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ICICI Bank (NYSE:IBN) is eyeing rural India for increasing exposure in view of the huge demand for banking in the rural sector.

ICICI Bank has set up 8,000 “touch points” across the country for penetrating rural pockets and is developing low-priced ATMs. The bank has also disbursed Rs 2,500 crore towards rural sector financing. The Bank is expecting good rural credit to off take in the current year and has also rolled out "Ashan" ATMs for the urban and semi-urban markets in India.

This is certainly a very positive move from ICICI Bank. Until now, ICICI was more focused on the retail banking and home loans segments in urban areas. ICICI has been very successful in these areas; in the home loan segment, ICICI is the number one private sector bank and in retail, they have a good amount of market share too.

But India is a country of villages and more than 70% of the population still lives in rural areas. The demand for credit in the rural markets was Rs 1.5 lakh crore, while the supply was only Rs 4,000 crore. Until now, the rural banking segment was controlled by government owned SBI, but now things are changing. Rural India is developing very fast-- the growing economy is leading to increase in business activities, which in turn has people in villages wanting many more services from a bank than simply depositing their money.

It is here that ICICI Bank has an advantage over SBI. In terms of customer service, SBI is way behind ICICI. Better service could shift the loyal customers of SBI towards ICICI Bank, as in the end, we all want good service for the money we pay (source: The Hindu)

IBN 1-yr chart:

IBN 1-yr chart

Source: ICICI Bank to Focus on Rural Indian Banking Segment (IBN)