http://www.icmrindia.org/casestudies/catalogue/Finance/ICICI%20Bank%20%20Innovations%20in%20Microfinance.

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ICICI Bank - Innovations 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. 3 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.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 microlending 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 the people below poverty line. It provided basic banking services like savings and withdrawal along with micro-investment products like mutual funds. This provided poor people with safer avenues for saving with little volatility. ICICI Bank was also instrumental in designing new structures through which microfinance institutions (MFIs) and non-governmental organizations (NGOs) could overcome capital constraints and expand their reach

http://www.icmrindia.org/casestudies/catalogue/Finance/FINC038.htm The case describes the growth and collapse of Global Trust Bank, a leading private sector bank in India. Since 2001, GTB's name was associated with scams and controversies, thereby casting shadows over the credibility of the bank and its management. Due to the overexposure to capital markets and huge NPAs, the bank was in a financial mess. When GTB tried to cover up its monumental NPAs through under provisioning, RBI the Central bank and the regulatory authority for banks in India, appointed an independent team to review the finances of the bank. The review revealed various financial discrepancies kept covered by the bank. RBI imposed a three month moratorium on GTB on the ground of "wrong financial disclosures" and within two days the bank was merged with Oriental Bank of Commerce (OBC), a public sector bank. With the merger becoming effective, GTB's identity came to an end and it became a part of OBC. Issues Analyze the reasons that led to the fall of Global Trust Bank Discuss the importance of proper supervision and control systems in a bank to mitigate risks Understand how overexposure to capital markets can lead to huge NPAs for a bank Appreciate the need for financial institutions to uphold the ideals of transparency and absolute scrupulousness where public money was involved Examine the role of RBI as a regulating authority and debating on the justifiability of its actions in the GTB fiasco.

The collapse of GTB resulted from many mistakes committed by the bank's management. GTB's problems started in 2000 and the imposition of the moratorium finally ended its independent existence

R BI's probe into GTB's accounts revealed a significant erosion of the bank's net worth and
huge number of NPAs reflected its weak financials. Moreover, GTB's attempts to strengthen its capital base through investments from overseas failed due to regulatory problems, resulting in the total collapse of the bank. The major factors that led to the fall of GTB included: NEXUS WITH KETAN PAREKH In mid-2000, GTB disbursed loans of Rs 1.4 bn to Ketan Parekh (KP), a leading stockbroker at the Bombay Stock Exchange (BSE). He used the money to purchase GTB shares from the BSE and the National Stock Exchange (NSE).

The Merger
All these factors resulted in the imposition of moratorium by RBI on GTB. On July 26, 2004, RBI announced that GTB would be merged with the Oriental Bank of Commerce (OBC). As per the scheme, OBC took over all the assets and liabilities of GTB on its books. It acquired all 104 branches of GTB, 275 ATMs, a workforce of 1400 employees and one million customers at an estimated merger cost of Rs. 8 bn. OBC's total business volume was expected to reach Rs 65 bn and the total branch network to cross 1,100. All corporate accounts including salary accounts were transferred to OBC. The entire amount of paid-up equity capital of GTB was adjusted towards its liabilities. There was no share swap between GTB and OBC, which meant that GTB shareholders were the ultimate losers, as they did not get any shares of OBC. Moreover, OBC enjoyed a huge tax break by acquiring GTB's NPAs worth Rs 1.2 bn and impaired assets of Rs. 3 bn.

Financial Services Working to Reduce Poverty in Urban India

More than 350 million people reside in Indias urban communities and at least 30 percent live in poverty. Ujjivan Financial Services, an innovative microfinance institution, was founded with the mission to reach economically active poor women and provide financial and support services to enable them to create a better life for themselves and their children. Just 26 months after opening its first branch office in Koramangala, Bangalore in 2005, Ujjivan has grown into a network of 32 branches offering a variety of loan services as well as life insurance, health insurance, and health outreach and education programs. Distinguishable by its holistic approach to alleviating poverty and focus in urban areas, Ujjivan now serves 55,000 of Indias poorest women in Bangalore, Delhi, and Kolkata. Ujjivans holistic model offers a range of products that truly meet the financial and social needs of urban customers. Ujjivan was launched with seed funding from Bellwether Microfinance Fund, UNITUS and the Michael & Susan Dell Foundation. The foundation made its near $475,000 equity investment because Ujjivans goals are well aligned with its own, and the fast-growing Ujjivan has demonstrated itself to be a professional, well-organized institution that is committed to alleviating poverty with measurable impact by tracking social performance indicators of progress. Currently, Ujjivan offers various loan products for business, housing, emergency and other needs. Its system of lending fosters relationships with women and educates them on using financial services and credit.

1. Are you agreeing financial services helped to reduce poverty in urban India? 2. Why Ujjivan concentrated on women. 3. Explain the present position of the Ujjivan bank? and its financial services offering to

customers?