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Introduction

The concern for environmental sustainability by the banks has given rise to concept of Green
Banking. The concept of ―Green Banking‖ will be mutually beneficial to the banks, industries
and the economy. Green financing is the part of green banking. Green banking means promoting
environmental friendly practices and reducing your carbon footprints from your banking
activities. Green banking aims at improving the operations and technology along with making
the clients habits environment friendly in the banking business. It is like normal banking along
with the consideration for social as well as environmental factors for protecting the environment.
It is the way of conducting the banking business along with considering the social and
environmental impacts of its activities. The banking sector is major economic agent which
influences the economic growth and development in terms of both quality and quantity, there by
changing the nature of economic growth.

Banking sector is one of the major sources of financing investment for commercial projects
which is one of the most important economic activities for economic growth. Therefore, banking
sector can play a crucial role in promoting environmentally sustainable and socially responsible
investment. Banking sector is generally considered as environmental friendly in terms of
emissions and pollutions. Internal environmental impact of the banking sector such as use of
energy, paper and water are relatively low and clean. Environmental impact of banks is not
physically related to their banking activities but with the customer‘s activities. Therefore,
environmental impact of bank‘s external activity is huge though difficult to estimate. Moreover,
Environment management in the banking business is like risk management. It increases the
enterprise value and lowers loss ratio as higher quality loan portfolio results in higher earnings.
Thus, encouraging environmentally responsible investments and prudent lending should be one
of the responsibilities of the banking sector. Those industries which have already become green
and those, which are making serious attempts to grow green, should be accorded priority to
Lending by the banks. This method of finance can be called as ―Green Banking‖, an effort by the
Banks to make the industries grow green and in the process restores the natural environment.
This Concept of ―Green Banking‖ will be mutually beneficial to the banks, industries and the
Economy. Not only ―Green Banking‖ will ensure the greening of the industries but it will also
facilitate in improving the asset quality of the banks in future. Banking and other financial
institutions are more effective towards achieving this goal for the kind of intermediary role they
play in any economy and for their potential reach to the number of investors. Environment is no
longer the exclusive concern of the government and the direct polluters, but also the other

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partners and stake- holders in the business. It would certainly give the much needed impetus for
the banking industry to expand the use of environmental information in their credit extension
and investment decisions. In this background, the paper aims to discuss the issues of
sustainability in banking and how banks can play a role for sustainable growth and development,
particularly in the Indian context. A green bank (sometimes referred to as green investment
bank, clean energy finance authority or clean energy Finance Corporation [1]) is a financial
institution, typically public or quasi-public, that uses innovative financing techniques and market
development tools in partnership with the private sector to accelerate deployment of clean
energy technologies. Green banks use public funds to leverage private investment in clean
energy technologies that, despite being commercially viable, have struggled to establish a
widespread presence in consumer markets. Green banks seek to reduce energy costs for
ratepayers, stimulate private sector investment and economic activity, and expedite the transition
to a low-carbon economy.

In the United States, green banks have been created at the state and local levels. The United
Kingdom, Australia, Japan, and Malaysia have all created national banks dedicated to leveraging
private investment in clean energy technologies. Together, green banks around the world have
driven approximately $20 billion of clean energy investment. In the US, the green bank concept
was originally developed by Reed Hundt and Ken Berlin, as a part of the 2008 Obama-Biden
Transition Team‘s efforts to facilitate clean energy development. A similar concept was adopted
as an amendment to the federal cap and trade bill, called the American Clean Energy and
Security Act, introduced in May 2009. A companion piece of federal green financing legislation
was simultaneously introduced in the Senate, where it received broad bipartisan support. When
the 2009 cap and trade legislation ultimately failed to pass the Senate, green bank advocates in
the US focused on the state level. Connecticut established the first state green bank in 2011,
followed by New York in 2013. By the end of fiscal year 2015, the Connecticut Green Bank had
supported $663 million in project investments. In the UK in 2009, two reports were published
advocating the creation of a state-backed infrastructure bank to provide financing to green
projects. The first, entitled "Accelerating Green Infrastructure Financing: Outline proposals for
UK green bonds and infrastructure bank" was published in March 2009 by Climate Change
Capital and E3G.The second, entitled "Delivering a 21st Century Infrastructure for Britain" was
published by Policy Exchange in September 2009 and was written by Dieter Helm, James
Wardlaw and Ben Caldecott.

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There are many types and styles of institutions that finance clean energy and green infrastructure
projects. There are several key elements that distinguish green banks from other financing
institutions: a focus on commercially viable technologies, a dedicated source of capital, a focus
on leveraging private investment, and a relationship with government. Green banks focus on
commercially viable technologies, as opposed to early-stage innovative technologies, because
they have been tested, have less associated ―technology risk‖ and can reliably produce revenue
for project owners. Green banks are public-purpose entities with some manner of a relationship
with government, and are usually capitalized by public dollars. Just like a commercial bank,
green banks lend capital and own debt, so it is important they have their own balance sheet.
Green banks also focus on using their capital to facilitate private entry into the clean energy
market specifically by using limited public dollars to leverage private investment in clean
energy.

Green Banking: Defined

Green Banking is like a normal bank, which considers all the social and environmental factors;
it is also called as an ethical bank. Ethical banks have started with the aim of protecting the
environment. These banks are like a normal bank which aims to protect the environment and it
is controlled by same authorities as what a traditional bank do. Green banking is like a normal
bank, which considers all the social and environmental/ecological factors with an aim to protect
the environment and conserve natural resources. It is also called as an ethical bank or a
sustainable bank. They are controlled by the same authorities but with an additional agenda
toward taking care of the Earth's environment / habitats / resources. For banking professionals
green banking involves the tenets of sustainability, ethical lending, conservation and energy
efficiency.

