Bom Helps Icici Bank To Bring Down Cost Of Funds

ICICI Bank has started reaping the benefits of its takeover of Bank of Madura through savings in payment of fees in cash management services to other banks and as well as reduction in the cost of funds. The bank has started receiving payments from its subsidiaries for the leads generated for the group.

According to H N Sinor, managing director, ICICI Bank, the bank had to pay Rs 6 to 8 crore for the using the network of other banks for the cash management services. Now with the expansion of its branch network it can save this money. The bank has been able to bring down the cost of funds by 100 basis point to 7.3 per cent now.

 

"The focus of the bank is now largely on retail deposits. What has also helped the bank is the downtrend in the rates," said Sinor. The retail component of deposits, which was at 30 per cent as on March 31, 2000, rose to 61 per cent by the end of March 2001. This has further gone up by more than 70 per cent.

The bank, however, has not yet trageted the retail asset side. "We cover the customer through a variety of services -- funding and non-funding activities. We look at what percentage of the shares of the customer's wallet the bank gets. For instance, in the payroll accounts, the bank targets insurance, housing loans and auto loans. However, it does not book these loans in its own books," Sinor said.

ICICI has different divisions in the group such as ICICI Home, ICICI PFS, etc which target these loan products.

Sinor added: "The bank gets fees for all the leads which it gets from its customers. In case we have to build up our book we can securitise the loan portfolio. It would not pay in duplicating the whole process which is already there within the group. No business opportunity can go out of the group." The new system of fees for the leads generated has started off from this financial year.

The bank has a retail customer base of around 4.2 million and is growing at 2.5 lakh customers per month. The payroll accounts of the bank have also touched the million mark.

The bank, at present, has 610 automated teller machines (ATMs). "In the next three months, ICICI Bank will target the second rung towns and cities where there are BoM branches to expand the ATM network. We will put up around three to five ATMs in these towns," Sinor said.