SUSTAINABLE BANKING -AN INDIAN PERSPECTIVE
Abstract
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The contribution of financial institutions including banks to sustainable development is dominant, considering the crucial role they play in financing the economic and developmental activities of the world. In this context, the urgency for banks to act as responsible corporate citizens in the society, especially in a developing country like ours, need be hardly overemphasized. Their activities should reflect their concern for human rights and environment. Since banking sector is one of the major stake holders in the Industrial sector, it can find itself faced with credit risk and ...view middle of the document...
Universal banks usually cover all activities. However there is no law and rule in India that can hold banks responsible for scrutinizing investment projects before financing and for the environmental damage created by its client. There has not been much initiative in sustainable development by the banks and other financial institutions in India though they play an active role in India’s emerging economy.
2 Significance of the study
Regarding the development process, two primary aspects of sustainability emerge: economic and environmental sustainability. Economic sustainability refers to a continual supply of finance to meet a person/community’s needs, usually in the form of secure and accessible loans from financial institutions; and environmental sustainability is the aim to preserve environmental resources for use by future generations. Reserve Bank of India feels that, there is general lack of adequate awareness on the issue in India. In this context, the need for sustainable developmental efforts by financial institutions in India assumes urgency and banks, in particular, can help contribute to this effort by playing a meaningful role.
3. Objectives of the study
a) To identify the initiatives of Indian banks in sustainable banking.
b) To assess the responsibility of banks in the environmental sustainability.
c) To suggest possible policy measures and initiatives to promote green banking in India.
4. Methodology:
The study was mainly based on secondary data drawn from the reports of UNEP, UNESCO, International Institute for Sustainable Development, IEG (Institute of Economic Growth), RBI reports and scholarly articles. The data collected analyzed for drawing conclusions
5. STAGES OF PROCEEDINGS TAKEN BY BANKS TOWARDS SUSTAINABILITY
(a). STAGE 1
Defensive banking- The first stage is defensive banking. In this stage, a bank is non-active and may even try to delay or oppose new environmental legislation, because it may damage the interests of the bank directly or indirectly (through damage to the profitability of customers). Opportunities from cost savings through initiatives such as energy efficiency are not taken up. Environmental management is seen as an avoidable cost. Very few banks in the North can said to be at this stage today, but certainly some departments of banks or niche players particularly within investment banking—still show symptoms of this attitude.
(b) STAGE 2
Preventative banking: The second stage is preventative banking. This stage diverges from the previous stage, because potential environmental cost savings and eco-efficiencies are actively taken up. Preventative banking is in some ways inevitable because government and NGOs will directly or indirectly put constraints on the activities of banks, through legislation, social pressure or jurisprudence. Preventative banks will integrate the potential revenues, costs and risks into their day-to-day business. However, banks at this...