There are many differences compared with normal banking, Green Banks give more weight to
environmental factors, their aim is to provide good environmental and social business practice,
they check all the factors before lending a loan, whether the project is environmental friendly
and has any implications in the future, you will awarded a loan only when you follow all the
environmental safety standards.

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Defining green banking is relatively easy. Green Banking means promoting environmental –
friendly practices and reducing your carbon footprint from your banking activities. This comes
in many forms

1. Using online banking instead of branch banking.

2. Paying bills online instead of mailing them.

3. Opening up accounts at online banks, instead of large multi-branch banks

4. Finding the local bank in your area that is taking the biggest steps to support local green
initiatives.

Green banking can benefit the environment either by reducing the carbon footprint of
consumers or banks. Either a bank or a consumer can conserve paper and benefit the
environment. Ideally, a green banking initiative will involve both. Online banking is an
example of this. When a bank‘s customer goes online, the environmental benefits work both
ways. Green banking means combining operational improvements and technology, and
changing client habits.

Background of the Study

Environmental protection and awareness, and sustainable, ecological measures have emerged as
significant themes of our age and an increasing number of ―green‖ technologies are also finding
their way into the banking branch. Until recently, environmental concerns were not considered
relevant to the business operation of banks and financial institutions. Traditionally, banking
sector‘s concern for environmentally degrading activities of clients is like interfering or
meddling in their business affairs. However, now it is being perceived that dealing with
environment brings risks to their business. Due to strict environmental disciplines imposed by
the competent authorities across the countries, the industries would have to follow certain
standards to run their business. In the case of failure, it would lead to closure of the industry‘s
leading to a likelihood of default to the bank. The importance of Green Banking is immense for
both the banks and economy by avoiding the following risks involved in banking sector. The
adoption of green banking strategies will help the bank to deal with these risks involved in their
business operation.

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Green banking strategies involves two components:

 Managing environment risk and

 Identifying opportunities for innovative environmentally oriented financial products

To manage environmental risk, the banks have to design proper environmental management
systems to evaluate the risks involved in the investment projects. The risks can be internalized
by introducing differential interest rates and other techniques. Moreover, bank can withdraw
itself from financing high-risk projects. The second component of green banking entails creating
financial products and services that support commercial development with environmental
benefits. This includes investment in renewable energy projects, biodiversity conservation,
energy efficiency, investment in cleaner production. Thus, the banking and financial institutions
should prepare an environmental risk and liability guidelines on development of protective
policies and reporting for each project they Finance or invest. They can also have an
environmental assessment requirement for the projects seeking finance. Environmental concerns
are integrated into the international trade policy and often act as trade barrier for
environmentally sensitive goods (ESGs). So adopting environmentally sustainable Technologies
or modes of production is no more considered as a financial burden, rather it brings new business
opportunities and higher profit.

Review of Literature

A general scanning of literature available in India from different published sources indicates
that very few detailed studies have been conducted in India in the field of Banking, particularly
in the field of Green Banking. However, many studies have been conducted abroad,
particularly in the western developed countries. But these are not very relevant in Indian
context. This section reviews empirical literature on Green Banking conducted in country as
well as abroad in chronological order.

Jeucken and Bouma (1999) in their study identified four stages or attitudes of banking toward
sustainability. The first stage is defensive banking, in which bank is non-active and tries to
delay or oppose the new legislation as it may damage the interest of banks directly or
indirectly.

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The Second stage is preventive banking in which bank has to comply with legislation to
avoid any constraint on its activities. The third stage is offensive banking in which banks are
concerned about internal as well as external activities. The final stage is sustainable banking,
which is, a win-win solution. Banks under this stage looks for highest sustainable rate of
return not for highest financial rate of return. Getzner and Kra¨uter (2004) in their research
paper tested the respondents' willingness to invest in green shares. Authors found education,
income, environmental awareness and the expected profit are the main explanatory
variables.

The study by Bhardwaj and Malhotra (2014) linked the performance of bank with the green
banking adoption. They found a positive relationship between adoption of green banking
and bank profitability. On the other hand, similar study by Rajput, Arora, and Khanna
(2014) found no relationship between green banking initiatives and bank‘s profitability.
Sudhalakshmi and Chinnadorai (2014) studied the green banking adoption status of Indian
banks. Their study showed that not many initiatives have been taken by banks in India as far
as green banking is concerned. They concluded that banks have to play a proactive role in
order to take environmental and ecological aspect as a part of their lending process, which
would force industries to go for mandated investment for environmental management.
Similarly, Ahmed (2012) discussed the contemporary green banking initiatives taken
globally and more specifically in Bangladesh. He gave policy recommendation which
included giving rewards to the banks for positive green banking initiatives by developing
green index rating and building awareness amongst the stakeholder such as Competitors,
Corporate Consumer, and non-Corporate Consumer, employee, employee union and
Government Regulatory Organization.

At policy level, Choudhury et al. (2014) advocated for the necessity of stakeholder's influences
in green banking practice and recommends some indication for Government, the whole banking
sector and for the business community. Bahl (2012) suggested RBI and Indian government
should play a proactive and formulate green banking policy, guidelines & financial incentives
for effective green banking.

Nath, Nayak, and Goel(2014) conducted a study on green banking practices and recommended
for change in routine operations of banks by adoption of paperless banking, online banking, and
mobile banking, and mass transportation system, green cards made up of recycled plastic. They
carried out SWOC analysis wherein, they explained time and cost saving as the major strength,
lack of infrastructure, computer illiteracy are the major weakness, opportunities that are
available is people are becoming tech-savvy and environmentally conscious, but the major
challenge is internet connectivity and moreover no banking practices are not fully

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secured.(world finance conference). Kalloch and Bachman (2011) highlighted the online and
small community banks are seen as greener than large banks. One big criticism of large banks is
that they finance environmentally detrimental endeavors.

