
concept of providing Marketingservices to low income people is much older.
While the emergence of informal Marketinginstitutions in Nigeria dates back to the 15th century,
they were first established in Europe during the 18th century as a response to the enormous
increase in poverty since the end of the extended European wars (1618 – 1648). In 1720 the first
loan fund targeting poor people was founded in Ireland by the author Jonathan Swift. After a
special law was passed in 1823, which allowed charity institutions to become formal
Marketingintermediaries a loan fund board was established in 1836 and a big boom was initiated.
Their outreach peaked just before the government introduced a cap on interest rates in 1843. At
this time, they provided Marketingservices to almost 20% of Irish households. The credit
cooperatives created in Germany in 1847 by Friedrich Wilhelm Raiffeisen served 1.4 million
people by 1910. He stated that the main objectives of these cooperatives “should be to control
the use made of money for economic improvements, and to improve the moral and physical
values of people and also, their will to act by themselves.”
In the 1880s the British controlled government of Madras in South India, tried to use the German
experience to address poverty which resulted in more than nine million poor Indians belonging to
credit cooperatives by 1946. During this same time the Dutch colonial administrators constructed
a cooperative rural banking system in Indonesia based on the Raiffeisen model which eventually
became Bank Rakyat Indonesia (BRI), now known as the largest MFI in the world.
Small Marketing Today
In the 1970s a paradigm shift started to take place. The failure of subsidized government or
donor driven institutions to meet the demand for Marketingservices in developing countries let to
several new approaches. Some of the most prominent ones are presented below.
Bank Dagan Bali (BDB) was established in September 1970 to serve low income people in
Indonesia without any subsidies and is now “well-known as the earliest bank to institute
commercial small Marketing”. While this is not true with regard to the achievements made in
Europe during the 19th century, it still can be seen as a turning point with an ever increasing
impact on the view of politicians and development aid practitioners throughout the world. In
1973 ACCION International, a United States of America (USA) based non governmental
organization (NGO) disbursed its first loan in Brazil and in 1974 Professor Muhammad Yunus
started what later became known as the Grameen Bank by lending a total of $27 to 42 people in
Bangladesh. One year later the Self-Employed Women’s Association started to provide loans of
about $1.5 to poor women in India. Although the latter examples still were subsidized projects,
they used a more business oriented approach and showed the world that poor people can be good
credit risks with repayment rates exceeding 95%, even if the interest rate charged is higher than
that of traditional banks. Another milestone was the transformation of BRI starting in 1984. Once
a loss making institution channeling government subsidized credits to inhabitants of rural
Indonesia it is now the largest MFI in the world, being profitable even during the Asian
Marketingcrisis of 1997 – 1998.
In February 1997 more than 2,900 policymakers, small Marketing practitioners and
representatives of various educational institutions and donor agencies from 137 different
countries gathered in Washington D.C. for the first Micro Credit Summit. This was the start of a
nine year long campaign to reach 100 million of the world poorest households with credit for self
employment by 2005. According to the Microcredit Summit Campaign Report 67,606,080 clients
have been reached through 2527 MFIs by the end of 2002, with 41,594,778 of them being
amongst the poorest before they took their first loan. Since the campaign started the average
annual growth rate in reaching clients has been almost 40 percent. If it has continued at that
speed more than 100 million people will have access to microcredit by now and by the end of
2005 the goal of the microcredit summit campaign would be reached. As the president of the
World Bank James Wolfensohn has pointed out, providing Marketingservices to 100 million of
the poorest households means helping as many as 500 – 600 million poor people.

1.2 Strategic Policy Initiatives

Some of the most recent strategic policy initiatives in the area of Small Marketing taken by the
government and regulatory bodies in India are:

 Working group on credit to the poor through SHGs, NGOs, NABARD, 1995
 The National Small Marketing Taskforce, 1999

 Working Group on MarketingFlows to the Informal Sector (set up by PMO), 2002

 Small Marketing Development and Equity Fund, NABARD, 2005

 Working group on Financing NBFCs by Banks- RBI

1.3 Activities in Small Marketing

Microcredit: It is a small amount of money loaned to a client by a bank or other institution.

Microcredit can be offered, often without collateral, to an individual or through group lending.
Micro savings: These are deposit services that allow one to save small amounts of money for
future use. Often without minimum balance requirements, these savings accounts allow
households to save in order to meet unexpected expenses and plan for future expenses.

Micro insurance: It is a system by which people, businesses and other organizations make a
payment to share risk. Access to insurance enables entrepreneurs to concentrate more on
developing their businesses while mitigating other risks affecting property, health or the ability to
work.

Remittances: These are transfer of funds from people in one place to people in another, usually
across borders to family and friends. Compared with other sources of capital that can fluctuate
depending on the political or economic climate, remittances are a relatively steady source of
funds.

1.4 Legal Regulations

Banks in India are regulated and supervised by the Reserve Bank of India (RBI) under the RBI
Act of 1934, Banking Regulation Act, Regional Rural Banks Act, and the Cooperative Societies
Acts of the respective state governments for cooperative banks.
NBFCs are registered under the Companies Act, 1956 and are governed under the RBI Act.
There is no specific law catering to NGOs although they can be registered under the Societies
Registration Act, 1860, the Indian Trust Act, 1882, or the relevant state acts. There has been a
strong reliance on self-regulation for NGO MFIs and as this applies to NGO MFIs mobilizing
deposits from clients who also borrow. This tendency is a concern due to enforcement problems
that tend to arise with self-regulatory organizations. In January 2000, the RBI essentially created
a new legal form for providing small Marketing services for NBFCs registered under the
Companies Act so that they are not subject to any capital or liquidity requirements if they do not
go into the deposit taking business. Absence of liquidity requirements is concern to the safety of
the sector.
Business based on Small Marketing in India

The “Service Provider” Model of Small Marketing Piloted by Private Banks

In January 2000, the RBI allowed banks to lend to MFIs and treat this as part of their priority sector
lending. Since then, a number of banks have used this opportunity to lend to MFIs, mainly NGOs, and all
banks now offer lines of credit to MFIs in addition to term loans. This enables MFIs to drawn down the
loan at the pace they build their portfolio, thereby reducing the effective interest payment. Banks appear
to have had a positive experience of lending to MFIs, where transaction costs for banks are lower as
compared to lending to SHGs, and the repayment rates are 98 percent and above. Encouraged by early
results, the new private sector banks, most notably ICICI Bank, but also UTI Bank and HDFC Bank, are
actively seeking exposure in the small Marketing sector. While their current exposure to small Marketing
is too small to make a difference to their overall portfolio, even their priority sector lending portfolio,
these new banks are pursuing new and innovative approaches to small Marketing – as a potential business
and not merely as a social or priority sector lending obligation.

The various approaches to small Marketing launched in recent years by ICICI Bank to reach rural
borrowers are noteworthy. One approach involves linking ICICI Bank’s network of about 100 rural
branches to SHGs; through this approach, ICICI Bank funds about 6,000 groups. To overcome the
constraints faced by the lack of ICICI Bank’s rural branch network, ICICI Bank uses local “promoters” to
help organize the groups. The interest rate on loans under this approach are about 18% and promoters are
paid a salary that depends on recovery rates, size of loans, etc.

Another approach piloted in areas where ICICI Bank does not have a physical presence involves the use
of NGOs or MFIs1, traders, or local brokers (who are close to the farmer by the nature of their business),
as intermediaries/“service providers” for loans to small and marginal farmers. The tasks of loan appraisal,
processing, management, collection, etc. are delegated to the NGO/MFI but the loans are always on the
books of the bank (ICICI funds the borrower directly and the loan does not pass through the NGO/MFIs).
ICICI provides an initial loan to the NGO/MFI to develop SHGs, but then requires that the NGO/MFI

1
repay the loan in a few years and become a “viable unit” through charging service fees to the groups
directly. In general, ICICI charges the group 12% plus the service provider charges 6%, equal to 18%.

ICICI Bank, as well as other banks such as Oriental Bank of Commerce, are also experimenting with an
approach now termed as the “integrated agricultural service provider” approach. One version of this
approach that could perhaps be replicated on a wider basis, is the ICICI Bank Farmer Service Center
operating model (Mahindra Shubhlabh model). Under this model, ICICI has identified an integrated
agricultural services provider, or IASP (Shubhlabh), that has a good relationship with the farmer and
provides genuine and timely information through extension services. ICICI Bank enters into a tripartite
agreement with the IASP and the output buyer. ICICI Bank provides credit to the farmers on the
recommendation of the IASP, the farmer pledges his produce to the output buyer at a market-based price,
the IASP provides inputs to the farmer. Loan processing, disbursement and collection are effectively
done by the IASP, while the credit decision remains nominally with ICICI Bank. At the end of the
season, the farmer supplies the crop to the output buyer and the output buyer deducts the loan amount
from the sale proceeds and remits the loan to ICICI Bank in full settlement of the loan amount. The IASP
receives a service fee for the loan processing and supervision services (1.5% on recovered loans). The
model creates a symbiotic relationship between the input supplier, financier and trader. This reduces
transactions costs and the risk exposure of all parties and, therefore, presents a relatively low-cost way of
serving farmers. It helps improve information collection, reduces credit risk, and increases access to rural
financing. However, deepening these relationships to the marginal farmers, scaling up the pilots, and
replicating them, remain major challenges.

Other variations on this model include ICICI’s trader farmer financing model (Rallis – HLL) in Haryana’s
Basmati growing area, where Rallis, as an IASP, provides comprehensive field support with fortnightly
checks and ensures pest control; and ICICI’s farmer financing coupled with insurance model, being
piloted in Tamil Nadu’s cotton growing area (Appachi), offers tailor-made insurance packages and bulk
storage capacity to farmers in order to avoid contamination.

Whenever possible, the lender would like to avoid paying the farmer directly. A model being used by
ICICI is to pay the input supplier directly and pre-arrange with the trader to prepay the lender before
paying the borrower. The borrower contracts to sell his crops at a market-based price – since if a contract
price was used and the market price was higher, the farmer would not deliver and default (and sell at the
higher rate).

The Kisan Credit Card

A recent approach to providing credit to the agriculture sector, including small farmers, is the Kisan
Credit Card (KCC), offered by commercial banks, RRBs and cooperative banks. Since their introduction
in 1998-99, some 31.6million KCCs had been issued by March 31, 2003. Though these are not truly
credit cards, the KCCs present a number of advantages for the borrowers and lenders. Borrowers appear
to have found this scheme quite useful because of the ease with which they can access credit and renew
loans on a yearly basis, once the initial screening has been done, the reduction in number of visits
required to branches, the choice/freedom of purchase of inputs and operation of accounts at the
designated branches. KCCs have substantially reduced the paperwork and delays associated with renewal
of crop loans. Branch staff also appear to have found the scheme helpful, as it has reduced transactions
costs. On the lines of KCC, banks have launched the Laghu Udhami Credit Cards for small
entrepreneurs.

However, one concern is the uneven growth in the distribution of the KCC scheme. For instance, in our
sample of households from AP and UP, only 6% of households report having a KCC (RFAS, 2003), and
access to a KCC appears to be higher for the larger farmers: while some 20% of large farmers report
having a KCC, the corresponding figure for marginal farmers I is just 2%. The reasons for this appear to
include the following: (i) instructions from controlling offices sometimes reduce the flexibility of branch
staff; (ii) some farmers have been unable to avail of the facility due to lack of title to the land that they
till; (iii) many farmers possess land under oral lease arrangements, which are not recognized; (iv) some
farmers have not yet availed of the scheme because they are unaware of its benefits.

The success of the KCC, and other similar facilities that could be introduced in the future, would depend
critically on the following factors: (i) extending the facility to rural non-farm activities; (ii) efforts to
update land records in a timely manner; (iii) a relaxation by the RBI in the rules so as to accommodate for
oral lessees and sharecroppers; (iv) greater flexibility to branch managers to be innovative in the use of
the KCC facility to meet the totality of the credit requirements of farm households;(v) greater flexibility
Micro- life and accident insurance. In a short period of three years since India’s insurance sector was
opened up to private investment, there have been a number of interesting innovations to provide insurance
services to the rural poor. The poor most often cannot afford traditional insurance products that are linked
with earnings. Some MFIs and banks are considering new, micro insurance products designed
specifically for rural and poor borrowers that they could cross-sell to small borrowers. SEWA Ahmedabad
is by far the leader in developing and offering insurance products to its customers. SEWA provides
insurance services managed through its Vimo SEWA affiliate, which works as a nodal agency for the LIC
and a number of general insurance companies. Vimo SEWA is perhaps the nation’s largest MFI insurer,
covering over 100,000 women, for life as well risks related to houses and assets used in earning their
livelihoods. It also offers health insurance covering maternity as well. ICICI Bank has also facilitated a
life insurance trust that is self-funded by SHGs and pays out in the case of death of the participant or her
spouse.

Weather insurance. Another innovation has been in the area of weather insurance. In 2003,
ICICI Lombard, a private sector general insurance company, started offering drought cover
policies via BASIX and excess rain covers through ICICI Bank. Such contracts offer the distinct
advantage of solving the delayed payment problem that is common with the government area-
yield based crop insurance programme. BASIX launched its first weather insurance program in
July 2003 through its local area bank KBS in Mahbubnagar. Since local area banks are limited to
operations in three adjacent districts and therefore face limited natural portfolio diversification,
this helped convince KBS that weather insurance contracts for its borrowers could mitigate the
natural default risk inherent in lending in drought prone areas such as Mahbubnagar, a district
that has experienced three consecutive droughts since 2000. KBS bought a bulk insurance policy
from ICICI Lombard seeking to sell individual farmer policies for three categories of groundnut
and castor farmers: small, medium and large. Informal interviews with the farmers who bought
the policies revealed that farmers are very well aware of the rainfall-based index nature of the
contracts and value the quick payout of the weather policy, which distinguishes it from the
experience with the government crop insurance scheme in India. ICICI Lombard also offered
excess rain policies to around 5,000 wheat farmers in Uttar Pradesh (in conjunction with ICICI
Bank) and 150 soya farmers in Madhya Pradesh in 2003/2004 (in conjunction with BASIX).
More recently the company has worked with the Government of Rajasthan to pilot weather
insurance for orange farmers in the state while also extending weather risk insurance for a rural
Marketing portfolio of BASIX. The latter deal is interesting from the point of view that it
captures, with one deal, all the farmers, big, small and marginal, who are part of BASIX’s
agriculture portfolio. This approach is therefore, potentially scalable even while having the
ability to reach small and marginal farmers on account of its use of a
Marketingintermediary/microfinancier. However, cost (around 10% of sum insured) remains an
issue even though relative to the true costs of the government crop insurance program (around
15%), the cost is lower. If the same or lower cost enabled with greater risk diversification can be
viably sustained over time, the argument for moving towards such a product becomes stronger.
Perhaps as in traditional crop insurance, this could be backed by government subsidies
particularly since early evidence seems to suggest that the subsidy required maybe lower than for
traditional crop insurance. Further, the other benefits of the use of an objective indicator
(rainfall) to determine payouts and reduced time lag between claim and payment (relative to
traditional crop insurance) associated with this product strengthen the case for pursuing the
development and scaling up of this innovation.

