ICICI Bank: Tapping The Rural Market

Abstract

In the year 2017, finance ministry of Haryana (one of the states in India) on the directives of RBI, instructed the banks to start additional rural offices in Haryana. Among the private banks ICICI bank was one of the banks who meet this target, even major nationalized banks like PNB, BoB, CBI, Corporation Bank, IDBI and OBC could not meet their target. A senior manager working with a national bank and handling the senior position expressed that starting a branch in rural area incurs an additional cost of INR 150 thousand every month which would require at least 8,000 accounts with them to meet this expense and to find such amount of business (accounts) in a small population of around 5,000 was a really a difficult job. However, ICICI bank, despite being a private bank, was able to meet its target. So, how was ICICI bank able to convert the rural market which was considered as an unprofitable segment into a business opportunity? What were the challenges in delivering and sustaining the banking services in rural areas? How could lending money to the low-income group segment be financially viable for banks? The primary focus of the case is on how ICICI bank converted the rural market into a business opportunity as well as on the decisions that the bank must now take to accomplish the target of financial inclusion.