Papastergiou and Blanas (2011) conducted study on ―Sustainable Green Banking: The Case of
Greece and approached the area in an integrated and innovative way. According to their
finding, they identified 50% banks were in defensive phase, 40% in preventive, and 10% in
offensive stage. KO et al. (2014) in their research paper found that there is a significant positive
relationship between green concern and internet use. Their study shows that ―bank's customers
are more concerned about environmental problems and they are willing to go green, following
other people who are making green efforts‖. Green concern as a construct of social influence
dimension significantly influence use of internet banking. The study also indicated word of
mouth communication from friends and family significantly influences the internet usage.
Similarly, Singh and Singh (2012) in their paper expressed society's growing concern about the
natural environment, the business organization are also modifying their working in order to
increase greenery.

Rajput, Khanna and Kaur (2014) in their study endeavors made by SBI, the market leader in
Educational Loans, Auto Loans, and the no.1 home loan, on the road of green banking and
sustainable development. The Bank has also been an active participant in wildlife conservation
projects like ‗Save the Tiger'. State Bank of India has become a signatory investor to the Carbon
Disclosure Project (CDP) to disclose its carbon footprints. Ahmed, Zayed and Harun (2014) in
their study applied factor analysis and finding revealed that six factors namely six factors
namely economic factor, policy guideline, loan demand, stakeholder pressure, environmental
interest, and legal factor were the major factors behind the green banking adoption in
Bangladesh. Verma (2012) in his study explained the evolution of green banking in India, and
highlight that now banks are incorporating green banking practices in CSR as a main activity.
However, his study concluded that only few banks in India adopted green banking and there is
lack of awareness among the bank staff and customers.

Environmentalism is a broad philosophy and social movement regarding concerns for

environmental conservation and improvement of the state of the environment.
Environmentalism and environmental concerns are often represented by the color ‗green‘.
Global warming, also called as ―Green House Effect‖ is a global issue that calls for a global
response. The warming effect of certain man-made gas emission such as carbon-dioxide,

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methane, nitrous oxide and hydro-fluro carbon is found responsible for distortion in climate
changes. The rapid change in climate will probably be too great to allow many eco systems to
suitably adapt, since the changes have direct impact on bio diversity, agriculture, forestry, dry
land, water resources and human health. However, there is general lack of adequate awareness
on the above issues and hence there is urgent need to promote certain urgent measures for
sustainable development and corporate social responsibility.

―The supreme reality of our time is… the vulnerability of our Planet.‖ - John F. Kennedy
to avoid falling into similar trap, the impulse of ‗going green‘ is running faster than blood
in Indian Incorporations veins. From IT giants to luxurious hotels, from Automobiles to
Aviations, from Mutual Funds to Banks corporate India is moving fanatically ahead with
green initiatives.

As a responsible financial organization of the country with its crucial role in financing the
economic and developmental activities of the country, banks have to play in addressing the
above issues, both in terms of its obligations and opportunities by virtue as a responsible
corporate citizen and as a financier.

Objectives of the Study

 To study the importance of green banking for banks and economy.

 To study various strategies adopted by Indian banks for Sustainable

Development.

 To study environmental and control regulations regarding green banking in India.

 To explore the level of awareness about green banking among the general public and
consumers at large.

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Research Methodology
This is an exploratory research thus methodology was based on literature review and secondary
data. The research took place in two phases:

 The first phase was an up-to date literature review on Green Banking and sustainable
development in the banking sector and particularly in green banking that identified
results, and suggested future steps.
 The second phase included data collection about Indian banks through secondary
published sources.

Secondary published sources were the reports on Green Banking and other relative information
published on the banks and other internet sites.

Challenges of Green Banking

 Confronting Challenges to Going Green: Green banks support wonderful causes; they
do face a lot of challenges as for-profit entities. Just like those socially conscious and
environmental mutual funds, they are expected to encounter more obstacles than typical
run-of-the-mill bank.

 Diversification matters: Green banks will be screening their customers and naturally,
they‘ll be limiting and restricting their business to those entities that qualify. With a
smaller pool of customers, they‘ll automatically have a smaller profit base to support
them. If they focus their loans on certain industries, they open themselves up to being
much more vulnerable to economic shifts.

 These banks are still startups: Apparently, it takes 3 to 4 years for a typical bank to
start making money. Many green banks in business today are very new and are still in
startup mode. It doesn‘t help that these banks are trying to get their footing during a
recession.

 Banks are “specialized”: Again, while the main goal of a Green Bank is to do good by
supporting those who are taking Care of the environment, the question here is—just how
much money is there in these businesses and in the eco-friendly industry? Saving the
environment does not necessarily equate to ―making a profit‖. Hopefully though, this
premise is proven wrong in this case and that green banks prove that they can survive,
even as they face restrictive requirements for doing business.

 Operating expenses and costs are higher: Green banks require specialized talent, skills
and expertise as well, due to the Kind of customers they are servicing. Employees, such
as loan officers, need to have additional background and experience in dealing with green

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businesses and consumers. Plus, giving breaks to such clients via discounted loan rates
can eat at their profit margins.

 Reputation Risk: In all likelihood, due to growing awareness about environment safety,
banking institutions are more prone to lose their reputations if they are involved in big
projects, which are viewed as socially and environmentally damaging. There are also few
cases where environmental management system has resulted in cost savings, increase in
bond value etc. (Heim, Getal, 2005).In few cases the environmental management system
resulted in lower risk, greater environmental stewardship and increase in operating profit.
Reputation risks involved in the financing of ecologically and ethically questionable
projects

 Proper legislation is not yet framed: Government must design proper legislation of
environmental rules for banks and ensure enforcement. The problems in India are the
legislation is not yet framed and in few cases, things are not strictly enforced, but things
can change overnight resulting in major compliance problems for the companies
concerned and increased risk for the Banks that have lent to them. There should be
continuous dialogue relating to environmental matters with relevant audiences, including
stakeholders, employees, customers, governments and the public.