Composite MarketingService Providers

A variation of small Marketing that has emerged in recent years is composite service provision,
in other words, a single small Marketing institution provides an array of services, including
credit, savings, insurance, etc. A recent set of studies sponsored by the Institute for Development
Policy and Management, UK, (Ruthven, 2001; Patole and Ruthven, 2001), found that a wide
array of Marketingtransactions (both borrowing and lending, often simultaneously, and at all
levels of income) characterized the Marketinglife of the poor. The aggregate
Marketingtransactions were between 113% to 167% of the income levels of the very poor and
the poor respectively, in rural Allahabad, and 149% to 135% in urban Delhi slums. The World
Bank RFAS Survey (2003) also supports this conclusion. The poor are constantly borrowing,
lending, saving, withdrawing, using and losing money, through contingencies, and calamities.
They need someone to help them with all these transactions.
Composite service providers are preferable from the viewpoint of reducing the number of
agencies with whom a poor household must deal, thus reducing transactions costs. Moreover, if
a composite agency has a good internal MIS, it can use the savings history of a household as a
“collateral” for loans. Similarly, if the same agency provides insurance for lives or livelihoods, it
will be more willing to give a loan. From the MFIs’ point of view, transaction costs come down
as the same delivery system can be used, with the addition of training, software and some staff.

There are now some examples, albeit few, of composite Marketingservice providers in India,
mostly to be found among MFIs. The three top MFIs in India are all trying to offer a composite
set of services to their customers, in spite of a fragmented and unsupportive regulatory
framework. For example:

· SEWA Ahmedabad provides a combination of savings and credit through its Sri Mahila
SEWA Urban Cooperative Bank and insurance services managed through its Vimo SEWA
affiliate, which front ends for the LIC and a number of general insurance companies.

· The BASIX group’s Krishna Bhima Samruddhi Local Area Bank, is able to provide all the
services – savings, including daily deposits collected from the doorstep of its borrowers,
credit for a range of purposes from crop loans to non-farm activities and to SHGs; and crop
insurance to farmers under the Kisan Credit Card / Rashtriya Krishi Bima Yojana as well as a
weather indexed crop product developed by ICICI Lombard, and piloted last year. BASIX
retails life insurance on behalf of AVIVA Life Insurance Company and provides livestock
insurance to its borrowers through Royal Sundaram General Insurance Company.

Portfolio Securitization

Portfolio securitization of the micro loan portfolios of MFIs is an innovative approach, recently
piloted in India by ICICI Bank and SHARE, a microfinancier. ICICI Bank has just completed
two such deals in AP. In the larger one, it has paid $4.3 million for a portfolio of 42,500 small
loans from SHARE, a microfinancier. SHARE will be responsible for collecting the loans. The
securitization is not asset-backed; rather, ICICI Bank will have as collateral instead a “first loss’
guarantee of an 8% deposit from the total from Grameen Foundation.
The approach has many advantages: ICICI Bank manages to reach borrowers it could never
otherwise have approached, and palm off most of the administration to SHARE. This also helps
it meet its government-set target of directing 40% of its loans to the “priority sectors”, including
18% to farmers. SHARE secures a new source of funds, off SHARE’s balance sheet, at a cost
that is 3 to 4 percentage points cheaper than it pays for a bank loan. This will help SHARE meet
its aim of increasing the number of borrowers from under 300,000 now to 1 million. The deal
also helps create a new asset class for which there is demand among the more liquid investors.

While such securitizations can be done for the better MFIs, for which credit ratings are available,
scaling up would pose a serious challenge, given the paucity of reliable, independent information
on the bulk of the MFIs and their loan portfolios. Also, at present, there is no secondary market
for the securities, but ICICI Bank is talking to CRISIL, a credit rating agency, about the
prospects for its rating the paper, and is hoping that over time, other banks will enter the market
too.

Price Insurance and Risk Management Products for Farmers

Commodity price insurance. Fluctuations in commodity prices are a major source of risk in rural
Marketing. Market-based tools to insure against commodity price volatility (e.g. futures and
options) can help reduce the risk of default by marginal and small farmers, and hence improve
the terms on which they can access Marketing. Such tools already exist and are widely used in
high income countries. Risk management service providers, such as grain elevators and oilseed
crushing plants, provide farmers with access to risk management tools using purchasing
contracts. As a result, the demands of individual farmers for insurance are aggregated into a
contract of a commercially viable size, thereby enabling even farmers who produce a relatively
small quantity of a commodity to indirectly purchase insurance. In developing countries like
India, small farmers and market intermediaries tend to lack knowledge of such market-based
price insurance instruments and an understanding of how to use them. Also, the sellers of such
instruments, generally international trading firms, are often unwilling to engage with a new and
unfamiliar customer base of small-scale farmers, characterized by high transaction costs, credit
issues, and performance risk. One illustration of an innovation that was tried recently relates to
the Indian Coffee Board and three commercial banks that designed a comprehensive pilot for
retailing New York traded coffee “put options” to protect farmers against adverse price
movements (this was designed with significant contributions from the Commodity Risk
Management Group of the World Bank2). However, fewer than expected coffee farmers pre-
registered for this scheme and therefore it has not been launched in 2004. The set up of this pilot
was driven by regulatory constraints, as banks are not allowed to deal with derivatives. This
continues to constrain the growth of such price risk management products.

The development of commodities futures markets can help efficiency price discovery and go a
long way in reducing risks related to a fall in commodity prices below production cost levels. In
particular, micro-futures can help marginal and small farmers hedge against commodity price
fluctuations.

Establishing warehouse receipt systems. Another means of reducing the default risk in rural
Marketing may be through establishing “warehouse receipt systems”. This involves farmers
using their crops as collateral for post-harvest financing. The basic idea is as follows: The
warehouses store the produce for a fee and deliver a receipt to the farmer, and the receipt
becomes immediately enforceable (similar to checks). For the warehouse receipt system to work
effectively, receipts would need to be recognized as legal instruments. Also, the grades and
quality standards of the commodities would need to be defined centrally, warehouse operation
standards would need to be developed and effective supervision established. The Government of
India has been examining this issue; a recent task force set up by the Ministry of Marketing
highlighted the following measures required to develop a warehouse receipt system: (i) creation
of a central warehouse registry and a central regulatory authority; (ii) making warehouse receipts
a negotiable instrument; (iii) allowing for the full transferability of warehouse receipts; and (iv)
the introduction of nationally recognized grades and qualities for commodities.

2
See Hess and Klapper (2003).
The strategic use of Information and Communication Technology

ITC, a leading agri-commodity market player in India, has pioneered the use of e-choupal: a
desktop computer, with an internet connection and revolutionary implications for more than
4,000 villages. The e-choupal is operated as a commercial venture by a local farmer who earns a
commission from the sales that take place through the e-choupal internet connection. Farmers
use the e-choupal to check prices for agricultural produce at the nearest mandi, or in international
commodity markets, as well as to trade commodities. Better market information enables farmers
to obtain better prices. The e-choupal is also a mode to seek technical advice, obtain weather
forecasts, and order agricultural inputs or indeed a range of other commodities. These e-choupals
also provide potential avenues for lenders, agricultural commodity traders and farmers to interact
in a relatively seamless manner, with low transaction costs and improved (credit and market)
information. With rapid expansion plans to cover a fifth of India’s villages in the future, ITC’s e-
choupals are a great illustration of the powers of information technology.

The strategic use of information and communication technology is critical to addressing the
transaction cost problem in rural Marketing. Some experiments in this direction have been made,
notably by BASIX to use to give out very small loans (below Rs 1,000) and collect repayments,
using smart cards readable at devices placed in STD PCOs. Though the initial experiment has
not been successful, due to a combination of technical and Marketingreasons, it certainly
established that there is a market for “nano-credit” (loans below Rs 5000 or $100) which can be
profitably and efficiently served using sophisticated ICT.
 OBJECTIVE OF THE STUDY

1. To find out some glaring reasons of lower efficiency in ICICI Banks and suggest ways and

means to improve the efficiency of this banks.

2. To make comparative analysis of the Marketingper formance of ICICI Bank.

3. To analyze the Marketingperformance of ICICI Bank.

4. To analyse the Marketingper formance of ICICI Bank.

5. To ICICI Bank on the basis of their Marketingperformance.

 LITERATURE REVIEW

Scholten Bert (2000) stated that, 'Competition, Growth and Performance in the Banking Industry'
examined profit performance of the banking industry in the international context, using a sample
of 100 international banks over the year 1981-97.

A.Gnanadoss(2001), highlighted "the branch expansion statistics from 1969 to 1999 with a clear
comparison of rural branch expansion with total branch expansion. The study includes
comparison of structural deposits and credits of all scheduled commercial banks from 1950 to
2000. He has compared the performance of scheduled commercial banks in priority sector
lending during 1990-2000".

Kohli (2001), emphasized on the importance of technology anissues emerging from this
technology. According to him, technology is emerging as a key-driver of business in the
Marketingservices industry. The advancement in computing and telecommunications has
revolutionized the Marketingindustry and banking on the net is fast catching on. As e-commerce
gets transformed into e-commerce with the increasing use of technologies like WAP, banking
business is in for a major overhaul.

Kaveri (2001), examine to extend the study conducted by the Verma Committee more
specifically to ascertain whether enough signals of weakness were indicated much before the
event. The present, study considers 1998-99 as the year of event when the Verma Committee
identified weak banks, strong banks and potential weak banks. This study considers nine
efficiency parameters that are computed, based on the data collected from the Reserve Bank of
India publications. The parameters include; Capital Adequacy Ratio; Net NonPerformance
Assets/Net Adequacy; Net Profit/Total Assets; Gross ProfitAA/orking Funds; Net Interest
Income/Total Assets; Interest Expended/Total Assets; Intermediation Cost/Total Assets; and
Provisions and Contingencies/Total Assets.

R.Nambirajan(2001), in his study compared gross and net Non Performing Assets of all Public
sector banks from 1998 to 2000 and could find marginal increase. The study states that
corporation bank has lowest NPAs (1.92 per cent) and Indian bank has highest NPAs (16.18%).

Anuradha (2001) stated that "the need for the change of Indian banks and the forces behind the
change like globalization, liberalization, international trade, revolution etc., The study also
highlights various consequences that are to be faced by the Indian banks if they remain
unchanged".

Shri S.R. Mittal {200^f^, Chairman of Committee on Intemet Banking,

Constituted by R.B.I, strongly urged to use the fast growing Internet medium in banking
transactions..The Government of India set up a nine-member committee under the chairmanship
of Narasimham, former Governor of Reserve Bank of India. He is to examine the structure and
functioning of the existing Marketingsystem of India and suggest Marketingsector reforms. The
report of the committee was tabled in the Parliament on December 17, 1991 .The Marketing
Ministry of Govt, of India appointed once again a committee under the chairmanship of Sri M.
Narasimhan to recommend reforms for Indian banking sector. Reviewing the developments that
have taken place during the period 1991-98, the committee made recommendations for
reforming the banking sector.The Report was submitted in April 1998.

Chowdary Prasad (2002), compared the 1991 economic reforms of India with that of china that
took place in 1998. He has stated "Reforms in India have just been a decade old but there have
been numerous changes in political set up, industrialization policies, legal reforms, privatization,
etc.," Indira Rajaraman, Garima Vashishta's (2002)^^, study "highlights gross and net NPAs of
commercial banks from* 1996 to 2000. The study tries to identify the relation between Non-
Performing Assets and operating efficiency".
COMPANY PROFILE OF ICICI:
 ICICI BANK | khayaal aapka

Khayaal Aapka:

Over the past decade ICICI Bank has redefined the banking landscape. Through a deep understanding of

customer needs, it has leveraged technology to introduce several innovations to make banking simple and

convenient for the consumer. Continuing with our commitment towards deepening our relationship with

our customers, we have undertaken many initiatives to strengthen the customer experience through

multiple touch points such as bank branches, internet banking, mobile banking and phone banking. In

addition we have continued to offer products and services that have been thoughtfully designed, keeping

the consumer in mind.

Khayaal aapka is a reflection of this commitment that we have towards our customers.

Khayaal aapka embodies our relationships with customers that go beyond transactions it is our

commitment to treat our customers fairly, show empathy towards customer needs and create and deliver

products and services that make a difference to our customers' lives.

ICICI Bank is India's second-largest bank with total assets of Rs. 3,849.70 billion (US$ 82 billion) at

March 31, 2010 and profit after tax Rs. 40.25 billion for the year ended March 31, 2010. The Bank has a

network of about 2,529 branches and 6,000 ATMs in India and presence in 19 countries.

ICICI Bank offers a wide range of banking products and Marketingservices to

corporate and retail customers through a variety of delivery channels and

through its specialized subsidiaries and affiliates in the areas of investment

banking, life and non-life insurance, venture capital and asset management.
 The Bank currently has subsidiaries in the United Kingdom, Russia and Canada,

branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka,

Qatar and Dubai International Marketing Centre and representative offices

in United Arab Emirates, China, South Africa, Bangladesh, Thailand,

Malaysia and Indonesia. Our UK subsidiary has established branches in

Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock

Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York

Stock Exchange (NYSE).

History:

institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%

through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed

on the NYSE in fiscal 200, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock

amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001

and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India

and ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian Marketingrepresentatives

of Indian industry. The principal objective was to create a development Marketinginstitution for providing

medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its

business from a development Marketinginstitution offering only project Marketing to a diversified

Marketingservices group offering a wide variety of products and services, both directly and through a

number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company

and the first bank or Marketinginstitution from non-Japan Asia to be listed on the NYSE.
 After consideration of various corporate structuring alternatives in the context of the emerging

competitive scenario in the Indian banking industry, and the move towards universal banking, the

managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would

be the optimal strategic alternative for both entities, and would create the optimal legal structure for the

ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders

through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based

income and the ability to participate in the payments system and provide transaction-banking services.

The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of

operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into

new business segments, higher market share in various business segments, particularly fee-based services,

and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors

of ICICI and ICICI bank approved the merger of ICICI and two of its wholly-owned retail Marketing

subsidiaries, ICICI Personal MarketingServices Limited and ICICI Capital Services Limited, with ICICI

bank. The merger was approved by shareholders of ICICI and ICICI bank in January 2002, by the High

Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the

Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking

operations, both wholesale and retail, have been integrated in a single entity. ICICI bank has formulated a

Code of Business Conduct and Ethics for its directors and employees.

