State regulatory bodies, NGOs, media, customers have significantly addressed social responsibility issues in banking sector. International organization such as World Bank also exerts pressures on banks to analyze social and environmental risk involved in projects to be financed. In addition the reputation and resultant profitability of an organization are greatly effected by their CSR activities. Researchers have found a positive correlation between CSR and financial performance of the organization. Around the globe, a good commitment is being shown by the banking industry to CSR principles.
Banks are showing conscious efforts to reduce the regulatory actions by depicting a good environmental citizen image. Banking in India has originated in the last decades of the 18th century with the establishment of General Bank of India in 1786, and the Bank of Hindustan set up in 1870 (both banks are now defunct). At present, the commercial banking structure in India consists of Scheduled Commercial Banks & Unscheduled Banks. Banking in India has evolved in four distinct phases: Foundation phase, Expansion phase, consolidation phase and Reforms phase.
An integrated approach of combining CSR with the ultimate customer satisfaction is being adopted by Indian banking industry voluntarily. An attempt has been initiated to ensure social responsible behavior of banking sector in a more systematic manner. Public and private sector banks have common thrust areas which are children welfare, community welfare, education, environment, healthcare, poverty eradication, rural development, vocational training, women’s empowerment, protection to girl child, employment. The core areas for reporting CSR activities are slightly different in both public and private sector banks.
The major areas investigated for reporting CSR activities in public and private sector banks is shown by the Figure 1 and Figure 2 respectively below: X axis in the below charts represents the fields of CSR activities and Y axis represents the number of banks working in the particular fields out of the selected sample. Figure 1: Core thrust areas for reported CSR activities in public sector banks Source: 1-IJAEBM-Volume-No-1-Issue-No-2-CSR-Practices-and-CSR-Reporting-in-Indian-Banking-Sector-058-066 As per the chart above rural development has been the ost actively participated activity for Indian public sector banks. Besides, their primary focus has been on gender equality through women empowerment. Figure 2: Core thrust areas for reported CSR activities in private sector banks Source: 1-IJAEBM-Volume-No-1-Issue-No-2-CSR-Practices-and-CSR-Reporting-in-Indian-Banking-Sector-058-066 Enhancing the level of education and employment has been the major areas for reporting CSR activities in Indian private sector bank. Following are community welfare, programs for child welfare and protection of environment. 3. 1 RBI guidelines on CSR:
On December 20, 2007 RBI circulated a notice for all the scheduled commercial banks to highlight the role of banks in corporate social responsibility, with title “Corporate Social Responsibility, Sustainable Development and Non-Financial Reporting – Role of Banks”. Major issues discussed in the notice were regarding – 1. Corporate Social Responsibility 2. Sustainable Development 3. Non-Financial Reporting Talking about the corporate social responsibility program RBI followed many international initiatives to highlight the importance of the notice like – 1. United Nations Environment Program Finance Initiative (UNEP FI) 2.
They can achieve the mission by supporting initiatives that are * Cost effective * Capable of large-scale replication * Measurable * Having potential for both near and long-term impact. * Banks must provide appropriate training to its employees on environmental and social risks in lending to ensure that climate change is taken into account in corporate banking decisions. 6. Conclusion The CSR moment in the banking sector is slowing picking the pace. Many banks are showing their inclination and interest towards the CSR activities and believe it as their social responsibility.
On the other side CSR reporting practices are far from satisfaction. There are hardly few banks which report their activities on triple bottom line principles. The lack of uniform standards for rating CSR practices leads to problem in comparison of corporate houses and difficulty in determining the CSR rating. In spite of the slow adaptation of CSR reporting practices in India, it is predicted to pick up a great pace in near future. The need for enacting some stringent regulatory provisions to ensure adherence to social responsibility principles is necessary.