Change Management @ICICI

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The basic objectives of ICICI were to: assist in creation, expansion and modernization of enterprises encourage and promote the participation of private capital, both internal and external take up the ownership of industrial investment; and expand the investment markets. Since the mid 1980s, ICICI diversified rapidly into areas like merchant banking and retailing. In 1987, ICICI co-promoted India's first credit rating agency, Credit Rating and Information Services of India Limited (CRISIL), to rate debt obligations of Indian companies. In 1988, ICICI promoted India's first venture capital company - Technology Development and Information Company of India Limited (TDICI) - to provide venture capital for indigenous technology-oriented ventures. In the 1990s, ICICI diversified into different forms of asset financing such as leasing, asset credit and deferred credit, as well as financing for non-project activities.

In 1991, ICICI and the Unit Trust of India set up India's first screen-based securities market, the over-the-counter Exchange of India (OCTEI). In 1992 ICICI tied up with J P Morgan of the US to form an investment banking company, ICICI Securities Limited. In line with its vision of becoming a universal bank, ICICI restructured its business based on the recommendations of consultants McKinsey & Co in 1998. In the late 1990s, ICICI concentrated on building up its retail business through acquisitions and mergers. It took over ITC Classic, Anagram Finance and merged the Shipping Credit Investment Corporation of India (SCICI) with itself. ICICI also entered the insurance business with Prudential plc of UK.

ICICI was reported to be one of the few Indian companies known for its quick responsiveness to the changing circumstances. While its development bank counterpart IDBI was reportedly not doing very well in late 2001, ICICI had major plans of expanding on the anvil. This was expected to bring with it further challenges as well as potential change management issues. However, the organization did not seem to much perturbed by this, considering that it had successfully managed to handle the employee unrest following Kamath's appointment.

Change Challenges - Part I

ICICI was a part of the club of developmental finance institutions (DFIs - ICICI, IDBI and IFCI) who were the sole providers of long-term funds to the Indian industry. If the requirement was large, all three pooled in the money. However, the deregulation beginning in the early 1990s, allowed Indian corporates' to raise long-term funds abroad, putting an end to the DFI monopoly. The government also stopped giving DFIs subsidized funds. Eventually in 1997, the practice of consortium lending by DFIs was phased out.

It was amidst this newfound independent status that Kamath, who had been away from ICICI for eight years working abroad², returned to the helm. At this point of time, ICICI had limited expertise, with its key activity being the disbursement of eight-year loans to big clients like Reliance Industries and Telco through its nine zonal offices. In effect, the company had one basic product, and a customer orientation, which was largely regional in nature.

Kamath, having seen the changes occurring in the financial sector abroad, wanted ICICI to become a one-stop shop for financial services. He realized that in the deregulated environment ICICI was neither a low-cost player nor was it a differentiator in terms of customer service. The Indian commercial banks' cost of funds was much lower, and the foreign banks were much more savvy when it came to understanding customer needs and developing solutions. Kamath identified the main problem as the company's ignorance regarding the nuances of lending practices in newly opened sectors like infrastructure.

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2] Though Kamath had started his career with ICICI, he had left the bank to join Asian Development Bank (ADB) in Manila in 1988.

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