ICICI bank (formerly Industrial Credit and Investment Corporation of India) is India's largest

private sector bank in market capitalization and second largest overall in terms of assets. Bank

has total assets of about USD 100 billion (at the end of March 2010), a network of over 2,529

branches, 22 regional offices and 49 regional processing centers, about 6000 ATMs (at the end of

March 2010), and 24 million customers (at the end of March 2010). ICICI bank offers a wide

range of banking products and Marketingservices to corporate and retail customers through a
variety of delivery channels and specialized subsidiaries and affiliates in the areas of investment

banking, life and non-life insurance, venture capital and asset management. (These data are

dynamic.) ICICI Bank is also the largest issuer of credit cards in India. ICICI Bank has got its

equity shares listed on the stock exchanges at Kolkata and Vadodara, Mumbai and the National

Stock Exchange of India Limited, and its ADRs on the New York Stock Exchange (NYSE).
V. MEETING THE CHALLENGE OF SCALING-UP ACCESS TO
MARKETING FOR INDIA’S RURAL POOR: THE POLICY
AGENDA

Improving access to Marketing for India’s rural poor, to meet their diverse Marketingneeds (savings,
credit, insurance against unexpected events, etc.) presents a formidable challenge in a country as vast and
varied as India. But the opportunities, too, are plentiful. In the near term, small Marketing can, at a
minimum, serve as a quick way to deliver Marketing. But the medium term strategy to scale up access to
Marketing for the poor should be to ‘graduate’ small Marketing clients to formal Marketing institutions
where they can access standard ‘individual’ loans, possibly on a fully commercial basis. An immediate
problem arises in that there are no obvious lenders for small Marketing customers to graduate to – none
yet are close to offering the reliability, convenience, continuity, and flexibility required by low-income
customers. Nor is the notion of graduation built explicitly into the design of small Marketing in India. In
Indonesia, in contrast, Bank Rakyat Indonesia has worked closely with (and in fact supervises) the Badan
Kredit Desa network, which has for some been a feeder to BRI. Even so, there is relatively little
graduation overall from the BKDs to BRI, partly because BRI is only now developing products that work
well for the smallest-scale clients. In Bangladesh, the pretext of graduation has been universally
abandoned for lack of an appealing next step—and for the desire of NGOs to continue working with
clients with whom they have developed relationships over many years. If the idea of graduation is a
serious one in India, efforts to promote small Marketing should go hand-in-hand with efforts to make the
formal sector better at “banking the poor”, and both government and private sector can play a critical role
in this context.

Scaling-Up Small Marketing

Scaling-up access to Marketing for India’s rural poor through small Marketing will require attention to the
following areas:
An enabling policy, legal and regulatory environment is urgently needed. An enabling framework is
already in place for UTKARSHBank Linkage, and scaling-up the model would require Government to
ensure that the existing framework is maintained. This would require ensuring that the model continues to
have a champion with a clear leadership role – a task which NABARD has assumed with exemplary
diligence by introducing policies and measures to encourage banks to lend to SHGs. And it would require
the authorities to maintain a ‘hands-off’ regulatory policy. For MFIs, Government could play an
important role in establishing an enabling policy, legal and regulatory framework for MFIs. While the
success of individual MFIs is largely attributable to their visionary leaders, this is clearly not enough to
mainstream the cause of MFIs. Advocates of MFIs argue that immediate measures needed include the
following: (i) Reducing minimum start-up capital requirements to facilitate the transformation of MFIs
into NBFCs; (ii)Encouraging multiple sources of equity for MFIs; (iii)Facilitating MFIs to raise debt,
including permitting MFIs to mobilize savings, with safeguards; (iv) Developing a set of prudential norms
that are more appropriate to institutions serving the poor, and set up supervision mechanisms around those
norms. Better policy coordination among the various government ministries/ department/agencies that
cover MFI issues would also help greatly.

Attention to group quality, and the importance of Marketingsustainability. Scaling-up small Marketing
in India requires attention to the quality and sustainability of groups, their promoters, and lenders (banks
or MFIs). A strong focus on the quality of SHGs by their NGO promoters was a key factor in the success
of the UTKARSHBank Linkage model in its pilot phase. But in recent years, growing concerns have
emerged about group quality as well as the ability of partner banks to properly assess, monitor and
manage risk on their UTKARSHportfolios. Going forward, if UTKARSHBank Linkage is to be scaled-
up, NABARD and its partners face an important challenge in ensuring that high quality groups are created
and maintained. In particular, the success and sustainability of UTKARSHBank Linkage depends
crucially upon a clear strategy on who will promote new groups, and how they should be funded.
Equally, efforts need to focus on ensuring that banks price their loans to SHGs at rates that would cover
their costs and ensure Marketingsustainability of UTKARSHbanking. Banks also need to focus more on
monitoring and managing UTKARSHlending risk. Since most Indian MFIs also lend to groups, issues
related to group quality have a bearing on the success of the MFI model as well.

Clear targeting of clients. Equally important is the need to ensure proper targeting of clients. The dual
pursuit of social ends and Marketingprofits is an ongoing tension for all in small Marketing. While our
analysis of UTKARSHBank Linkage indicates that the model has so far successfully targeted the poorer
segments, mission drift is a common fear as pressures mount to serve richer clients with larger loans (and
thereby to earn higher profits per loan since transactions costs per rupee tend to fall with loan size).
Keeping focused on its target population is thus critical to the success of small Marketing in India, as
elsewhere.

The experiences of Bangladesh, Indonesia and elsewhere offers some useful pointers for India. There has
been much debate about how stringently to target, and how best to do it in practice. A first priority is to
clearly determine who is being targeted and define eligibility rules. In Bangladesh, Grameen and BRAC
employ eligibility rules to restrict attention to households holding under a half acre of land. Grameen
expands the definition to also exclude households with more than the equivalent of an acre’s worth of
assets. BRAC excludes households without a manual laborer. Others, like SafeSave, rely on geographic
targeting, restricting attention to specific slums in Dhaka. Small Marketing in Bangladesh has earned a
reputation for maintaining a focus on women from functionally landless households (although this has
softened in practice). In Indonesia, BRI has also focused on serving the under-served, but, in contrast, it
has focused on low-income households (and not just those below the poverty line) and most clients are
men.

Appropriate products and services, and good staffing is critical to ensuring effectiveness. How products
are designed, how staff are compensated, what messages are delivered from headquarters, and who is
recruited onto staff, all have an important bearing on the success of small Marketing. Group promoters
from local communities are generally better able to target poorer households. Product design is another
means of targeting. Lending in groups and sending staff to villages has been credited with much of small
Marketing’s appeal in Bangladesh, as in India. A critical but less-heralded breakthrough for Grameen was
to create a loan product that allowed borrowers to repay in small, weekly installments. This suited poor
households well, since they could repay out of the regular bits of income coming in daily or near-daily.
Charging appropriate interest rates has also helped stem leakage of resources from target populations to
those richer or politically-favored. On the savings side, BRI has tried to encourage broad access by
maintaining very low minimum balances ($0.57) and low minimum deposits for opening accounts. New
depositors can start an account with 10,000 rupiah (just over $1), and the new savings products have
given BRI its most notable success in serving the poor. On the borrowing side, BRI requires borrowers to
put up collateral to secure loans, but the bank has chosen to be very flexible in what it will accept, so that
collateral is not a major constraint when seeking poor clients. A survey completed in 2000, for example,
shows that 88% of non-customers had acceptable collateral of some sort. In order to push still further,
BRI has instituted products that require no collateral at all for loans up to rupiah 2 million ($225), offered
at the discretion of the unit manager.

Inclusiveness and competition in the small Marketing sector can generate high payoffs. The
inclusiveness of UTKARSHbank Linkage, which has involved a partnership between government, NGOs,
and arrange of rural banks (commercial banks, RRBs, cooperative banks) has already generated a strong
payoff. Further gains in terms of outreach and Marketingsustainability may be reaped through involving
private sector banks and MFIs in UTKARSHBanking. Recent experiments indicate good prospects for
scaling-up models that are variations of ICICI Banking, and involve MFIs as intermediaries between
SHGs and private sector banks (who want to enter the market, but don’t have the branch network).
Equally, there is space for independent, specialized MFIs in the Indian small Marketing market that could
provide the necessary competition to UTKARSHBank Linkage in the area of savings and credit
provision, and also complement the services provided by UTKARSHbank Linkage. Evidence from
elsewhere in Asia, and particularly from Bangladesh and Indonesia, suggests that good, reliable,
responsive, long-term MFIs for the poor can go a long way in improving access to Marketing. (Morduch
and Rutherford, 2003).

Recent studies also indicate the key role that can be played by MFIs that provide composite services,
given the wide array of Marketingtransactions (both borrowing and lending, often simultaneously, and at
all levels of income) that characterize the Marketinglife of the poor (Ruthven, 2001; Patole and Ruthven,
2001). The RFAS-2003 also supports this conclusion. The poor are constantly borrowing, lending, saving,
withdrawing, using and losing money, through contingencies, and calamities. They need someone to help
them with all these transactions. Composite service providers are preferable from the viewpoint of
reducing the number of agencies with whom a poor household must deal, thus reducing transactions costs.
Moreover, if a composite agency has a good internal MIS, it can use the savings history of a household as
a “collateral” for loans. Similarly, if the same agency provides insurance for lives or livelihoods, it will
be more willing to give a loan. From the MFIs’ point of view, transaction costs come down as the same
delivery system can be used, with the addition of training, software and some staff. As discussed above,
the growth of the MFI sector is closely related to a more conducive policy, legal and regulatory
framework.
Overcoming geographic concentration in small Marketing. Another issue of concern is that small
Marketing in India continues to be skewed in its geographical distribution. The underlying causes for this
include the general malaise in the economy of the central, eastern and north eastern states, with very little
resultant demand for credit among the subsistence poor, and the absence (for historical reasons) of good
quality NGOs, that are willing to initiate small Marketing programs in these states (there are a large
number of small NGOs but all of them with limited experience and outreach). (Mahajan and Ramola,
2003). Expanding the reach of small Marketing to these areas is not a challenge that can be met overnight.
Investments are required in areas such as watershed development, small-scale irrigation, livestock up
gradation and forest regeneration. Unfortunately, none of these are amenable to the “ small, short and
unsecured” nature of microcredit loans. These require long term, lumpy public investments. However,
once made, they unlock the potential for enhancing the livelihoods of millions of poor people, moving
them up from subsistence production to surplus production and thereby increasing the demand for credit.
One simple example of this is the dramatic increase in the demand for credit once irrigation becomes
available to erstwhile rain-fed farmers. A proposal for increasing the number of good NGOs in the lesser-
served states was made by the Tenth Five Year Plan Working Group on Poverty Alleviation Programs
(Planning Commission, 2002), which recommended that well established NGOs be asked to set up
branches in selected poor districts and that they be funded for this on an assured though declining basis
for the first three to five years. The experience of the Rashtriya Gramin Vikas Nidhi and the Rashtriya
Mahila Kosh in supporting hundreds of small NGOs all over the eastern region is useful in this regard and
lessons from such experience need to be taken into account.

Attention to the demand-side. While the importance of small Marketing in consumption-smoothening

should not be underestimated, its success in building up poor peoples’ assets, over the medium term,
would depend very much on efforts directed at providing assistance in skills development, technology and
marketing – all of which are critical to ensuring that investments made by poor households reap returns
and contribute to a sustained increase in incomes and improvements in rural livelihoods.

Making the Formal MarketingSector Better At Banking The Rural Poor

Efforts to promote small Marketing should go hand-in-hand with actions to make the formal sector better
at banking the poor. Both government and private sector can play a critical role. An immediate challenge
is for formal sector institutions to introduce products and services that are not only reliable and available
on a continuous basis, but are also flexible and convenient, and also to introduce measures that allow for
low-cost ways of reaching the rural poor. Here, small Marketing can offer some useful lessons to formal
banks. Over the medium term, key reforms in government policy are required to improve the overall
incentive framework, and the regulatory and legal system within which rural banks operate, so as to
promote greater efficiency and competition in rural Marketing.

Low-cost ways of reaching the rural poor through the formal sector: Role of Banks and Government
India’s vast network of rural banks potentially presents a tremendous advantage, and one on which the
country could capitalize in delivering Marketing for the poor. Currently, most banks operating in rural
areas, the majority of which are state-owned banks, do not seem to be tailored to meet the needs of the
rural poor in an efficient and effective manner. The responsibility for introducing more flexible products
and services, that would better match the needs of the rural poor, rests with bankers. But Government,
given its domination of rural Marketing institutions, also has an important role to play in spearheading
change. In this context, small Marketing offers a number of lessons for formal banks.

Introducing flexible products: Small rural clients prefer to borrow frequently, and repay in small
installments; banks could usefully explore the possibility of offering new and more flexible loan products,
like those offered by small Marketing.

The need for composite Marketingservices: While small rural borrowers seek savings and lending
services, they also seek insurance (life, health, crop); bank branches in rural areas would do well to
explore opportunities to offer composite Marketingservices, as they have begun to do in urban areas, and
as some microfinanciers have begun to offer in rural and urban areas.

Simplification of procedures to open a bank account, access credit, etc. could also go a long way in
encouraging the poor to bank with the formal sector, by reducing clients’ transactions costs. The KCC
experiment is a move in the right direction, but it needs to be scaled-up and accompanied by other
procedural changes.

Better staffing policies and doorstep banking: The high recovery rates of small Marketing are associated
with staffing policies that allow recruiting staff from the local area who understand clients’ needs, and a
focus on doorstep banking. State-owned banks operating in rural areas currently do not have the
flexibility to recruit staff locally, but staffing policies could be revisited. Doorstep banking is costly, but
the gains from better recovery and cost savings from hiring local staff in rural branches could well
outweigh the higher transactions costs of doorstep banking.

Use of technology: Banks can use technology to drive down their transactions costs, for example, through
the introduction of smart cards and biometrics.

Improving the incentive regime, and promoting competition: Role of Government policy

Interest rates. One obvious area could be for Government to revisit its policy of setting interest rate
“caps” on rural lending rates and “floors” on the deposit rates. As noted above, this has the opposite effect
of what is intended – poor borrowers are cut off from access and end up paying higher interest rates to
informal lenders. Meanwhile, banks face an implicit tax (cost) that is not insignificant. Also, as indicated
by the RFAS, 2003, the ‘store of value’ reason for holding accounts dominates the transactions needs of
rural households; most transactions are cash-based. This suggests that deposit mobilization may be
relatively inelastic to interest rates (however further study is needed) which could mean that there is scope
for more attractive spreads for commercial banks – if interest rates were further deregulated. The success
of countries such as Indonesia and Philippines that have no interest rate controls but have succeeded in
making deep in-roads in rural areas, is noteworthy.

