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Banking Theory and Practice

Notes Self Assessment

Fill in the blanks:
5. The Basel Capital Accord was developed to .......................................
6. The full form of CRAR is .......................................

7. NCAF stands for .......................................
8. Basel II is based on three mutually reinforcing ……………
9. The Basel Capital Accord is an ....................................... concluded among country
representatives in 1988 to develop standardized risk-based capital requirements for banks
across countries.

Case Study ICICI Bank – Innovations in Microfinance

“ICICI Bank is one bank that has developed a very clear strategy to expand the provision of financial
products and services to the poor in India as a profitable activity.”
– Haruhiko Kuroda, President, Asian Development Bank
The case describes microfinance initiatives of ICICI Bank, the largest private sector bank
in India. In spite of being a new entrant, ICICI Bank has been highly successful in the
microfinance sector, primarily because of its innovative microfinance business models.
The case discusses some of these models including Bank led & Partnership model. Other
microfinance ventures of ICICI Bank are also explained in detail. The case presents how
ICICI Bank has made microfinance a viable business proposition for banks.
Forays in Microfinance
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 financed by ICICI Bank and
was set up in association with n-Logue Communications. Latha, a 29-year-old married
woman with three children borrowed ` 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 ` 3,500 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 financial assistance 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 financial benefits, the initiatives helped the women to develop self
confidence, improve their communication skills and raise their position in society.

In India, 400 million people spread across more than six million villages are estimated to
be in need of micro-financing. The organized financial sector caters to the need of about 20
million people. ICICI Bank’s micro credit initiatives involved lending small amounts to
Contd...

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