Contribution of Financial Institution towards Sustainable Development: A Study on Green Banking Initiatives of State Bank of India (SBI)

Vidhi Chhabra, Yulendra Kumar Rajput

Agrasen Mahavidyalaya, Purani Basti, Raipur, Chhattisgarh, India.

ABSTRACT

The nation's economic status is greatly influenced by the banking industry. Like other industries, environmental protection is also a responsibility which has to be equally shared by the banking industry also. The banking industry has now accepted the concept of "Green Banking" which leads to sustainable development. This study revolves around SBI how it captures its dedication to incorporating sustainable practices into its daily operations and going above and beyond the Bank's boundaries to have a beneficial influence on the environment, society, and economy. This paper aims to highlight the initiatives adopted by State Bank of India to attain sustainable development through green banking. The paper is based on qualitative data gathered from variety of sources like reports, research papers, articles, and more.

KEYWORDS: Sustainable Development, Green Initiatives, State Bank of India, Eco-Friendly Banking.

INTRODUCTION

Sustainable development has emerged as a new development paradigm in response to the current development discourse where the natural environment is overused to achieve economic prosperity. Sahoo, P. & Nayak B. P.  (2007). The banking industry plays a crucial role in providing financial support for business projects, which are essential for promoting economic growth. Hence, the banking industry has the potential to influence environmentally sustainable and socially responsible investment. While banks themselves may not directly contribute to pollution, they are likely to have financial ties with certain companies or investment projects that are, or could become, polluters. The banking industry is typically seen as eco-friendly when it comes to emissions and pollutants. The banking sector's internal environmental impact, such as energy, paper, and water usage, is comparatively minimal and environmentally friendly but now in order to safeguard and promote a more eco-friendly environment banks in its internal operations have also taken initiatives which lead to sustainable development. The environmental impact of banks is not only connected to their banking operations but rather more to the actions of their customers. Hence, it is challenging to calculate the significant environmental impact of a bank's external operations.

"Green Banking" involves banks promoting the growth of industries in an environmentally friendly way to enhance the natural environment. The idea of "Green Banking" will benefit banks, industries, and the economy in a reciprocal manner. "Green Banking" will not only promote the green transformation of industries but also enhance the bank’s asset quality in the future. (Ahuja, N. (2015) Academics have described green banking in different ways, but the main emphasis is on banking systems that promote both substantial economic growth and sustainable environmental practices. Climate change is endangering the planet to the point of no return, however, we have the power to change this situation. Development and climate change do not always come with the price of each other – sustainable development is the way out. (Dr. Michael 2023)

LITERATURE REVIEW

Girish, Dr. Prasanth A.P (2024) carried out a research study entitled “Sustainability through finance: An analysis of customer response to SBI green banking initiatives in Kerala”. The principal target of the study was to evaluate the degree of customer satisfaction regarding green banking products and services as well as to identify the main barrier to the adoption of green banking at SBI in Kerala. The researcher also solicited the opinion of the bank’s officials regarding the coordinates of green banking initiatives taken by the bank. The expectancy disconfirmation model was employed to measure the extent of customer Satisfaction with green banking of SBI bank. The outcome of the study revealed that the bank had carried out various activities to create awareness among customers regarding the green banking initiatives and also that the green banking practices are not a strong factor for customer satisfaction but rather the environmental considerations of the bank are the last factor contributing to customer satisfaction.

V. Santoshi (2023) compares SBI and ICICI by looking at key areas of green banking, such as policy framework, product offerings, stakeholder engagement, and environmental performance metrics. The study uses tools like regression analysis, quality coding, descriptive statistics, and software such as SPSS.

Prasad Mahale & Dr. Hebbar C.K. (2023) aimed to define eco-friendly banking and showcase its benefits in their study. The researcher includes a case study on the State Bank of India (SBI). It looks at how aware employees and customers are of green banking services and the challenges.