Moral suasion by governments on interest rates on farm loans and announcements of interest (and
principle) waivers by state governments from time to time, must be avoided. With regard to the former,
announcements by government’s on interest rate ceilings even if with compensatory subsidies to banks,
dis-incentivize rural bankers, hamper the credit culture that could otherwise have been established and
lead to the expectation amongst farmers that low interest rates will continue in perpetuity. The role of the
state thus, harms the Marketingsystem rather than perform an enabling role. Similarly interest waivers
announced by governments, create an adverse incentive amongst farmers not to service the debt, riding on
the expectation that waivers may eventually be announced. Clearly such measures have an adverse impact
on the Marketingsystem and alternatives such as direct farm protection measures, including increasing the
outreach of agricultural risk mitigation need to be given serious consideration by governments at both the
central and state levels. Moreover, to the extent that such announcements are generally linked to disaster
situations, disaster relief and rehabilitation measures 3 need to form the government response – these can
be politically viable and financially more prudent and effective than seeking to waive interest.

Revisiting the policy on ‘priority sector’ lending. Government should also consider revisiting its policy
on priority sector lending requirements imposed on banks. Priority lending quotas are not fully observed
and often circumvented through such means as subscription by banks to NABARD and SIDBI bonds.
One option, that would allow the most competitive lender to emerge in rural areas and minimize
distortions, is for government to make the priority lending obligation “tradable”. The most competitive
lender would then be paid by the less well placed banks to effectively take on their priority lending
requirements for a price. Creating such a market for priority lending requirements would benefit both
banks and the rural poor, who would be able to access Marketing from the most efficient and competitive
institution.

Entry of new private banks in rural Marketing. Some private banks such as ICICI Bank have shown a
growing interest in entering India’s rural Marketing sector—and have introduced innovative approaches
and Marketingproducts to reach the rural poor. Government needs to do what it takes to create an
environment that would make it possible and profitable for interested private banks to enter the rural
Marketing market. This would require liberalizing interest rates (see above) so that lending to small, rural
clients can become a more profitable business for banks. It would also require revisiting branch licensing
policies (private banks may be interested in buying up the branch networks of the government-owned
rural banks). And it would require strengthening the supervision of rural banks so as to ensure
Marketingdiscipline/reduce moral hazard problems while also fostering an enabling environment for
Marketingintermediaries (see below). The entry of private banks could have a good demonstration effect
for the public sector banks on how to reduce transactions costs in rural banking and how to make rural
banking profitable. It would also create more competition, that would help wean out the good from the
bad banks and create further space for new, private sector entrants. To this extent, measures to support
innovations by the private sector banks and consolidate and disseminate lessons from such pilots, would
help in leveraging adequately on their initiatives.

3
In this context, the following report could be a useful reference: Financing Rapid Onset Natural Disaster Losses in India: A Risk
Management Approach; World Bank, 2003.
Restructuring the RRBs and rural cooperative banks. Restructuring the RRBs and rural cooperative
banks poses a major challenge. Various Government-appointed task forces and committees 4 have
highlighted in detail what needs to be done to deal with the weaker RRBs and cooperative banks; the
challenge really is to build consensus for reforms and implement the changes. (Annex 5). As a first step,
the regulation and supervision of these banks needs to be urgently strengthened. Prudential regulation
standards related to capital adequacy and asset classification (and related to the latter, regulation on
income recognition and provisioning) need to be upgraded and introduced in a phased manner, and the
supervisory enforcement improved. Weaknesses in regulatory standards, poor enforcement and regulatory
forbearance, have undermined market discipline and have contributed to the deep Marketingdistress that
characterizes many RRBs and rural cooperative banks. Improved prudential standards needs to go along
with clearer demarcation and prioritization of functions to address the conflict of interest in apex
institutions’ (RBI and NABARD) regulatory, supervisory, refinancing and development functions. While
perhaps the decreasing importance of reMarketing from apex institutions could be the way that some of
these issues will be resolved, nonetheless, there is a need to deliberate actively on this issue. And while
there may be no one right and no short term solution, reviewing international experience would be useful 5
in terms of studying prudential regulation and supervisory mechanisms (central bank versus auxiliary
supervision versus delegated supervision (Annex 6) and determining ways to minimize potential conflict
of interests between these roles.

Better regulation and supervision would pave the way for the restructuring of these banks. It would help
wean out the adequately capitalized banks from the weaker banks (undercapitalized banks, and those that
are insolvent). The proper enforcement of prudential norms would mean that the weaker banks are forced
to address their problems through such means as mergers or closures. 6 Studying the experiences of
countries such as Korea, Mexico, Peru, Thailand and Chinese Taipei, where recent rural banking crises
had emerged and been dealt with, would be useful to assess the kinds of policy response that was adopted
(Annex 7).

4
Including the Capoor Committee and the Patil Committee reports on the rural cooperative banks and the Rao Committee on
RRBs.
5
The experience of countries such as Canada, Mexico, Peru, Germany and Brazil would be a good starting point as well as
studying the cases of countries where weak regulation and supervision led to collapse of the cooperative system (Nicaragua,
Venezuela) – the following website provides more information: www.worldbank.org/recifecoops
6
This is indeed in line with the recommendations made by various Government-sponsored committees on the future of the RRBs
and cooperatives, which suggest measures to reduce government ownership, undertake structural consolidation, improve
governance and management, strengthen regulation and supervision and so forth.
At the same time, better regulation and supervision need to be accompanied by operational restructuring,
involving improvements in governance to reduce state interference (especially for rural cooperative
banks, the duality of control issue needs to be addressed – all banking functions need to vest clearly with
the central bank rather than be shared with the state government; these functions include policies on
interest rate and loans, reserve and appropriation, remission of debts, branch licensing, powers to appoint
auditors and supercede the Board, powers to appoint CEOs, etc), better management, strong policies on
loan sanctions (without any influence of the government) including measures to check related party
lending, clear portfolio risk management strategies, staffing policies that allow banks to employ local staff
who are familiar with the community and thereby better able to address the needs of their client, and the
introduction of new products, such as loans with flexible repayment terms, and better services, such as
door-step banking that can help better meet the needs of rural clients and minimize risk. In introducing
new products and services for the rural poor, lessons could be drawn from small Marketing.

Better regulation and supervision also needs to be go hand in hand with strengthening the refinancing
eligibility norms for rural banks used by NABARD and the due diligence underlying lending to rural
Marketing. With regard to the former, relatively lenient conditions used at present provide wrong signals
to rural banks and thereby, reduce the incentive to improve Marketingperformance sufficiently, while also
potentially crowding out private sector Marketinginstitutions 7. The point on the quality of due diligence
is particularly relevant to the practice of lending against state government guarantees – this includes
NABARD reMarketing to state level cooperative banks and state governments but also lending by state
level cooperative banks to other commodity cooperative sectors against a state guarantee. Often, given the
comfort of a state guarantee, such lending may not be backed by adequate due diligence on the part of the
lender, and therefore, while retaining a standard asset on its books on account of the government
guarantee, ultimately this could create a fiscal liability for the state if the underlying asset Marketingd by
the intermediary is not a viable project. Such lending could include NABARD’s exposures under the
Rural Infrastructure Development Fund, its lending to long term cooperative banks (many of which have
eroded their capital base) and the lending (often ‘directed’ by state governments 8) by state cooperative
banks to unviable and bankrupt, government owned sugar (and other commodity) cooperatives backed by
state guarantees.

7
The flow of funds to the rural finance sector from financially weak entities, not merely creates weak assets for the rural banks,
but also potentially crowds out private sector provision of financial services. While it can be argued that the private sector does
not have a significant presence in rural areas at present, recent initiatives by these banks discussed in this report, could indicate a
turning point in their degree of focus on rural finance.
8
Most recently the case of the Maharashtra State Cooperative Bank’s exposures to the state’s sugar cooperative sector.
Beyond these measures, Government can also play an active role in many other areas to facilitate
increased efficiency of rural Marketing markets and increased competition that would help financiers
make credit available more efficiently to rural borrowers, both large and small. Better laws and
regulations governing Marketingtransactions, a judiciary that can enforce contracts, the demarcation of
property, better credit information, improved price discovery in rural markets, could go a long way in
addressing market constraints. Specifically, these measures would include:

Improving contract enforcement, the legal framework and land titling. To encourage banks and other
private creditors to lend in rural areas, the government needs to strengthen the legal framework for
recovering smaller non-performing loans. While the recent enactment of the securitization and asset
reconstruction law (2002) has helped improve the legal framework for recovering bad loans, by
facilitating out-of-court settlements on non-performing loans and instituting alternate methods of dispute
resolution between creditors and debtors, the law does not cover small loans. Extending the law to small
loans would greatly facilitate loan recovery on rural loans, thereby, reducing the default risk faced by
RFIs. Land titling and registration systems should also be strengthened, restrictions on the use and
transfer of land removed, and enforcement mechanism improved, so as to facilitate the use of land as
collateral. At present, some 90% of land parcels in India are reportedly subject to disputes over
ownership, which take decades to settle in court. While these are complex issues, a start could be made
by efforts to improve the titling and registration process through the automation of land records. Land
laws need to be modified to facilitate the development of a free-and-fair land-lease market. Indeed, many
states do not permit leasing of land, while in some other states, the lease creates long-term irrevocable
rights for the lessee to the disadvantage of the lessor. All this encourages unrecorded and unofficial year-
to-year oral leases, which prevent the lessor from getting a good lease value, and the lessee from putting
the land to best use.

Better credit information would directly increase the amount of financing for rural borrowers, by
reducing transactions costs and costs related to default risk. A credit bureau that focuses on small, rural
clients could eliminate the need for these certificates and decrease the time necessary for loan approval
and disbursement. A way forward may be for NABARD to consider collecting credit information on
micro borrowers, both groups and individuals. A first step could be to require the 2,500 NABARD-
affiliated Marketinginstitutions to provide default information to a central registry. For example, in many
rural areas, NABARD arranges for farmers to meet informally, and share default information among
themselves. It would be helpful if this information – historically and across regions – were kept
electronically and made easily accessible. One constraint is the unique identification of borrowers.
However, the current system – of including name, father’s name and address – is considered accurate in
over 95% of cases. In addition, as National IDs become more common, NABARD could require that
every borrower have an ID (as is the case in Sri Lanka). A similar initiative could be undertaken with
SIDBI and other apex micro Marketing lenders. A useful reference would be the South African credit
bureau that also covers the micro Marketing sector, using the apex micro Marketing council as a channel
to collate information on micro-borrowers.

Better price discovery, crop insurance and commodity price insurance to reduce default risk. One of the
main sources of default risk faced by rural financiers is a fall in commodity prices below production cost
levels. The development of commodities futures markets could be way of improving price discovery and
hence, reducing risk. This would require changes to the regulatory and legal framework, specifically,
government and RBI need to re-examine the entire set of forward markets regulations and section 8 of the
banking law. At present, the regulatory framework for forward markets seems to conflict with the rapidly
liberalizing futures market regulations. One aspect of this conflict is the interpretation of section 8 of the
banking law. Currently, the law does not allow a bank to buy commodity price derivatives, even if the
bank does not take any exposure by retailing the derivative as price insurance to commodity producers.
Banks should be allowed to trade derivatives as long as speculation and exposure to price movements are
limited and well supervised. A variant product is “micro futures”, which are smaller denominated future
products marketed to smaller businesses or independent farms. Contract sizes on future contracts are often
too large to accommodate small holders needs. Smaller micro futures on principal crops and weather
measures in major cities could be retailed through brokers and bank and marketed to retail buyers. This
instrument could help marginal and small farmers hedge against commodity price fluctuations.

Access to price insurance and price derivative instruments would also help commodity producers and
traders access Marketing on better terms. But this would require the Indian authorities to redefine the
regulatory framework governing the use of commodity price derivatives. Appropriate supervision would
need to be put in place to curtail the speculative use of these instruments and limit exposure to more
sophisticated structures with margin requirements. The supervisor would need to distinguish between
simple straightforward hedging instruments, such as “put” options and futures, and more complicated and
hard to track swaps, “collars”, “swaptions”. etc.
An important tool in agricultural risk mitigation could be weather based insurance products. The main
pre-condition for the scaling-up of weather insurance is the timely and full availability of weather data,
preferably online. Currently, weather stations in India are often not automated and data is not available
online. In addition, the use of weather derivatives is subject to tight restrictions, essentially they are not
part of the recognized Marketinginstruments which leaves only the instrument of weather insurance.
Thus, government would have to: (i) ensure that those who would like to pilot this instrument are
provided full access to historical and current weather data (which does seem to exist, but is not readily
available at present); (ii) make available this data online (on the basis of specific agreements); (iii)
introduce weather derivatives as a tradable instrument.

Recent innovations in agricultural risk mitigation have opened the doors for innovations to reduce default
risk in rural Marketing while also providing protection to the borrower. For illustration, the basic product
offered and being developed by the Agriculture Insurance Company of India (AICI), the main provider of
crop insurance at present, is based on an area-yield formulation - the Government could allow providers
of risk management services the right to allow the farmer to assign the area-yield indemnities payment to
the risk provider in exchange for new tailored risk management products better suited to the individual
farmer’s risk management needs. This innovation could prove pivotal in addressing main problem with
the current program, namely of delayed indemnity payment.

Yet another means of reducing the default risk in rural Marketing may be through establishing
“warehouse receipt systems”. The immediate priorities in this area, as highlighted by a recent task force
set up by the Ministry of Marketing, are as follows: (i) creation of a central warehouse registry and a
central regulatory authority; (ii) making warehouse receipts a negotiable instrument; (iii) allowing for the
full transferability of warehouse receipts; and (iv) the introduction of nationally recognized grades and
qualities for commodities.
 SMALL MARKETING IN INDIA

At present lending to the economically active poor both rural and urban is pegged at around Rs
7000 crores in the Indian banks’ credit outstanding. As against this, according to even the most
conservative estimates, the total demand for credit requirements for this part of Indian society is
somewhere around Rs 2,00,000 crores.

Small Marketing changing the face of poor India

Micro-Marketing is emerging as a powerful instrument for poverty alleviation in the new

economy. In India, micro-Marketing scene is dominated by Self Help Groups (SHGs) - Banks
linkage Programme, aimed at providing a cost effective mechanism for providing
Marketingservices to the 'unreached poor'. In the Indian context terms like "small and marginal
farmers", " rural artisans" and "economically weaker sections" have been used to broadly define
micro-Marketing customers. Research across the globe has shown that, over time, small
Marketing clients increase their income and assets, increase the number of years of schooling
their children receive, and improve the health and nutrition of their families.

A more refined model of micro-credit delivery has evolved lately, which emphasizes the
combined delivery of Marketingservices along with technical assistance, and agricultural
business development services. When compared to the wider UTKARSHbank linkage movement
in India, private MFIs have had limited outreach. However, we have seen a recent trend of larger
small Marketing institutions transforming into Non-Bank MarketingInstitutions (NBFCs). This
changing face of small Marketing in India appears to be positive in terms of the ability of small
Marketing to attract more funds and therefore increase outreach.