 Lack of environmental audits: Lack of environmental audits are required to determine

the environmental status of a facility, property, and operation and to identify regulatory
compliance status, past present problems and potential environmental risks and liabilities
associated with the project. These should be done by an independent body or by any
environment investigation team.

 Less attention on environmental risk management: Less attention is given for the
environmental risk management after the post transaction period.

 Non automation of business process: Mostly banks are not adopting automation process
Banks should conduct energy audits in all their offices for effective energy management
using compact fluorescent lighting (CFL) can help banks save on energy consumption
considerably.

 Lack of clear policies: Clear policies are required to altering the present management
systems.

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Scope of Green Banking in India

There has been a remarkable improvement in the working of Banks in terms of cutting costs,
increasing productivity, improving the profitability, controlling and management of the Non-
Performing Assets (NPAs), face the risks, carry out the Asset Liability Management, manage the
changes in interest rates, handle the foreign exchange rate fluctuations, comply with the
regulator‘s requirements and finally improve the customer service to their best satisfaction.
Green banking avoids as much paper work as possible and rely on online/ electronic transactions
for processing so that we get green credit cards and green mortgages. Less paperwork means less
cutting of trees. It also involves creating awareness to banking business people about
environmental and social responsibility enabling them to do an environmental friendly business
practice.

Benefits towards the banks:-

Green banking is very important in mitigating the following risks involving the banking sector:

 Credit Risk: Due to climate change and global warming, there have been direct as well
as indirect costs to banks. It has been observed that due to global warming, there have
been extreme weather conditions which affect the economic assets financed by the banks,
thus leading to high incidence of credit default. Credit risk can also arise indirectly when
banks lead to companies whose businesses are adversely affected due to changes in
environmental regulation.

 Legal risk: Banks, like other business entities, face legal risk if they do not comply with
relevant environmental regulation. They may also face risk of direct lender liability for
cleanup costs or claims for damages in case they actually take possession of pollution
causing assets.

 Reputation Risk: Due to increasing environmental awareness, banks are more prone to
reputation risk, if their direct or indirect actions are viewed as socially and
environmentally damaging. Reputation risks emerge from the financing of
environmentally objectionable projects.

Benefits of Green Banking in India:-

 Avoids Paper Work: Paperless banking almost all banks in India are computerized or
operate on a core banking solution(CBS). Thus there is sample scope for the banks to
adopt paperless or less paper for office correspondence, audit, reporting etc. These banks
can switch over to electronic correspondence and reporting thereby controlling
deforestation.

 Creating Awareness to Business People about Environment: Many NGOs and

environmentalists are propagating environment consciousness among the public in
general by a ranging awareness programs and organizing seminars etc. Banks may

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associate themselves by sponsoring such programs. Besides, many corporate bodies are
organizing similar program in their own line of business such as ―free pollution check
program‖ organized by a car manufacturer. Banks may tie with such corporate. These
will help to brighten the image of the bank.

 Loans at Comparatively Lesser Rates: Banks can alsointroduce green bank loans with
financial concessions for environment friendly products and projects such as fuel
efficient vehicles, green building projects, housing and house furnishing loans to install
solar energy system etc.

 Environmental Standards for Lending: Banks follow environmental standards for

lending, is really a good idea and it will make business owners to change their business to
environmental friendly which is good for our future generations.

Other Benefits:-

 Improving the service standards

 Automation of manual tasks
 Attracting and retention of staff
 Increase in profitability &sales
 Reducing Cycle time
 Drive customer loyalty
 Reduce costs to serve and sell
 Reduce administrative burden

Indian industry faces the challenges of controlling environmental impact of their business i.e.
reducing pollution and emission of their clients. Though government has been trying to address
the issue by framing environmental legislations and encouraging industry to follow
environmental technologies and practices, public awareness and inability to derive competitive
advantage by producing eco-friendly products.

India‘s is the world‘s sixth largest and second fastest growing country in terms of Producing
greenhouse gases. Delhi, Mumbai and Chennai are the three of the world‘s ten most Polluted
cities. The major polluting industries in India are-

 Primary metal industries namely zinc, copper, steel etc.

 Paper & pulp
 Pesticides/insecticides
 Refines
 Fertilizers
 Tanneries
 Sugar

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 Textiles
 Chemicals/pharmaceuticals etc.
The banking operation and investment by financial institutions should take care of
environmental Management of these polluting industries by improving the overall
environment, the quality and Conversation of life, level of efficiency in using materials and
energy, quality of services and Products. In this context, the role of banking sector, which is on
major financing sources to the Industries, assumes high importance.

Environmental Regulation in India

The environmental regulations in India can be broadly classified into two broad categories

 Command and control regulations and

 Liability law.

1. The Command and control regulations are ex ante regulations that are designed
to dissuade environmentally damaging projects. This regulation is implemented by
setting industry specific pollution standards, scrutinizing the projects and
granting/denying permissions by the concerned authorities like Ministry of
Environment and Forest.

2. The liability laws are ex post in nature and are implemented by enforcing authorities
through imposing fines, closing down the defaulting industries etc.Once legal framework
for the environmental pollution standards are formulated in India, the polluting industries
either have to close down or have to make necessary investment to comply with the
standard. In this process these industries will lose their competitiveness in the
international market, which would directly affect Indian economy and the banking
sector. As far as Green Banking in India is concerned, the banking and financial
institutions are running behind the schedules compared to global trends. The British
business newspaper and Financial Times which together nominated following banks for
Sustainable Banking Awards in2006 for leadership and innovation in integrating social,
environmental and corporate governance objectives into their operations did not find a
single Indian nationalized bank or major private bank in the list except Yes bank.