T. C. & Melvin (2022) state that every industry’s focus has gradually shifted from simply “making a profit” to a triad of “Planet, People, and Profit” because of the constant danger posed by climate change and global warming. Among the other industries, the banking sector has been more aware of the present times and its contributing role to the environment and sustainability. It is a significant player in the economic development of India and by being the mainstay, whether directly or indirectly, of all sectors, it continues to grow along with them.

Green banking is the practice of banking that generates positive impacts on the environment. (Lalon, 2015). The components of green banking may include green marketing, green financing, green operations, and more. Modern banks, both at the local and global level, are encouraging green banking initiatives that are driven by technology and environmentally friendly. (Silva, 2015).

K. Vadrale (2016) Research conducted a comparison between three government and three privately- owned banks were chosen based on their net profit figures, with the reasoning for their selection being elucidated. The initiatives undertaken by these banks to support eco-friendly banking and the corresponding products available for customers. The findings were derived from the secondary data sources and indicated that despite both sectors have made significant changes, however, public-sector banks are the ones that have taken the lead and are more forward thinking and have made significant progress.

Jha & Bhome (2013) the research paper attempt to discover methods for being environmentally friendly by utilizing green banking. The paper considers both primary and secondary data. The researcher conducted interviews with 12 bank managers, 50 bank employees, and bank customers. Additional focus is placed on the processes involved in green banking.

Sinu, Gopi. (2016) stated that eco-friendly banking is a concept functions as a safeguard and intelligent strategy for planning for long-term environmental viability. That higher as the influence of eco-friendly banking on the environment identify the strategies implemented for protection SBI promotes environmentally- friendly banking practices. A large number of the institutions took essential measures to manage these issues. The financial industry or banking industry also adopts such practices which is called as green banking. In other terms, green banking involves the functioning of the banking industry with particular emphasis on the environmental, ecological, and societal influences.

India CSR Network (2018) Recently SBI made efforts to encourage eco-friendly banking through marathon event. The primary goal of the marathon was aimed at raising awareness about the importance of protecting the environment and also many trees were planted during the race by distributing seedlings to participants. The goal was to motivate all individuals to engage in behaviour that promote sustainable development.

PROBLEM STATEMENT

The scope of banking extends beyond the conventional activities of deposit-taking and loan provision. While banks may not directly affect the environment through their operations, they play a significant role as the primary financial providers for polluting industries. Hence, it is the duty of banks to guarantee that they refrain from financing businesses that cause harm to the environment.       Although there is an increasing worldwide focus on environmental sustainability and responsiblefinancial practices, the uptake and execution of green banking initiatives in India continue to be scarce and inconsistent among various financial organizations.

Furthermore, the extent to which SBI’s green banking initiatives have successfully aided sustainable development and environmental conservation is not sufficiently recorded. Hence,​‍​‌‍​‍‌​‍​‌‍​‍‌ it is necessary to find out how well people are aware of the green banking initiatives of SBI and to assess the bank's total contribution to sustainability. In such a case, it is necessary to evaluate the extent to which SBI's green banking initiatives have led to sustainable development and to figure out the obstacles that have prevented their implementation and ‍​‌‍​‍‌​‍​‌‍​‍‌use. Moreover we see that banking sector is generally considered as friendly in terms of emissions and pollutants. However, in order to protect and promote environment friendly ecosystem, bank have to implement certain measures within their internal operations as well which will contribute to sustainable growth.

OBJECTIVES OF THE STUDY

The study aims to accomplish the following objectives:

1.     Defining and comprehensive the idea of green banking.

2.     Assess and analyse the important green banking initiatives and advancements made by the State Bank of India.

RESEARCH METHODOLOGY

The current research is of qualitative in nature and is descriptive. The study is based on the analysis of the different alternative secondary data sources. These sources consists of research papers, annual reports, different articles and the bank's sustainability reports. During the extensive literature review, various problems and initiatives were identified and systematically discussed.