In terms of demand for micro-credit or micro-Marketing, there are three segments, which
demand funds. They are:

 At the very bottom in terms of income and assets, are those who are landless and
engaged in agricultural work on a seasonal basis, and manual labourers in forestry,
mining, household industries, construction and transport. This segment requires, first
 and foremost, consumption credit during those months when they do not get labour work,
and for contingencies such as illness. They also need credit for acquiring small
productive assets, such as livestock, using which they can generate additional income.

 The next market segment is small and marginal farmers and rural artisans, weavers
and those self-employed in the urban informal sector as hawkers, vendors, and
workers in household micro-enterprises. This segment mainly needs credit for working
capital, a small part of which also serves consumption needs. This segment also needs
term credit for acquiring additional productive assets, such as irrigation pumpsets,
borewells and livestock in case of farmers, and equipment (looms, machinery) and
worksheds in case of non-farm workers.

 The third market segment is of small and medium farmers who have gone in for
commercial crops such as surplus paddy and wheat, cotton, groundnut, and others
engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment
includes those in villages and slums, engaged in processing or manufacturing activity,
running provision stores, repair workshops, tea shops, and various service enterprises.
These persons are not always poor, though they live barely above the poverty line and
also suffer from inadequate access to formal credit.

Well these are the people who require money and with Small Marketing it is possible. Right now
the problem is that, it is SHGs' which are doing this and efforts should be made so that the big
Marketinginstitutions also turn up and start supplying funds to these people. This will lead to a
better India and will definitely fulfill the dream of our late Prime Minister, Mrs. Indira
Gandhi, i.e. Poverty.

One of the statement is really appropriate here, which is as:

“Money, says the proverb makes money. When you have got a little, it is often easy to get
more. The great difficulty is to get that little.”Adams Smith.

Today India is facing major problem in reducing poverty. About 25 million people in India are
under below poverty line. With low per capita income, heavy population pressure, prevalence of
massive unemployment and underemployment , low rate of capital formation , misdistribution of
wealth and assets , prevalence of low technology and poor economics organization and
instability of output of agriculture production and related sectors have made India one of the
poor countries of the world.

Present Scenario of India:

India falls under low income class according to World Bank. It is second populated country in
the world and around 70 % of its population lives in rural area. 60% of people depend on
agriculture, as a result there is chronic underemployment and per capita income is only $ 3262.
This is not enough to provide food to more than one individual . The obvious result is abject
poverty , low rate of education, low sex ratio, exploitation. The major factor account for high
incidence of rural poverty is the low asset base. According to Reserve Bank of India, about 51 %
of people house possess only 10% of the total asset of India .This has resulted low production
capacity both in agriculture (which contribute around 22-25% of GDP ) and Manufacturing
sector. Rural people have very low access to institutionalized credit( from commercial bank).

Poverty alleviation programmes and concepualisation of Small Marketing:

There has been continuous efforts of planners of India in addressing the poverty . They Have
come up with development programmes like Integrated Rural Development progamme (IRDP),
National Rural Employment Programme (NREP) , Rural Labour Employment Guarantee
Programme (RLEGP) etc. But these progamme have not been able to create massive impact in
poverty alleviation. The production oriented approach of planning without altering the mode of
production could not but result of the gains of development by owners of instrument of
production. The mode of production does remain same as the owner of the instrument have low
access to credit which is the major factor of production. Thus in Nineties National bank for
agriculture and rural development(NABARD) launches pilot projects of Small Marketing to
bridge the gap between demand and supply of funds in the lower rungs of rural economy. Small
Marketing . the buzzing word of this decade was meant to cure the illness of rural economy. With
this concept of Self Reliance, Self Sufficiency and Self Help gained momentum. The Indian
small Marketing is dominated by Self Help Groups (SHGs) and their linkage to Banks.
Deprived of the basic banking facilities, the rural and semi urban Indian masses are still relying
on informal financing intermediaries like money lenders, family members, friends etc.

2.5 Small Marketing Social Aspects

Micro financing institutions significantly contributed to gender equality and women’s

empowerment as well as poor development and civil society strengthening. Contribution to
women’s ability to earn an income led to their economic empowerment, increased well being of
women and their families and wider social and political empowerment.

Small Marketing programs targeting women became a major plank of poverty alleviation and
gender strategies in the 1990s. Increasing evidence of the centrality of gender equality to poverty
reduction and women’s higher credit repayment rates led to a general consensus on the
desirability of targeting women.

Chapter 3: Self Help Groups (SHGs)

Self- help groups (SHGs) play today a major role in poverty alleviation in rural India. A growing
number of poor people (mostly women) in various parts of India are members of SHGs and
actively engage in savings and credit (S/C), as well as in other activities (income generation,
natural resources management, literacy, child care and nutrition, etc.). The S/C focus in the
UTKARSHis the most prominent element and offers a chance to create some control over
capital, albeit in very small amounts. The UTKARSHsystem has proven to be very relevant and
effective in offering women the possibility to break gradually away from exploitation and
isolation.

3.1 How self-help groups work

NABARD (1997) defines SHGs as "small, economically homogenous affinity groups of rural
poor, voluntarily formed to save and mutually contribute to a common fund to be lent to its
members as per the group members' decision".

Most SHGs in India have 10 to 25 members, who can be either only men, or only women, or
only youth, or a mix of these. As women's SHGs or sangha have been promoted by a wide range
of government and non- governmental agencies, they now make up 90% of all SHGs.
The rules and regulations of SHGs vary according to the preferences of the members and those
facilitating their formation. A common characteristic of the groups is that they meet regularly
(typically once per week or once per fortnight) to collect the savings from members, decide to
which member to give a loan, discuss joint activities (such as training, running of a communal
business, etc.), and to mitigate any conflicts that might arise. Most SHGs have an elected
chairperson, a deputy, a treasurer, and sometimes other office holders.

Most SHGs start without any external Marketingcapital by saving regular contributions by the
members. These contributions can be very small (e.g. 10 Rs per week). After a period of
consistent savings (e.g. 6 months to one year) the SHGs start to give loans from savings in the
form of small internal loans for micro enterprise activities and consumption. Only those SHGs
that have utilized their own funds well are assisted with external funds through linkages with
banks and other Marketingintermediaries.

However, it is generally accepted that SHGs often do not include the poorest of the poor, for
reasons such as:

(a) Social factors (the poorest are often those who are socially marginalized because of caste
affiliation and those who are most skeptical of the potential benefits of collective action).

(b) Economic factors (the poorest often do not have the Marketingresources to contribute to the
savings and pay membership fees; they are often the ones who migrate during the lean season,
thus making group membership difficult).

(c) Intrinsic biases of the implementing organizations (as the poorest of the poor are the most
difficult to reach and motivate, implementing agencies tend to leave them out, preferring to focus
on the next wealth category).

3.2 Sources of capital and links between SHGs and Banks

SHGs can only fulfill a role in the rural economy if group members have access to
Marketingcapital and markets for their products and services. While the groups initially generate
their own savings through thrift (whereby thrift implies savings created by postponing almost
necessary consumption, while savings imply the existence of surplus wealth), their aim is often
to link up with Marketinginstitutions in order to obtain further loans for investments in rural
enterprises. NGOs and banks are giving loans to SHGs either as "matching loans" (whereas the
loan amount is proportionate to the group's savings) or as fixed amounts, depending on the
group's record of repayment, recommendations by group facilitators, collaterals provided, etc.

3.3 How SHGs save

Self-help groups mobilize savings from their members, and may then on-lend these funds to one
another, usually at apparently high rates of interest which reflect the members’ understanding of
the high returns they can earn on the small sums invested in their micro-enterprises, and the even
higher cost of funds from money lenders. If they do not wish to use the money, they may deposit
it in a bank. If the members’ need for funds exceeds the group’s accumulated savings, they may
borrow from a bank or other organization, such as a micro-Marketing non-government
organization, to augment their own fund.

The system is very flexible. The group aggregates the small individual saving and borrowing
requirements of its members, and the bank needs only to maintain one account for the group as a
single entity. The banker must assess the competence and integrity of the group as a micro-bank,
but once he has done this he need not concern himself with the individual loans made by the
group to its members, or the uses to which these loans are put. He can treat the group as a single
customer, whose total business and transactions are probably similar in amount to the average for
his normal customers, because they represent the combined banking business of some twenty
‘micro-customers’. Any bank branch can have a small or a large number of such accounts,
without having to change its methods of operation.

Unlike many customers, demand from SHGs is not price-sensitive. Illiterate village women are
sometimes better bankers than some with more professional qualifications. They know that rapid
access to funds is more important than their cost, and they also know, even though they might
not be able to calculate the figures, that the typical micro-enterprise earns well over 500% return
on the small sum invested in it (Harper, M, 1997, p. 15). The groups thus charge themselves high
rates of interest; they are happy to take advantage of the generous spread that the NABARD
subsidized bank lending rate of 12% allows them, but they are also willing to borrow from
NGO/MFIs which on-lend funds from SIDBI at 15%, or from ‘new generation’ institutions such
as Basix Marketing at 18.5% or 21%.
3.4 SHGs-Bank Linkage Model

NABARD is presently operating three models of linkage of banks with SHGs and NGOs:

Model – 1: In this model, the bank itself acts as a Self Help Group Promoting Institution (SHPI).
It takes initiatives in forming the groups, nurtures them over a period of time and then provides
credit to them after satisfying itself about their maturity to absorb credit. About 16% of SHGs
and 13% of loan amounts are using this model (as of March 2002).

Model – 2: In this model, groups are formed by NGOs (in most of the cases) or by government
agencies. The groups are nurtured and trained by these agencies. The bank then provides credit
directly to the SHGs, after observing their operations and maturity to absorb credit. While the
bank provides loans to the groups directly, the facilitating agencies continue their interactions
with the SHGs. Most linkage experiences begin with this model with NGOs playing a major role.
This model has also been popular and more acceptable to banks, as some of the difficult
functions of social dynamics are externalized. About 75% of SHGs and 78% of loan amounts are
using this model.

Model – 3: Due to various reasons, banks in some areas are not in a position to even Marketing
SHGs promoted and nurtured by other agencies. In such cases, the NGOs act as both facilitators
and micro- Marketing intermediaries. First, they promote the groups, nurture and train them and
then approach banks for bulk loans for on-lending to the SHGs. About 9% of SHGs and 13% of
loan amounts are using this model.

Comparative Analysis of Micro-Marketing Services offered to the poor

Source: R. Arunachalam - Alternative Technologies in the Indian Micro- Marketing Industry

3.5 Life insurances for self-help group members

The United India Insurance Company has designed two PLLIs (personal line life insurances) for
women in rural areas. The company will be targeting self-help groups, of which there are around
200,000 in the country, with 15-20 women in a group. The two policies are

(1) the Mother Teresa Women & Children Policy, with the aim of giving to the woman in the
event of accidental death of her husband and to support her minor children in the event of her
death, and

(2) The Unimicro Health Scheme, giving personal accident and hospitalization covers besides
cover for damage to dwelling due to fire and allied perils.

Chapter 4: Micro Marketing Models

 1. Micro Marketing Institutions (MFIs):

MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and
cooperatives. They are provided Marketingsupport from external donors and apex institutions
including the Rashtriya Mahila Kosh (RMK), SIDBI Foundation for micro-credit and NABARD
and employ a variety of ways for credit delivery.

Since 2000, commercial banks including Regional Rural Banks have been providing funds to
MFIs for on lending to poor clients. Though initially, only a handful of NGOs were “into”
Marketingintermediation using a variety of delivery methods, their numbers have increased
considerably today. While there is no published data on private MFIs operating in the country,
the number of MFIs is estimated to be around 800.

Legal Forms of MFIs in India

Types of MFIs Estimated Legal Acts under which Registered

Number*
1. Not for Profit MFIs 400 to 500 Societies Registration Act, 1860 or
similar Provincial Acts
a.) NGO - MFIs
Indian Trust Act, 1882
b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956
2. Mutual Benefit MFIs 200 to 250 Mutually Aided Cooperative Societies
a.) Mutually Aided Cooperative Act enacted by State Government
Societies (MACS) and similarly
set up institutions
3. For Profit MFIs 6 Indian Companies Act, 1956

a.) Non-Banking Reserve Bank of India Act, 1934

MarketingCompanies (NBFCs)
Total 700 - 800

Source: NABARD website

2. Bank Partnership Model

This model is an innovative way of financing MFIs. The bank is the lender and the MFI acts as
an agent for handling items of work relating to credit monitoring, supervision and recovery. In
other words, the MFI acts as an agent and takes care of all relationships with the client, from first
contact to final repayment. The model has the potential to significantly increase the amount of
funding that MFIs can leverage on a relatively small equity base.

A sub - variation of this model is where the MFI, as an NBFC, holds the individual loans on its
books for a while before securitizing them and selling them to the bank. Such refinancing
through securitization enables the MFI enlarged funding access. If the MFI fulfils the “true sale”
criteria, the exposure of the bank is treated as being to the individual borrower and the prudential
exposure norms do not then inhibit such funding of MFIs by commercial banks through the
securitization structure.
3. Banking Correspondents

The proposal of “banking correspondents” could take this model a step further extending it to
savings. It would allow MFIs to collect savings deposits from the poor on behalf of the bank. It
would use the ability of the MFI to get close to poor clients while relying on the
Marketingstrength of the bank to safeguard the deposits. This regulation evolved at a time when
there were genuine fears that fly-by-night agents purporting to act on behalf of banks in which
the people have confidence could mobilize savings of gullible public and then vanish with them.
It remains to be seen whether the mechanics of such relationships can be worked out in a way
that minimizes the risk of misuse.
4. Service Company Model

Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works hand in
hand with that MFI to extend loans and other services. On paper, the model is similar to the
partnership model: the MFI originates the loans and the bank books them. But in fact, this model
has two very different and interesting operational features:

(a) The MFI uses the branch network of the bank as its outlets to reach clients. This allows the
client to be reached at lower cost than in the case of a stand–alone MFI. In case of banks which
have large branch networks, it also allows rapid scale up. In the partnership model, MFIs may
contract with many banks in an arms length relationship. In the service company model, the MFI
works specifically for the bank and develops an intensive operational cooperation between them
to their mutual advantage.

(b) The Partnership model uses both the Marketingand infrastructure strength of the bank to
create lower cost and faster growth. The Service Company Model has the potential to take the
burden of overseeing small Marketing operations off the management of the bank and put it in
the hands of MFI managers who are focused on small Marketing to introduce additional
products, such as individual loans for UTKARSHgraduates, remittances and so on without
disrupting bank operations and provide a more advantageous cost structure for small Marketing.
 RESEARCH METHODOLOGY
The study will be conducted with reference to the data related to ICICI Bank. These banks have
been studied with the belief that they hold the largest market share of banking business in India,
in their respective sectors.
This study covers a periods of years from 2017-2018.