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Banks need to be more careful in India about the environmental aspects of their clients and
products because-

 Future of exports and product market are going to go through strict environmental
rules a deco-friendly product will have better market.
 Increased demand for pollution controls equipments will require more financial
assistance from banks.
 Reserve Bank of India (RBI) may follow environmental guidelines for the banks.
 Recent announcement of the government to use economic instruments for
environmental control may include Banks in future.

Steps in Green Banking

From the empirical study, it is found that following are some of the steps that can be taken for
going green in banking:

 Go Online: Online banking is the developing concept in young and corporate India.
Online banking helps in additional conservation of energy and natural resources. Online
Banking includes: a. Paying bills online, b. Remote deposit, c. Online fund transfers and
d. online statements. It creates savings from less paper, less energy, and less expenditure
of natural resources from banking activities. Customers can save money be avoiding late
payments of fees and save time by avoiding standing to queues and paying the bill from
home online.

 Use Green Checking Accounts: Customers can check their accounts on ATM or special
touch screens in the banks. This can be called as green checking of account. Using a
green checking account helps the environment by utilizing more online banking services
including online bill payment, debit cards, and online statements. Banks should promote
green checking by giving some incentives to customers by giving higher rate of interests,
waiver or discount in fees etc.

 Use Green Loans for Home Improvements: The Ministry of Non-renewable Resource
in association with some nationalized and scheduled banks undertook an initiative to go
green by paying low interest loans to the customers who would like to buy solar
equipments. The rate of interest is as low as 4% p.a. Before you undertake a major home
improvement project, study if the project can be done in an eco-friendly manner and if
you might qualify for a green loan from a bank Green loan are perfect for energy-saving
project around the house. The new Green Home Loan Scheme from SBI, for instance,
will support environmentally friendly residential projects and offer various concessions.
These loans will be sanctioned for projects rated by the Indian Green Building Council
(IGBC) and offer several financial benefits –a 5 percent concession in margin, 0.25
percent concession in interest rate and processing fee waiver.

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 Power Savings Equipments: Banks can directly contribute to controlling climate change
and as an initial step they intend to start a campaign to replace all fused GSL bulbs, in all
owned premises offices and residential. Banks can also make a feasibility study to make
rain water harvesting mandatory in all the Bank‘s owned premises. In December 2009
IndusInd Bank inaugurated Mumbai‘s first solar-powered ATM as part of its ‗Green
Office Project‘ campaign titled ‗Hum aur Hariyali‘.

 Use Green Credit Cards: Some of the banks introduced Green Credit Card. The benefit
of using a green credit card is that banks will donate funds to an environment-friendly
non-profit organization from every rupee you spend on your credit card to a worthwhile
cause of environment protection.

 Save Paper: Bank should purchase recycled paper products with the highest post-
consumer waste content possible. This includes monthly statements, brochures, ATM
receipts, annual reports, newsletters, copy paper, envelopes etc. Whenever available,
vegetable-based inks are used instead of less environmentally friendly oil-based inks.

 Use of Solar and Wind Energy: Using solar and wind energy is one of the noble cause
for going green. State Bank of India (SBI) has become the first bank in the country to
venture into generation of green power by installing windmills for captive use. As part of
its green banking initiative, SBI has installed 10 windmills with an aggregate capacity of
15 MW in the states of Tamil Nadu, Maharashtra and Gujarat.

 Mobile Banking: Mobile banking is tricky. On the one hand, it is great to have the
ability to check balances, transfer funds or pay bills from you phone. One the other hand,
it saves time and energy of the customers. It also helps in reducing use of energy and
paper of the bank. Most of the Indian banks introduced this paper-less facility.

Small Scale Sector in India and Green Banking

Industries irrespective of their size i.e. large, medium or small scale emit pollutants to the
environment. Though the large-scale industries are more capable of degrading the environment,
they have adequate financial resources to install pollution control equipment or waste treatment
plants to control pollution. Moreover, these large-scale industries are always in the eyes of the
government or the pollution control board, these industries strives hard to adhere to set emission
standards. But small-scale industries (SSIs), on account of their financial constraints may unable
to install the necessary equipment to meet the emission standards prescribed by the competent
authorities. Also because of their small scale of operation, the SSIs escape from the eyes of the

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concerned authorities. SSI constitute major portion of Indian industry. These industries account
for about 40 percent of industrial production and 30% of total manufacturing exports. Use of
western technological systems in small scale industries produces enormous gaseous, liquid and
solid wastes. However, they may not be in a position to bear additional expenditures on account
of environment audit and pollution control equipments.

Therefore, banks need to apply different procedures to promote pollution controls like-

 Environmental pollution status of SSI

 Environmental Clearance from the appropriate authorities and
 Steps undertaken or proposed for disposal of solid, liquid and gaseous wastes before
lending to SSI in India.

For green banking, Bank should begin implementing procedures like-

 Assessment of risk due to environment

 Environmental audit management
 Assessment of credit requirement and loan follow up before investing on different
projects.

Green Banking: International Initiatives

The financial sector‘s growing adherence to environmental management system is attributed to

the direct and indirect pressures from international and local Non Governmental Organizations
(NGOs), multilateral agencies and in some cases the market through consumers. Some
200financial institutions around the globe are signatories of this initiative statement to promote
sustainable development within the framework of market mechanisms toward common
environmental goals. The objective is to integrate the environmental and social dimension to the
financial performance and risk associated with it in the financial sector. As the commitment of
this UNEPFI statement goes, sustainable development is regarded basic to the sound business
management. It advocates for a precautionary approach towards environmental management and
suggests integrating environmental considerations into the regular business operations, asset
management, and other business decisions of the banks.