CONCEPT OF GREEN BANKING

In order to survive, change is essential in all areas. Global issues like global warming, commonly known as the "Green House Effect," necessitate global solutions. Financial institutions, especially banking industry act as a significant economic agent that impact overall industrial activity and economic growth. One of the main sources of funding for investments in commercial projects, which are crucial for economic growth, is the banking industry. Under the idea of "green banking," banks work to protect the environment and encourage green business practices. Green banking means promoting ecological practices and reducing the carbon footprint from banking activities. Biswas, N. (2011).  Green banking is a concept that is connected to the three P's: people, planet, and profit. RBI also took the initiative to promote sustainable development.  In December 2007, the Reserve Bank made it compulsory for banks to focus on "Corporate Social Responsibility, Sustainable Development and Non-financial Reporting" to emphasize the significance of global warming and climate change in relation to sustainable development. In January 2022, the RBI carried out a Survey on Climate Risk and Sustainable Finance to evaluate the situation of climate risk and sustainable finance in major scheduled commercial banks. The Reserve Bank of India has been actively advocating for the significance of green and sustainable finance in the banking industry. This initiative has involved a range of recommendations, guidance, and literature to educate people about the benefits and difficulties related to sustainable finance.  

SBI INITIATIVES

The aim of Green Banking actions by the state bank is to identify necessary steps to conserve the environment. Protecting the environment and decreasing pollution while also catering to or funding clients and enhancing the internal environment with the help of efficient and effective resource utilization in bank’s branch and head offices for successful management.

SBI, being the biggest public sector bank in India, is dedicated to generating substantial positive social and environmental influence. In this effort, the bank utilizes direct as well as indirect methods to control the effects of its operations throughout its value chain. Furthermore, SBI acknowledges the significance of advancing financial inclusion and embracing eco-friendly banking methods as crucial elements in the country's journey towards a thriving, sustainable, and technologically advanced society.

The Bank’s initiatives can be broadly highlighted as below:

Table 1

Source- Sustainability Report of SBI 2023-24 & Researchers compilation using Secondary Data

DISCUSSIONS AND RECOMMENDATION

Based on the analysis of the stated objectives, it has been noticed the SBI has taken significant steps to initiate and implement green banking. The initiatives that have been taken on are significant features capable of instigating transformation within the banking industry. The evidence indicates that there has been some progress in recognizing the significance of environmental conservation, only a few actions have been taken. Among various companies, SBI is currently carrying out the necessary actions effectively.

LIMITATIONS

1.     The present study solely relies on secondary data for its foundation thereby inheriting all the limitations associated with the analysis of such data.

2.     Only SBI was chosen for the study due to constraints of time and cost. However, it is possible to conduct a future study that includes the initiatives taken by other banks.

3.     An additional research can be conducted to assess how the implementation of green banking practices affects the profits and expenses of the company.

DIRECTION FOR FUTURE RESEARCH

1.     Conduct​‍​‌‍​‍‌​‍​‌‍​‍‌ comparative studies on several public sector banks and private sector banks to find variations in green banking performance and adoption.

2.     Research customer behaviour, awareness levels, and digital adoption patterns for different demographic segments.

3.     Research the success of government policies, regulatory guidelines, and the incentive framework in encouraging the adoption of sustainable banking practices.

4.     Identify the problems that banks located in rural and remote areas, where there is limited access to technology and low levels of sustainability awareness, have to face.

5.     Analyse internal organizational barriers such as the lack of employee training, operational limitations, and the cost side of green initiatives.

CONCLUSION

State Bank of India is considered as one of the leading institution in India that understands the importance and urgency of transitioning traditional banking practices to new digital
based and ecological methods. The advancement of green banking is very crucial activity for the development of Indian banking sector. It can be accurately observed from the SBI initiatives that the bank has taken voluntarily to progress towards working on environmentally friendly banking. Both internal and external approaches are being implemented to create raising awareness and altering customer banking behaviour. Being SBI, putting in a lot of effort to make a difference, similar efforts are being expected from other banks and banking industry as a whole to address the situation and prevent it from worsening.