Tools for data collection

The study is purely based on secondary data. The data required for the study will be collected
from annual reports of respective banks, journals and reports on trends, newspapers, magazines,
and progress of Banking of India, government publications, books and website.

Tools for data analysis

Different scales will be used for data analysis. Various Marketingratios, bar charts are used to
know Marketingperformance and business model of ICICI Bank.

Importance and Significance of the study

The Indian banking industry is passing through a phase of customers market. The customers have
more choices in choosing their bank .The competition has been established within the bank
operating in India. With stiff competition and advance technology, the service provided by the
bank have become more easy and convenient This Study will gave a base to the further research
in this field.
 RESEARCH HYPOTHESIS

Ho:1 There is no significant difference between the bank size of ICICI Bank and others small
Marketing banks.
Ho:2 There is no significant difference between the ICICI Bank and others small Marketing
banks in terms of profitability.
Ho:3 There is no significant difference between the ICICI Bank and others small Marketing
banks in terms of liquidity.
Ho:4 There is no significant difference between the net non performing assets of ICICI Bank and
others small Marketing banks.
Chapter 5
Role, Functions and Working Mechanism of MarketingInstitutions

5.1 ICICI Bank

“ICICI Bank is one bank that has developed a very clear strategy to expand the provision of
Marketingproducts and services to the poor in India as a profitable activity”

- Haruhiko Kuroda, President, Asian Development Bank.

ICICI’s small Marketing portfolio has been increasing at an impressive speed. From 10,000
small Marketing clients in 2001, ICICI Bank is now (2007) lending to 1.8 million clients through
its partner small Marketing institutions, and its outstanding portfolio has increased from Rs. 0.20
billion (US$4.5 million) to Rs. 9.98 billion (US$227 million). A few years ago, these clients had
never been served by a formal lending institution.

There is an increasing shift in the small Marketing sector from grant-giving to investment in the
form of debt or equity, and ICICI believes grant money should be limited to the creation of
facilitative infrastructure. “We need to stop sending government and funding agencies the signal
that small Marketing is not a commercially viable system”, says Nachiket Mor, Executive
Director of ICICI Bank.

As a result of banks entering the game, the sector has changed rapidly. “There is no dearth of
funds today, as banks are looking into MFIs favorably, unlike a few years ago”, says Padmaja
Reddy, the CEO of one of ICICI Bank’s major MFI partners, Spandana.

Bank Led Model

The bank led model was derived from the SHG-Bank linkage program of NABARD. Through
this program, banks Marketingd Self Help Groups (SHGs) which had been promoted by NGOs and
government agencies.
ICICI Bank drew up aggressive plans to penetrate rural areas through its UTKARSHprogram.
However, rather than spending time in developing rural infrastructure of its own, in 2000, ICICI
Bank announced merger of Bank of Madura (BoM), which had significant presence in the rural
areas of South India, especially Tamil Nadu, with a customer base of 1.9 million and 87
branches.

Bank of Madura's UTKARSHdevelopment program was initiated in 1995. Through this

program, it had formed, trained and initiated small groups of women to undertake
Marketingactivities like banking, saving and lending. By 2000, it had created around 1200 SHGs
across Tamil Nadu and provided credit to them.

Partnership Models
A model of small Marketing has emerged in recent years in which a small Marketing institution
(MFI) borrows from banks and on-lends to clients; few MFIs have been able to grow beyond a
certain point. Under this model, MFIs are unable to provide risk capital in large quantities, which
limits the advances from banks. In addition, the risk is being entirely borne by the MFI, which
limits its risk-taking.

This model aimed at synergizing the comparative advantages and Marketingstrength of the bank
with social intermediation, mobilization power and infrastructure of MFIs and NGOs. Through
this model, ICICI Bank could save on the initial costs of developing rural infrastructure and
micro credit distribution channels and could take advantage of the expertise of these institutions
in rural areas. Initially, ICICI Bank started off by lending to MFIs and NGOs in order to provide
the necessary Marketingsupport to their activities. Later, ICICI Bank came up with a plan where
the NGO/MFI continued to promote their small Marketing schemes, while the bank met the
Marketingrequirements of the borrowers.

Other Small Marketing Initiatives

As a part of small Marketing initiatives in the agriculture sector, ICICI Bank developed Farmer
Service Centers (FSC). An FSC was managed by an agricultural input supply company which
supplied inputs like seeds and technical knowhow to the farmers.

FSCs were also managed by an extension service organization which provided inputs, credit and
technology or by an NGO that provided all the services that farmers needed for their agricultural
needs. Working in close association with farmers, FSCs provided them with services like advice
on seeds, sowing techniques, pest control, weed control, usage and dosage of herbicides,
pesticides and fertilizers and other services associated with agriculture. The FSCs also provided
crop-related information and services to farmers, apart from facilitating the sale of agricultural
produce. The FSCs arranged to procure the produce through agents and sold it in organized
agricultural markets thus getting better realization.

The Future
These agents contact several borrowers, thus expanding the reach of ICICI Bank at a low cost.
Taking the FSC initiative further, ICICI Bank plans to provide farmers credit from sugar
companies, seed companies, dairy companies, NGOs, micro-credit institutions and food
processing industries.
SIG has been involved in a project in the southern state of Tamil Nadu to find out how wireless
technology can be applied in the development of low cost models of banking. Another plan to
increase the reach in rural areas is to launch mobile ATM services. ICICI Bank branded trucks
have started carrying ATMs through a number of villages

Some Articles of News Paper:

1. ICICI Bank to offer micro-Marketing to sex-workers

Mumbai, March 14: In a novel way to help sex-workers to live more meaningfully, country's
largest private sector bank, ICICI Bank is planning to offer Marketingassistance to them though
the micro-Marketing route.

For starters, the bank plans to launch the programme in Kolkata by entering into a tie-up with
Durbar Mahila Samwanaya Samitee, an NGO working for the welfare of around 65,000 sex-
workers in and around the city.

Source: (Press Trust of India) Posted online: Wednesday, March 14, 2007 at 20:54 hours IST
2. ICICI Bank launches new initiative in micro-Marketing
ICICI Bank has taken a stake of under 20 per cent in MarketingInformation Network and
Operations Private Ltd (FINO), which was launched on Thursday, July 13, 2001.

FINO would provide technological solutions as well as services to Marketing providers to reach
the underserved in the country. ICICI Bank is the lead facilitator.

According to Mr Nachiket Mor, Deputy Managing Director, ICICI Bank, FINO is an

independent entity. "We would reduce our stake in the company when required," he said.

ICICI Bank expects to target 200 micro-Marketing institutions (MFIs) by March 2007, he said,
speaking on the sidelines of the press conference to launch FINO. At present, the bank has tie-
ups with 100 MFIs.

FINO is an initiative in the micro-Marketing sector. It would target 300-400 million people who
do not have access to basic Marketingservices, said Mr Manish Khera, CEO, FINO. The
company has an authorised capital of Rs 50 crore. MFIs, NBFCs, RRBs, co-operative banks, etc
would directly or indirectly tie up with FINO to use its services, he said. FINO would charge Rs
25-30 per account every year.

Core banking products

FINO has partnered with IBM and i-flex to offer core banking products. It would also provide
credit bureau services, which includes individual customer credit rating and analytics based on
transaction history. It also launched biometric cards for customers, which would be a proof of
identity and give collateral to them. The card would also offer multiple products including
savings, loans, insurance, recurring deposits, fixed deposits and remittances. The company would
also build-up customer database, thus bringing them into mainstream banking.

"There was a need for automated structured data system like FINO," said Mr Mor. "Essential
pieces of infrastructure are missing in India. We lack credit-tracking mechanism; therefore there
was a need for an intervention like FINO."

The company expects to reach 25 million customers in five years and two million customers by
the end of 2007.
FINO aims bringing scale to "micro" business leading to lowering of costs for the local
Marketinginstitutions (LFIs) and act as an internal technology department for the LFIs, said Mr
Khera.

The company is working on providing technological solutions in insurance, especially the health
insurance sector to the under-privileged," he said. It is interacting with Nabard, SIDBI and other
banks to give shape to what FINO does, said Mr Khera.

3. ICICI Bank's thrust on micro-Marketing

CHENNAI, MARCH 9. ICICI Bank has entered into partnerships with various small Marketing
institutions (MFI) and non-Government organisations (NGOs) to scale up its micro lending
business. Addressing presspersons here, today, Nachiket Mor, Executive Director, ICICI Bank,
said, the partnership model would provide assured source of funding to NGOs and MFIs. The
bank had extended advances to the tune of Rs. 150 crores as on February 29, this year, under this
scheme, Mr. Mor said.

The bank had acquired a network of self-help groups (SHGs) developed by the erstwhile Bank of
Madura after its merger with ICICI Bank. Since then the UTKARSHprogramme had grown
substantially and 10,175 groups had been promoted reaching out to 2.03 lakh women spread
across 2,398 villages, the Executive Director said.

One of the micro Marketing institutions, `Microcredit Foundation of India', established by K. M.

Thiagarajan, former Chairman of Bank of Madura in 2002, had initiated a programme for
microcredit through self-help groups.

ICICI Bank has entered into a memorandum of understanding with Microcredit Foundation to
outsource UTKARSHdevelopment, maintenance of groups, credit linkage and recovery of loans.

The MFI as Collection Agent

To address these constraints, ICICI Bank initiated a partnership model in 2002 in which the MFI
acts as a collection agent instead of a Marketingintermediary. This model is unique in that it
combines debt as mezzanine Marketing to the MFI (Mezzanine Marketing combines debt and
equity financing: it is debt that can be converted by the lender into equity in the event of a
default.
This source of financing is advantageous for MFIs because it is treated like equity in the balance-
sheet and enables it to raise money without additional equity, which is an expensive financing
source.).The loans are contracted directly between the bank and the borrower, so that the risk for
the MFI is separated from the risk inherent in the portfolio. This model is therefore likely to have
very high leveraging capacity, as the MFI has an assured source of funds for expanding and
deepening credit. ICICI chose this model because it expands the retail operations of the bank by
leveraging comparative advantages of MFIs, while avoiding costs associated with entering the
market directly.

Securitization
Another way to enter into partnership with MFIs is to securitize small Marketing portfolios. In
2004, the largest ever securitization deal in small Marketing was signed between ICICI Bank and
SHARE Small Marketing Ltd, a large MFI operating in rural areas of the state of Andra Pradesh.
Technical assistance and the collateral deposit of US$325,000 (93% of the guarantee required by
ICICI) were supplied by Grameen Foundation USA. Under this agreement, ICICI purchased a
part of SHARE’s small Marketing portfolio against a consideration calculated by computing the
Net Present Value of receivables amounting to Rs. 215 million (US$4.9 million) at an agreed
discount rate. The interest paid by SHARE is almost 4% less than the rate paid in commercial
loans. Partial credit provision was provided by SHARE in the form of a guarantee amounting to
8% of the receivables under the portfolio, by way of a lien on fixed deposit. This deal frees up
equity capital, allowing SHARE to scale up its lending. On the other hand, it allows ICICI Bank
to reach new markets. And by trading this high quality asset in capital markets, the bank can
hedge its own risks.

Beyond Microcredit
Small Marketing does not only mean microcredit, and ICICI does not limit itself to lending.
ICICI’s Social Initiative Group, along with the World Bank and ICICI Lombard, the insurance
company set up by ICICI and Canada Lombard, have developed India’s first index-based
insurance product. This insurance policy compensates the insured against the likelihood of
diminished agricultural output/yield resulting from a shortfall in the anticipated normal rainfall
within the district, subject to a maximum of the sum insured. The insurance policy is linked to a
rainfall index.

Technology
One of the main challenges to the growth of the small Marketing sector is accessibility. The
Indian context, in which 70% of the population lives in rural areas, requires new, inventive
channels of delivery. The use of technologies such as kiosks and smart cards will considerably
reduce transaction costs while improving access. The ICICI Bank technology team is developing
a series of innovative products that can help reduce transaction costs considerably. For example,
it is piloting the usage of smart cards with Sewa Bank in Ahmedabad. To maximize the benefits
of these innovations, the development of a high quality shared banking technology platform
which can be used by MFIs as well as by cooperatives banks and regional rural banks is needed.
ICICI is strongly encouraging such an effort to take place. Wipro and Infosys, I-Flex, 3iInfotech,
some of the best Indian information technology companies specialized in Marketingservices, and
others, are in the process of developing exactly such a platform. At a recent technology
workshop at the Institute for MarketingManagement Research in Chennai, the ICICI Bank
Alternate Channels Team presented the benefits of investing in a common technology platform
similar to those used in mainstream banking to some of the most promising MFIs.

The Centre for Small Marketing Research

ICICI Bank has created the Centre for Small Marketing Research (CMFR) at the Institute for
MarketingManagement Research (IFMR) in Chennai. Through research, research-based
advocacy, high level training and strategy building, it aims to systematically establish the links
between increased access to Marketingservices and the participation of poor people in the larger
economy. The CMFR Research Unit supports initiatives aimed at understanding and analyzing
the following issues: impact of access to Marketingservices; contract and product designs;
constraints to household productivity; combination of small Marketing and other development
interventions; evidence of credit constraints; costs and profitability of small Marketing
organizations; impact of MFI policies and strategies; people’s behavior and psychology with
respect to Marketingservices; economics of micro-enterprises; and the effect of regulations.

Finally, the CMFR recognizes that while MFIs aim to meet the credit needs of poor households,
there are other missing markets and constraints facing households, such as healthcare,
infrastructure, and gaps in knowledge. These have implications in terms of the scale and
profitability of client enterprises and efficiency of household budget allocation, which in turn
impacts household well-being. The CMFR Small Marketing Strategy Unit will address these
issues through a series of workshops which will bring together MFI practitioners and sectoral
experts (in energy, water, roads, health, etc). The latter will bring to the table knowledge of best
practices in their specific areas, and each consultation workshop will result in long-term
collaboration between with MFIs for implementing specific pilots.
5.2 ICICI Bank
(Ranked 2nd by Forbes Magazine in December 2007)
ICICI Bank is working towards the twin objective of poverty alleviation and women
empowerment. It started as a Capacity Building Institution (CBI) in November 2000 under the
leadership of Mr. Chandra Shekhar Ghosh. During such time, it was giving capacity building
support to local small Marketing institutions working in West Bengal.
ICICI Bank opened its first small Marketing branch at Bagnan in Howrah district of West Bengal
in July 2002. ICICI Bank started with 2 branches in the year 2002-03 only in the state of West
Bengal and today it has grown as strong as 412 branches across 6 states of the country! The
organization had recorded a growth rate of 500% in the year 2003-04 and 611% in the year 2004-
05. Till date, it has disbursed a total of Rs. 587 crores among almost 7 lakh poor women. Loan
outstanding stands at Rs. 221 crores. The repayment rate is recorded at 99.99%. ICICI Bank has
staff strength of more than 2130 employees.