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Some key green banking products introduced around the world are:-

 Green Mortgages: Green mortgages basically offer better rates for energy-efficient
houses. It offers home buyers an additional price of 15% of their house loan for
upgrading energy efficient windows, solar panels or water heaters. The Energy Efficient
Mortgage is HUD-approved green mortgage which credits for home energy efficiency.

 Green Loans: Basically Green banks offer loans at better rates for energy-efficiency
projects. Banks offer incentives to projects like bio-fertilizer, biogas, solar panel, etc. are
being offered loans at low interest rates from the banks.

 Green Credit Cards: Green credit card offers the cardholders to redeem points for
contributions to eco-friendly organizations. Therefore, it offers great incentive for
customers to use their green card for buying expensive eco-friendly products and hence
promoting green technologies.

 Green Banking Abroad: Citibank has pledged to invest $50 billion for the climate
changing solutions and Bank of America not only offers a Visa card to those who support
natural conservancy but some extra points are also added in their visa for their support.
Hence, Green Banking is creating a buzz in this fast growing financial world. Though it
is a new concept some countries have adopted its policies and activities. But earlier most
banks only used to include green and ethical commitments in their manifestos and not
follow them. Co-Operative Bank was the first bank whose environmental policy
document is available and it includes sections on the arms trade, human rights, corporate
social responsibility and carbon neutrality.

 Other Green banking products like green checking helps in converting checking accounts
to online banking, green money market accounts which converts saving accounts to
online banking and green CDs in which bonus rates are given for online banking and
hence we are able to save a lot of paper.

When global warming and environment issues are being talked about in every country, be it a
developing or a developed nation Green Banking has become the top priorities for many. The
concept of Green Banking has developed in western countries. Not only developed countries but
developing countries like Bangladesh which is one of the most vulnerable countries for climatic
change has successfully replicated the concept of green banking. Low lying countries like
Bangladesh are adversely affected by the melting of glaciers and ice-bergs which leads to rise in
sea level. Because of the increase in climatic change bank credit risk have increased and green
banks like BASIC Bank (Bangladesh Small Industries and Commerce Bank) have adopted
various strategies to curb the various climatic issues.

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Some of the other Major initiatives in the field of green banking by some International
Banks:-

 Green Auto Loan Rate deal from United Financial Credit Union: United Financial
Credit Union is offering a .25% rate reduction if one has to buy a new car fueled by
alternative energy source mainly Hybrid car, Electric car, Ethanol-powered car or a car
powered by a fuel cell. Now buying an eco-friendly car is no more a costly affair.

 Citi Bank: It has developed environmental management system which basically guides
its environmental initiatives. In 2003 it developed had developed a comprehensive
environment and social risk management (2003) policy and updates periodically which
requires adherence to International Financial Corporation (IFC) performance standards
and its guidelines which provides pollution prevention, safety and guidance to as large as
63 specific sectors.

 PNC Bank: PNC Bank is the first U.S bank which applies green building standards to all
newly constructed or renovated retail branch offices. Some of the benefits of green
building standards are cleaner indoor air and improved health and well-being of
employees. PNC integrates water and energy saving technology into building practice.
PNC has built the largest green wall in United States which provides energy efficiency on
the PNC‘s headquartering building.

 National Bank of Abu Dhabi: It is the first bank in United Arab Emirates to install a
solar-powered ATM for use by customers. National Bank of Abu Dhabi has a target of
installing solar-powered machines in all its 110 branches and also adds another 430 solar-
powered stand alone.

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Product Key Product Design and Result Bank Region

Home Government led ‗green‘ mortgage initiative. 1% Dutch Banks Europe
Mortgage reduction on interest for loans that meet
environmental criteria.
Generation GreenTM Home Loans. Offered to both Bendigo Australia
new and old homes, so those with existing Bank
mortgages can take advantage of discounted rates.
Commercial Green Loans for new condos. Developer (Tridel) TAF/Tridel Canada
Building repays loan with funds that would otherwise be
Loan spent on operating cost using conventional
equipment and material
Home Equity Environmental Home Equity Program. For Bank of USA
Loan customers using line of Visa Access Credit, bank America
will donate to an environmental NGO.
Bank Signed a joint marketing agreement with CitiGroup USA
Sharp Electronics Corporation to offer customers
easily accessible and convenient financing options
to Purchase and install residential solar
technologies.
Credit Cards Climate Credit Card. Bank will donate to WWF. Rabobank Europe
Sum of donation depends on the energy-intensity of
the product or service purchased with the card.
Existing cardholders can donate Visa WorldPoints Bank of USA
rewards to organizations that invest in GHG America
reductions or redeem them for ‗green‘ merchandise.