As on July 2008

Column1 Column2
No. of states :8
No. of branches : 528
No. of members : 1,182,741
No. of staff : 3,191
Cumulative loan disbursed : Rs.1,249 crores
Loan outstanding : Rs. 417 crores

Operational Methodology
ICICI Bank follows a group formation, individual lending approach. A group of 10-25 members
are formed. The clients have to attend the group meetings for 2 successive weeks. 2 weeks hence,
they are entitled to receive loans. The loans are disbursed individually and directly to the
members.

Economic and Social Background of Clients

 Landless and asset less women
  Family of 5 members with monthly income less than Rs. 2,500 in rural and Rs.
3,500 in urban
 Those who do not own more than 50 decimal (1/2acre) of land or capital of its
equivalent value

Loan Size
The first loan is between Rs. 1,000 – Rs. 7,000 for the rural areas and between Rs. 1,000 – Rs.
10,000 for the urban areas. After the repayment, they are entitled to receive a subsequent loan
which is Rs 1,000 - 5,000 more than the previous loan.

Service Charge
ICICI Bank charges a service charge of 12.50% flat on loan amount. ICICI Bank initially
charged 17.50%. However from 1st July 2005, it has slashed down its lending rate to 15.00%.
Then it was further reduced to 12.50% in May 2006. The reason is obvious. As overall
productivity increased, operational costs decreased. ICICI Bank, being a non profit organization
wanted the benefit of low costs to ultimately trickle down to the poor.

Monitoring System
The various features of the monitoring system are:
 A 3 tier monitoring system – Region, Division and Head Office
 Easy reporting system with a prescribed checklist format
 Accountability at all levels post monitoring phase
 Cross- checking at all the levels
 The management team of ICICI Bank spends 90.00% of time at the field

Liability structure for Loans

When a member wants to join ICICI Bank, she at first has to get inducted into a group. After she
gets inducted into the group, the entire group proposes her name for a loan in the Resolution
Book. Two members of the group along with the member’s husband have to sign as guarantors in
her loan application form. If she fails to pay her weekly installment, the group inserts peer
pressure on her. The sole purpose of the above structure is simply to create peer pressure.

5.3 Grameen Bank

The Grameen Model which was pioneered by Prof Muhammed Yunus of Grameen Bank is
perhaps the most well known, admired and practised model in the world. The model involves the
following elements.

 Homogeneous affinity group of five

 Eight groups form a Centre
 Centre meets every week
 Regular savings by all members
 Loan proposals approved at Centre meeting
 Loan disbursed directly to individuals
 All loans repaid in 50 instalments

The Grameen model follows a fairly regimented routine. It is very cost intensive as it involves
building capacity of the groups and the customers passing a test before the lending could start.
The group members tend to be selected or at least strongly vetted by the bank. One of the reasons
for the high cost is that staff members can conduct only two meetings a day and thus are
occupied for only a few hours, usually early morning or late in the evening. They were used
additionally for accounting work, but that can now be done more cost effectively using
computers. The model is also rather meeting intensive which is fine as long as the members have
no alternative use for their time but can be a problem as members go up the income ladder.

The greatness of the Grameen model is in the simplicity of design of products and delivery. The
process of delivery is scalable and the model could be replicated widely. The focus on the
poorest, which is a value attribute of Grameen, has also made the model a favourite among the
donor community.
However, the Grameen model works only under certain assumptions. As all the loans are only for
enterprise promotion, it assumes that all the poor want to be self-employed. The repayment of
loans starts the week after the loan is disbursed – the inherent assumption being that the
borrowers can service their loan from the ex-ante income.

5.4 SKS Small Marketing

(CEO-Vikram Akula)
Many companies say they protect the interests of their customers. Very few actually sit in dirt
with them, using stones, flowers, sticks, and chalk powder to figure out if they will be able to
repay a $20 loan at $1 a month. With this approach, this company has created its own loyal gang
of over 2 million customers.
Its borrowers include agricultural laborers, mom-and-pop entrepreneurs, street vendors, home
based artisans, and small scale producers, each living on less than $2 a day. It works on a model
that would allow micro-Marketing institutions to scale up quickly so that they would never have
to turn poor person away.

Its model is based on 3 principles-

1. Adopt a profit-oriented approach in order to access commercial capital- Starting
with the pitch that there is a high entrepreneurial spirit amongst the poor to raise the
funds, SKS converted itself to for-profit status as soon as it got break even and got
philanthropist Ravi Reddy to be a founding investor. Then it secured money from parties
such as Unitus, a Seattle based NGO that helps promote micro-Marketing; SIDBI; and
technology entrepreneur Vinod Khosla. Later, it was able to attract multimillion dollar
lines of credit from Citibank, ABN Amro, and others.
2. Standardize products, training, and other processes in order to boost capacity- They
collect standard repayments in round numbers of 25 or 30 rupees. Internally, they have
factory style training models. They enroll about 500 loan officers every month. They
participate in theory classes on Saturdays and practice what they have learned in the field
during the week. They have shortened the training time for a loan officer to 2 months
though the average time taken by other industry players is 4-6 months.
 3. Use Technology to reduce costs and limit errors- It could not find the software that
suited its requirements, so it they built their own simple and user friendly applications
that a computer-illiterate loan officer with a 12 th grade education can easily understand.
The system is also internet enabled. Given that electricity is unreliable in many areas they
have installed car batteries or gas powered generators as back-ups in many areas.

Scaling up Customer Loyalty

Instead of asking illiterate villagers to describe their seasonal pattern of cash flows, they
encourage them to use colored chalk powder and flowers to map out the village on the
ground and tell where the poorest people lived, what kind of Marketingproducts they needed,
which areas were lorded over by which loan sharks, etc. They set people’s tiny weekly
repayments as low as $1 per week and health and whole life insurance premiums to be $10 a
year and 25 cents per week respectively. They also offer interest free emergency loans. The
salaries of loan officers are not tied to repayment rates and they journey on mopeds to
borrowers’ villages and schedule loan meetings as early as 7.00 A.M. Deep customer loyalty
ultimately results in a repayment rate of 99.5%.

Leveraging the SKS brand

Its payoff comes from high volumes. They are growing at 200% annually, adding 50
branches and 1,60,000 new customers a month. They are also using their deep distribution
channels for selling soap, clothes, consumer electronics and other packaged goods.

Chapter 6
Marketing of Small Marketing Products

1. Contract Farming and Credit Bundling

Banks and Marketinginstitutions have been partners in contract farming schemes, set up to
enhance credit. Basically, this is a doable model. Under such an arrangement, crop loans can be
extended under tie-up arrangements with corporate for production of high quality produce with
stable marketing arrangements provided – and only, provided – the price setting mechanism for
the farmer is appropriate and fair.

2. Agri Service Centre – Rabo India

Rabo India Marketing Pvt Ltd. has established agri-service centres in rural areas in cooperation
with a number of agri-input and farm services companies. The services provided are similar to
those in contract farming, but with additional flexibility and a wider range of products including
inventory Marketing. Besides providing storage facilities, each centre rents out farm machinery,
provides agricultural inputs and information to farmers, arranges credit, sells other services and
provides a forum for farmers to market their products.

3. Non Traditional Markets

Similarly, Mother Dairy Foods Processing, a wholly owned subsidiary of National Dairy
Development Board (NDDB) has established auction markets for horticulture producers in
Bangalore. The operations and maintenance of the market is done by NDDB. The project, with
an outlay of Rs.15 lakh, covers 200 horticultural farmers associations with 50,000 grower
members for wholesale marketing. Their produce is planned with production and supply
assurance and provides both growers and buyers a common platform to negotiate better rates.

4. Apni Mandi
Another innovation is that of The Punjab Mandi Board, which has experimented with a ‘farmers’
market’ to provide small farmers located in proximity to urban areas, direct access to consumers
by elimination of middlemen. This experiment known as "Apni Mandi" belongs to both farmers
and consumers, who mutually help each other. Under this arrangement a sum of Rs. 5.2 lakh is
spent for providing plastic crates to 1000 farmers. Each farmer gets 5 crates at a subsidized rate.
At the mandi site, the Board provides basic infrastructure facilities. At the farm level, extension
services of different agencies are pooled in. These include inputs subsidies, better quality seeds
and loans from Banks. Apni Mandi scheme provides self-employment to producers and has
eliminated social inhibitions among them regarding the retail sale of their produce.
 METHODOLOGY

The evaluation of any project or activity, including small Marketing, aims ideally at knowing not
only what happened to whom in the process of that activity, but also why it happened. The
scientist’s approach to assessing cause and effect is generally experimental: the application of a
particular stimulus to a particular substance in a controlled environment which eliminates
extraneous influences.

This experimental approach, because of the nature of the subject matter, finds limited application
in the social sciences. Although the experimental method is increasingly being used to deal with
problems such as choice under uncertainty, it is impossible to conduct experiments which
recreate the imaginary situation which would have prevailed if, say, the Grameen Bank had never
existed. Without the possibility to make and unmake projects, it is not possible to assess the
impact of such projects by experimental means.

Confronted with this basic difficulty, evaluators have resorted to a range of methods for impact
assessment, some of them specious and some less so:

1.before versus after comparisons demonstrating “progress” or the lack of it in the time trend of
specified indicators; this method is flawed by the impossibility to separate project and non-
project influences. A small Marketing project may claim to have achieved poverty reduction,
which may be actually the result of many other factors, price fluctuations, changes in
government policy, improved infrastructure, or simply better weather. To put it differently, a
project in which the target group’s income declines may still be a success if, without it, the
outcome would have been worse;

2. comparisons of plan versus realization; the validity of this method depends on how
meaningful the planned target is; setting the target in a meaningful way presupposes substantial
prior information about the extent and nature of poverty and what small Marketing can at best
do; most often, target setting is relatively arbitrary; a target such as “moving 10,000 people
across the poverty line this year” may be over- or under- fulfilled; this can be a reflection of the
project’s performance, but also of the significance of the target; in the absence of supplementary
analysis, this is difficult to tell;
3. beneficiary and staff appreciation: subjective judgments by individuals involved in or affected
by the project: target group individuals may have an axe to grind; similarly project staff want the
project to be seen as a success and their professional competence confirmed;

4. closest to the experimental methods of the natural sciences are quasi-experiments (Casley and
Lury,1982), i.e. operations which attempt to simulate the situation which would have prevailed if
there had been no project;

5. one of these is multiple regression analysis: the assessment of the changes in a specified
dependent variable (say poverty) produced by changes in a specified independent variable (say a
small Marketing project) holding other specified influences (say weather, input availability,
output prices, political conditions….) constant;

6. another quasi-experimental approach, less intensive in its data requirements and already
widely used is the control-group method. A population which benefitted from, say, microcredit is
compared to a population which did not. This method calls for a baseline survey as well as ex-
post assessments.

This control-group approach is used, for example, to assess the effects of specified fertilizer
treatments on a particular crop, or of specified drugs on a particular type of patient. Likewise it
can be used in small Marketing to show an “impact” — i.e. the difference in target variables
between borrowers and non-borrowers. It can further be used, subject to the same provisos, to
determine the impact of alternative lending techniques, for example a sequence of loans, or loans
given with training and marketing advice compared to a minimalist (i.e. loans only) approach.

The drawback of the control-group approach is that, unlike regression analysis, it cannot tell us
the quantitative impact of project - in relation to non-project influences; on the other hand, it is
free of biases associated with regression analysis in those cases where the standard assumptions
of the normal linear regression model (normally distributed disturbances, constant variance of
the error term, etc.) do not hold.
Success Factors of Micro-Marketing in India

Over the last ten years, successful experiences in providing Marketing to small entrepreneur and
producers demonstrate that poor people, when given access to responsive and timely
Marketingservices at market rates, repay their loans and use the proceeds to increase their
income and assets. This is not surprising since the only realistic alternative for them is to borrow
from informal market at an interest much higher than market rates. Community banks, NGOs
and grass root savings and credit groups around the world have shown that these microenterprise
loans can be profitable for borrowers and for the lenders, making small Marketing one of the
most effective poverty reducing strategies.

A. For NGOs

1. The field of development itself expands and shifts emphasis with the pull of ideas, and
NGOs perhaps more readily adopt new ideas, especially if the resources required are
small, entry and exit are easy, tasks are (perceived to be) simple and people’s acceptance
is high – all characteristics (real or presumed) of small Marketing.

2. Canvassing by various actors, including the National Bank for Agriculture and Rural
Development (NABARD), Small Industries Development Bank of India (SIDBI), Friends
of Women’s World Banking (FWWB), Rashtriya Mahila Kosh (RMK), Council for
Advancement of People’s Action and Rural Technologies (CAPART), Rashtriya Gramin
Vikas Nidhi (RGVN), various donor funded programmes especially by the International
Fund for Agricultural Development (IFAD), United Nations Development Programme
(UNDP), World Bank and Department for International Development, UK (DFID)], and
lately commercial banks, has greatly added to the idea pull. Induced by the worldwide
focus on small Marketing, donor NGOs too have been funding small Marketing projects.
One might call it the supply push.

3. All kinds of things from khadi spinning to Nadep compost to balwadis do not produce
such concrete results and sustained interest among beneficiaries as small Marketing. Most
NGO-led small Marketing is with poor women, for whom access to small loans to meet
 dire emergencies is a valued outcome. Thus, quick and high ‘customer satisfaction’ is the
USP that has attracted NGOs to this trade.

4. The idea appears simple to implement. The most common route followed by NGOs is
promotion of SHGs. It is implicitly assumed that no ‘technical skill’ is involved. Besides,
external resources are not needed as SHGs begin with their own savings. Those NGOs
that have access to revolving funds from donors do not have to worry about
Marketingperformance any way. The chickens will eventually come home to roost but in
the first flush, it seems all so easy.

5. For many NGOs the idea of ‘organising’ – forming a samuha – has inherent appeal.
Groups connote empowerment and organising women is a double bonus.

6. Finally, to many NGOs, small Marketing is a way to Marketingsustainability. Especially

for the medium-to-large NGOs that are able to access bulk funds for on-lending, for
example from SIDBI, the interest rate spread could be an attractive source of revenue
than an uncertain, highly competitive and increasingly difficult-to-raise donor funding.

B. For MarketingInstitutions and banks

Small Marketing has been attractive to the lending agencies because of demonstrated
sustainability and of low costs of operation. Institutions like SIDBI and NABARD are hard
nosed bankers and would not work with the idea if they did not see a long term engagement –
which only comes out of sustainability (that is economic attractiveness).

On the supply side, it is also true that it has all the trappings of a business enterprise, its output is
tangible and it is easily understood by the mainstream. This also seems to sound nice to the
government, which in the post liberalisation era is trying to explain the logic of every rupee
spent. That is the reason why small Marketing has attracted mainstream institutions like no other
developmental project.