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Chapter 3 P a g e | 20

Green Banking Strategies Adopted by Indian Banks

The Reserve Bank of India document titled ‗Policy Environment‘ dated 8th November, 2010
includes on Pages No. 56 and 57 a reference to Green Banking and Green IT initiatives for banks
in India. Like any other Corporate, banks in India too are adopting the principle of Corporate
Social Responsibility (CSR) and are concerned about the protection of environment. Mainly, the
computerized environment and facilities like on-line banking are helping the banks to promote
the green banking concept [Shalini Mehta (2011)]. Paper work is being reduced consciously at
all levels by bankers and customers. In addition to providing of onsite and off-site ATMs, some
banks have gone ahead with innovative ideas like installing Bio-metric ATMs, Solar-based
ATMs, White-labelled ATMs, Brown ATMs, SMS alerts, Mobile Banking etc. for the
convenience of their customers [Ashok Singh (2010)]. Besides reducing any environmental
pollution, these initiatives are helping the banks in reduction in their cost of operations and
delays which results in increased customer satisfaction too [Devaprakash R. (2008)]. While
offering several simple suggestions for practicing green banking arrangements, the specific
initiatives taken by banks in India are - IndusIand Bank introducing solar powered ATMs, SBI
adopting green banking policy and offering green home loans, Union Bank of India‘s energy
efficiency measures, IDBI Bank‘s membership in National Action Plan on Climate Change,
ICICI Bank‘s Corporate Environmental Stewardship initiatives and also Clean Technology
Initiatives, YES Bank‘s community development initiatives, ABN Amro Bank‘s (now Royal
Bank of Scotland) launching of Indian Sustainable Development Fund as also the Role played by
RBI in its CSR initiatives. Green Banking goes a long way it serving its objectives. The
incorporation of social and environmental strategies into the development goals of the banks
helps them in arriving effective environmental management system. According to Krebsbach
(2005), the banks, which adopted socially and environmentally responsible lending and investing
strategies were altering their processes of bond underwriting, investment banking and corporate
lending. These banks were enjoying a competitive advantage over others as society is aware
about the environmental issues. But the author had suggested that banks should adopt the green
lending principles in such a way that a customer base will not be affected. The author said
"Credibility comes from having high standards, but if you push the standards too high too
quickly, it may stop some banks from lending and have a serious impact on companies that needs
capital". Environmental management in the banking sector is like risk management because it
reduces the credit risk, improves the asset quality and increases the enterprise value. Biswas
(2011) revealed some strategies for the adoption of environmental management in the banking
sector:-.

 Banks should do Environmental Impact Assessment (EIA) in which they design the
environmental system to evaluate the risk involved before investing in different projects;
 They should adopt the Annual Reporting System (ARS) in which they prepare an annual
report on environmental risk guidelines for every project they invest or finance;
 They should adopt environmentally sustainable technologies which minimizes risk, saves
cost and enhance the bank's reputation;

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 ATM services: John Shepherd-Barron devised what is hailed as the world's first
automatic teller machine. First ATM in the world was installed by Barclays bank in
London in 1967.First ATM in India was installed by HSBC in Kolkata in 1987 First PSB
to install ATM in India is Indian bank.

 Debit card: The first debit cards were introduced in the early 1980‘s to enable consumers
to obtain cash from ATMs by debiting their bank account. Corporation Bank is the first
Indian Bank to introduce debit card.

 VISA & Master Card: As credit card processing became more complicated, outside
service companies began to sell processing services to Visa and MasterCard association
members. This reduced the cost of programs for banks to issue cards, pay merchants and
settle accounts with cardholders, thus allowing greater expansion of the payments
industry.

 Credit Card: "The general-purpose credit card was born in 1966, when the Bank of
America established the BankAmerica Service Corporation that franchised the Bank
America brand (later to be known as Visa) to banks nationwide," Sienkiewicz writes. As
the bank card industry grew, banks interested in issuing cards became members of either
the Visa association or Master Card association. Their members shared card program
costs, making the bank card program available to even small financial institutions. Later,
changes to the association bylaws allowed banks to belong to both associations and issue
both types of cards to their customers.

 Vishwa Yatra Card: State Bank Vishwa Yatra Foreign Travel Card' is a prepaid Foreign
Currency Card which travellers going abroad are guaranteed to find useful. It is a Chip
based Card which stores encrypted and confidential information. State Bank Vishwa
Yatra Foreign Travel Card is available in Eight Foreign Currencies viz.US Dollars
(USD), Pound Sterling (GBP), Euro (EUR), Japanese Yen (YEN),Canadian Dollar
(CAD), Australian Dollar (AUD), Saudi Riyal (SAR) and Singapore Dollar(SGD).

 Gift Card: Gift Card is also a prepaid Indian rupee VISA CARD –an excellent substitute
of Gift Vouchers.

 Green Channel Counter: The Bank had launched 'Green Channel Counter'(GCC)
facility on State Bank Day (01.07.2010), at 57 select branches of the Bank spread across
the country. This was an innovative step taken by the Bank towards changing the
traditional way of paper based banking in a limited way, to card based ‗Green Banking‘
focusing on reduction in paper usage as well as saving transaction time. This is a
pioneering concept which would save both paper and time resources.

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 Online banking services: Online banking services are helped the customers to reduce
the carbon foot prints indirectly and make the convenience to the customer almost most
of the important baking services. Some of these services do not require any manual
intervention.
 Fund Transfer to Self Accounts
 Third Party Fund Transfer
 Inter Bank Payee Fund Transfer
 PPF transfer
 Setting up Standing Instruction
 E-Tax Payment
 E-ticketing
 Bill Payments
 Visa Money Transfer
 D-mat Enquiry
 Online Application for IPO.

 Mobile Banking Services: Mobile banking also known as M-Banking. M-banking is a

term used for performing balance checks, account transactions, payments, credit
applications and other banking transactions through a mobile device such as a mobile
phone or Personal Digital Assistant (PDA). The earliest mobile banking services were
offered over SMS, a service known as SMS banking. With the introduction of the first
primitive smart phones with WAP support enabling the use of the mobile web in 1999,
the first European banks started to offer mobile banking on this platform to their
customers.

Green Banking Initiatives by Indian Banks

1. State Bank of India (SBI): SBI has become the first bank in the country to venture into
generation of green power by installing windmills for captive use. As part of its green
banking initiative, has installed 10 windmills with an aggregate capacity of 15 MW in the
states of Tamil Nadu, Maharashtra and Gujarat. . It has planned to install an additional 20
MW capacity of windmills in Gujarat soon and touch 100 MW power generation through
windmills within five years, windmills are set up with a definite objective of reducing the
dependence on the polluting thermal power and not on purely economic or business
considerations.SBI had launched Green Channel Counter (GCC) facility at their branches in
2010 to change the traditional way of paper based banking(SBI, 2014).The bank had also
collaborated with Suzlon Energy Ltd for the generation of wind power for selected branches
by setting of windmills in Gujarat, Tamil Nadu and Maharashtra(Business Standard, 2014).It
has become a signatory to the Carbon Disclosure Project in which they undertake various
environmentally and socially sustainable initiatives through its branches spread across the
length and breadth of the country (WWF-INDIA, 2014).Export Import Bank of India (EXIM)
and SBI entered into an agreement to jointly provide long term loans up to 14 years to Spain
based company Astonfield Renewable Resources and Group T-Solar Global SA for building
solar plant in India (Yadav & Pathak, 2013).