Perhaps the most important factor that got banks involved is what one might call the policy push.
Given that most of our banks are in the public sector, public policy does have some influence on
what they will or will not do. In this case, policy was followed by diligent, if meandering,
promotional work by NABARD. The policy change about a decade ago by RBI to allow banks to
lend to SHGs was initially followed by a seven-page memo by NABARD to all bank chairmen,
and later by sensitisation and training programmes for bank staff across the country. Several
hundred such programmes were conducted by NGOs alone, each involving 15 to 20 bank staff,
all paid for by NABARD. The policy push was sweetened by the NABARD reMarketing scheme
that offers much more favourable terms (100% reMarketing, wider spread) than for other rural
lending by banks. NABARD also did some system setting work and banks lately have been
given targets. The canvassing, training, reMarketing and close follow up by NABARD has
resulted in widespread bank involvement.

Moreover, for banks the operating cost of small Marketing is perhaps much less than for pure
MFIs. The banks already have a vast network of branches. To the extent that an NGO has already
promoted SHGs and the UTKARSHportfolio is performing better than the rest of the rural (if not
the entire) portfolio, small Marketing via SHGs in the worst case would represent marginal
addition to cost and would often reduce marginal cost through better capacity utilisation. In the
process the bank also earns brownie points with policy makers and meets its priority sector
targets.

It does not take much analysis to figure out that the market for Marketingservices for the 50-60
million poor households of India, coupled with about the same number who are technically
above the poverty line but are severely under-served by the Marketingsector, is a very large one.
Moreover, as in any emerging market, though the perceived risks are higher, the spreads are
much greater. The traditional commercial markets of corporates, business, trade, and now even
housing and consumer Marketing are being sought by all the banks, leading to price competition
and wafer thin spreads.
Further, bank-groups are motivated by a number of cross-selling opportunities in the market, for
deposits, insurance, remittances and eventually mutual funds. Since the larger banks are offering
all these services now through their group companies, it becomes imperative for them to expand
their distribution channels as far and deep as possible, in the hope of capturing the entire
Marketingservices business of a household.

Finally, both agri-input and processing companies such as EID Parry, fast-moving consumer
goods (FMCG) companies such as Hindustan Levers, and consumer durable companies such as
Philips have realised the potential of this big market and are actively using SHGs as entry points.
Some amount of free-riding is taking place here by companies, for they are using channels which
were built at a significant cost to NGOs, funding agencies and/or the government.

On the whole, the economic attractiveness of small Marketing as a business is getting established
and this is a sure step towards mainstreaming. We know that mainstreaming is a mixed blessing,
and one tends to exchange scale at the cost of objectives. So it needs to be watched carefully.

A real life Examples :

Lakshmi, a 22-year-old school dropout, lived in a remote village of Tamil Nadu. Instead of
getting married and starting a family like any other village girl of her age in India, she wanted to
set up on her own business.

Lakshmi started an Internet kiosk in her village, offering services like e-mail, Internet chat and
tips on health and education. The kiosk was partially Marketingd by ICICI Bank and was set up
in association with n-Logue Communications. Latha, a 29-year-old married woman with three
children borrowed Rs.18,000 to set up a small provision store in Kothaipalli, a small village, in
the north of Andhra Pradesh. Within a year, she started earning Rs.3500 a month from the store.
With this money, she was able to provide her children a good education at a local private school.
She was a part of a self help group in Andhra Pradesh which received Marketingassistance from
ICICI Bank. These are real-life examples to illustrate how the micro-lending initiatives of ICICI
Bank affected the lives of poor women in India.
By becoming a part of self-help groups, several rural women were able to move out of poverty.
Apart from Marketingbenefits, the initiatives helped the women to develop self confidence,
improve their communication skills and raise their position in society.

By becoming a part of self-help groups, several rural women were able to move out of poverty.
Apart from Marketingbenefits, the initiatives helped the women to develop self confidence,
improve their communication skills and raise their position in society.
Issues in Small Marketing

1. Sustainability

The first challenge relates to sustainability. MFI model is comparatively costlier in terms of
delivery of Marketingservices. An analysis of 36 leading MFIs by Jindal & Sharma shows
that 89% MFIs sample were subsidy dependent and only 9 were able to cover more than 80%
of their costs. This is partly explained by the fact that while the cost of supervision of credit
is high, the loan volumes and loan size is low. It has also been commented that MFIs pass on
the higher cost of credit to their clients who are ‘interest insensitive’ for small loans but may
not be so as loan sizes increase. It is, therefore, necessary for MFIs to develop strategies for
increasing the range and volume of their Marketingservices.

2. Lack of Capital

The second area of concern for MFIs, which are on the growth path, is that they face a
paucity of owned funds. This is a critical constraint in their being able to scale up. Many of
the MFIs are socially oriented institutions and do not have adequate access to
Marketingcapital. As a result they have high debt equity ratios. Presently, there is no reliable
mechanism in the country for meeting the equity requirements of MFIs.

The IPO issue by Mexico based ‘Compartamos’ was not accepted by purists as they thought
it defied the mission of an MFI. The IPO also brought forth the issue of valuation of an MFI.

The book value multiple is currently the dominant valuation methodology in small Marketing
investments. In the case of start up MFIs, using a book value multiple does not do justice to
the underlying value of the business. Typically, start ups are loss making and hence the book
value continually reduces over time until they hit break even point. A book value multiplier
to value start ups would decrease the value as the organization uses up capital to build its
business, thus accentuating the negative rather than the positive.

3. Marketingservice delivery
Another challenge faced by MFIs is the inability to access supply chain. This challenge can
be overcome by exploring synergies between small Marketing institutions with expertise in
credit delivery and community mobilization and businesses operating with production supply
chains such as agriculture. The latter players who bring with them an understanding of
similar client segments, ability to create microenterprise opportunities and willingness to
nurture them, would be keen on directing small Marketing to such opportunities. This enables
MFIs to increase their client base at no additional costs.

Those businesses that procure from rural India such as agriculture and dairy often identify
Marketing as a constraint to value creation. Such businesses may find complementarities
between an MFI’s skills in management of credit processes and their own strengths in supply
chain management.

ITC Limited, with its strong supply chain logistics, rural presence and an innovative
transaction platform, the e-choupal, has started exploring synergies with Marketingservice
providers including MFIs through pilots with vegetable vendors and farmers. Similarly, large
FIs such as Spandana foresee a larger role for themselves in the rural economy ably
supported by value creating partnerships with players such as Mahindra and Western Union
Money Transfer.

ITC has initiated a pilot project called ‘pushcarts scheme’ along with BASIX (a small
Marketing organization in Hyderabad). Under this pilot, it works with twenty women head
load vendors selling vegetables of around 10- 15 kgs per day. BASIX extends working
capital loans of Rs.10,000/- , capacity building and business development support to the
women. ITC provides support through supply chain innovations by:

1. Making the Choupal Fresh stores available to the vendors, this avoids the hassle of
bargaining and unreliability at the traditional mandis (local vegetable markets). The
women are able to replenish the stock from the stores as many times in the day as
required. This has positive implications for quality of the produce sold to the end
consumer.
2. Continuously experimenting to increase efficiency, augmenting incomes and reducing
energy usage across the value chain. For instance, it has forged a partnership with
 National Institute of Design (NID), a pioneer in the field of design education and
research, to design user-friendly pushcarts that can reduce the physical burden.
3. Taking lessons from the pharmaceutical and telecom sector to identify technologies that
can save energy and ensure temperature control in push carts in order to maintain quality
of the vegetables throughout the day. The model augments the incomes of the vendors
from around Rs.30-40 per day to an average of Rs.150 per day. From an environmental
point of view, push carts are much more energy efficient as opposed to fixed format retail
outlets.

4. HR Issues

Recruitment and retention is the major challenge faced by MFIs as they strive to reach more
clients and expand their geographical scope. Attracting the right talent proves difficult
because candidates must have, as a prerequisite, a mindset that fits with the organization’s
mission.

Many mainstream commercial banks are now entering small Marketing, who are poaching
staff from MFIs and MFIs are unable to retain them for other job opportunities.

85% of the poorest clients served by small Marketing are women. However, women make up
less than half of all small Marketing staff members, and fill even fewer of the senior
management roles. The challenge in most countries stems from cultural notions of women’s
roles, for example, while women are single there might be a greater willingness on the part of
women’s families to let them work as front line staff, but as soon as they marry and certainly
once they start having children, it becomes unacceptable. Long distances and long hours
away from the family are difficult for women to accommodate and for their families to
understand.

5. Microinsurance
First big issue in the microinsurance sector is developing products that really respond to the
needs of clients and in a way that is commercially viable.

Secondly, there is strong need to enhance delivery channels. These delivery channels have
been relatively weak so far. Microinsurance companies offer minimal products and do not
want to go forward and offer complex products that may respond better. Microinsurance
needs a delivery channel that has easy access to the low-income market, and preferably one
that has been engaged in Marketingtransactions so that they have controls for managing cash
and the ability to track different individuals.

Thirdly, there is a need for market education. People either have no information about

microinsurance or they have a negative attitude towards it. We have to counter that. We have
to somehow get people - without having to sit down at a table - to understand what insurance
is, and why it benefits them. That will help to demystify microinsurance so that when agents
come, people are willing to engage with them.

6. Adverse selection and moral hazard

The joint liability mechanism has been relied upon to overcome the twin issues of adverse
selection and moral hazard. The group lending models are contingent on the availability of
skilled resources for group promotion and entail a gestation period of six months to one year.
However, there is not sufficient understanding of the drivers of default and credit risk at the
level of the individual. This has constrained the development of individual models of micro
Marketing. The group model was an innovation to overcome the specific issue of the quality
of the portfolio, given the inability of the poor to offer collateral. However, from the
perspective of scaling up micro Marketingservices, it is important to proactively discover
models that will enable direct Marketing to individuals.
 Data Analysis

Q1) Which factor you consider while buying the product?

S.No. Topic Percentage (%)

1 Quality 20

2 Price 48

3 Brand Name 32

INTERPRETATION:
Respondents said 20% quality, 48% Price, 32% brand name factors consider while buying the
product.
Q2) Are you satisfied with the price of the product you are using?

S.No. Topic Percentage (%)

1 Yes 62

2 No 38

INTERPRETATION:
62% Respondents satisfied with the price of the product and 32% are not.
Q3) Which brand you prefer?

S.No. Topic Percentage (%)

1 Taj mahal tea 19

2 Tata tea 47

3 Lipton tea 10

4 Taza tea 15

5 Bhandan tea 9

INTERPRETATION:
47% respondents prefer Tata Tea, 19% respondents Taj Mahal, 19% Lipton, 15% Tazza and 9%
Bhandan tea.

Q4) How much importance you give to the price of the product while buying it?
S.No. Topic Percentage (%)

1 High 16

2 Average 65

3 Low 19

INTERPRETATION:

16% respondents give high, 65% respondents average, 19% respondents low give to the price of
the product while buying it.
Q5) Consumers in Lucknow are?

S.No. Topic Percentage (%)

1 Price Conscious 67

2 Brand Conscious 33

INTERPRETATION:
33% respondents are price conscious, 67% respondents are brand conscious.
Q6) Are you satisfied with our product?

S.No. Topic Percentage (%)

1 Yes 69

2 No 31

INTERPRETATION:
69% customers are satisfied with the company’s products and 31% are not.
Q7) What image do you want the price to convey?

S.No. Topic Percentage (%)

1 Quality 47

2 Quantity 53

INTERPRETATION:
53% respondents said quantity and 47% said quality.
Q8) Does the price charge for the product is as per the quality?

S.No. Topic Percentage (%)

1 Yes 73

2 No 27

INTERPRETATION:
73% respondents agreed that the product price is according to its quality while 27% disagreed.
Q9) Are you satisfied with our Company?

S.No. Topic Percentage (%)

1 Yes 39

2 No 61

INTERPRETATION:
61% respondents are satisfied with the company and 39% respondents are dissatisfied with the
company.
Q10) Are you satisfied with the products of ICICI Bank which includes?

S.No. Topic Percentage (%)

1 ICICI Bank Tea 74

2 Detergent Powder 15

3 Kacchi Dhani Oil 11

INTERPRETATION:
74% respondents preferred ICICI Bank tea, 15% Detergent powder, 11% Kacchi Dhani Oil.
 FINDINGS

 Most of the consumers prefer ‘price’ while buying the products.

 ICICI Bank- Tea, penetrating the market with 5%.

 The percentage of brand conscious consumer is greater than the price conscious
consumer.

 Most of the customers are satisfied with the products of the company.

 Consumers prefer quantity while purchasing the products in comparison to quality.

 Most of Customers are satisfied with the price charged by the company of its products.

 ICICI Bank tea is most popular among the other products of company.
 SUGGESTIONS

 Company should adopt innovative promotional strategy to beat the competition.

 Company should provide value added.

 To increase market Demand Company should attach Lucky Draw Coupon with its
products.

 Company should focus on its packaging.

 Company should decrease its product price.

 Company should target the middle class customers.

 CONCLUSION

 The customer focuses most on the price of the product in its buying decision.

 The company should reduce the price of its products to penetrate more in the market.

 The market share of the company’s tea product that is ICICI Bank is 4%, so the
company’s should focus more on marketing of its product.

 Though most of the users of the company’s product are satisfied. But the company should
focus more on improving a quality of the product.

 Most of the respondents are dissatisfied with the company so the company should focus
on doing marketing research for the above matter.

 So the company should focus on improving the marketing of detergent powder and
Kacchi Dhani oil.
 BIBLIOGRAPHY

 MarketingManagement by R.P. Rastogi

 MarketingManagement by M.Y. Khan & P.K. Jain

 Class notes

 Internet –

 www.ICICI Bank.com
 www.wikipediya.com
 www.scribd.com
 Slide share
 QUESTIONNAIRE
Personal Details:
A. Name: ...................................................................................................
B. Date: .....................................................................................................
C. Email- : ................................................................................................
D. Contact No.: ........................................................................................
E. Address: ................................................................................................

Q1) Which factor you consider while buying the product?

a) Quality
b) Price
c) Brand name

Q2) Are you satisfied with the price of the product you are using?

a) YES
b) No

Q3) Which brand you prefer?

a) Tata tea
b) Taj mahal
c) Tipton
d) Tazza
e) Bhandan

Q4) How much important you give to the price of the product while buying it?

a) High
b) Average
c) Low

Q5) Consumers in Lucknow are?

a) Price conscious
b) Brand conscious

Q6) Are you satisfied with our product?

 a) Yes
b) No

Q7) What images do you want the price to convey?

a) Quality
b) Quantity

Q8) Does the price charge for the product is as per the quality?

a) Yes
b) No

Q9) Are you satisfied with our Company?

a) Yes
b) No

Q10) Are you satisfied with the products of ICICI Bank which includes?

a) ICICI Bank Tea

b) Detergent Powder
c) Detergent Cake
d) Kacchi Dhani Oil