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2. Punjab National Bank (PNB): According to Corporate Social Responsibility Report 2010-
11 (PNB, 2011),they had taken various steps for reducing emission and energy
consumption.PNB is conducting Electricity Audit of offices as an energy conversation
initiative and maintained a separate audit sheet for assessing the impact of green initiatives
taken by them. The bank had organized more than 290 Tree Plantation Drives. It started
emphasizing on green building practices such as energy efficient lights, immediate repair of
water leakage, printing on both sides of paper, mater censors for lights, fans, etc.The
organization had signed a ‗Green Pledge‘ with Ministry of New and Renewable energy under
which they had set up the butterfly park at the compound of Guruvayur temple which houses
18 types of medicinal plants. They had formulated guidelines to ensure that all the necessary
approvals and permissions, including from Pollution Control Board has been obtained before
disbursement of term loans and for the project loans, compliance with environment and
social safeguards including rehabilitation and resettlement of project affected people is to be
ensured as pre-disbursement condition. The bank is also considering stepping of sustainable
development with particular reference to the Equators Principles on project finance. The
organization had sanctioned nine wind energy projects with an aggregation limit of 185.81
crore and they were also awarded with a second prize for ‗Best Wind Energy Power
Financer‘ by wind power India2011.

3. Bank of Baroda: According to the annual report of BOB (2013), they had taken various
green banking initiatives such as: -While financing a commercial project, BOB is giving
preference to environmentally friendly green projects such as windmills, biomass and solar
power projects which help in earning the carbon credits. The organization had made
considerable changes in their lending policy, i.e. it is compulsory for industries to obtain ‗No
Objection Certificate‘ from the Pollution Control Board and also they are not extending any
finance to environmental hazardous industries which are using ozone depletion substances.
The bank had taken several technological initiatives such as compliance with e-business
guidelines, use of internet banking, mobile banking to promote paperless banking and also
increasing the installation of ATM‘s in most of uncovered areas to reduce the petrol or diesel
consumption in travelling and helps in maintaining a clean environment. As a part of green
initiative, they had made changes to desktop virtualization; backup consolidation and server
virtualization improve data centre operational efficiency. The bank is also promoting
measures for pollution control and environmental conservation.

4. Canara Bank: According to Canara Bank (2013), the bank had taken many green initiatives
such as: - As a part of green banking initiative, the bank had adopted environmental friendly
measures such as mobile banking, internet banking, tele-banking, solar powered biometric
operations etc.Canara bank had set up e-lounges for high-tech banking facilities like internet
banking, pass book printing kiosk, ATM, online trading, tele-banking and cash/cheque
acceptor‘s The bank had implemented e-governance for HRM function and several other
administration areas to reduce the paperwork. In terms of Lending policy, they are giving due
preference and weight age to projects which can earn carbon credits like solar energy
projects, windmills, etc.The bank is also not extending any finance to the units which are
producing ozone depletion substances such as cholorofluoro carbon, carbon tetrachloride,
aerosol products, solvents etc.While appraising any project, the organization insists the
manufacturing units which are emitting toxic pollutants, to install water treatment projects to

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Chapter 3 P a g e | 24

process such pollutants and they also ensure that the borrower to obtain No Objection
Certificate (NOC) from central or state pollution control board.

5. ICICI Bank Ltd: ICICI bank had adopted ‗Go Green‘ initiative, which involves activities
such as Green products/offerings, Green engagement and green communication with
customers as per ICICI Bank (2014):- The bank is offering green products and services like
Instabanking: - It is a service which gives convenience to the customers to do banking
anywhere and anytime through internet banking, mobile banking, IVR banking, etc. This
reduces the carbon footprint of the customers as they do not require the physical statement or
travel to the bank branches. They are offering 50% waiver on processing fee of auto loans on
the car models which uses alternate sources of energy like the Civic Hybrid of Honda, Tata
Indica CNG, Reva electric cars, Mahindra Logan CNG versions, Maruti's LPG version of
Maruti 800, Omni and Versa and Hyundai's Santro Eco.The bank had reduced the processing
fee for the customers who are purchasing homes in LEED certified buildings. During Diwali
2013, the organization had conducted an environmental awareness program for employees
and customers in which money plant was presented to all the people present there as a token
of collective responsibility to protect the environment. It has also become partners with the
Green theme CNBC – overdrive auto awards. The bank is celebrating World Environment
Day every year on June 5. They perform various activities on that day like green pledge
through signature campaigns, plantation and distribution of saplings etc. They are also
celebrating Earth hour every year in March in which they switch off the lights of their
premises, branches and ATM‘s between 8:30 pm to 9:30pm. The bank always insists their
customers for online bill payment, online funds transfer and subscription to e-statements
which promote ‗paperless‘ and ‗commute free‘ modes of banking transactions. The
organization is looking forward for partnerships with national and international green
organizations and NGO‘s. They are partners with Green Governance awards set up by BHNS
to appreciate the participant‘s organization effort beyond the statutory compliance for
protection of the environment.

6. HDFC Bank Ltd: HDFC bank is taking up various measures inreducing their carbon
footprints in the area of waste management, paper use and energy efficiencies as per HDFC
Bank (2013):- The bank is encouraging their employees to prevent any wasteful use of
natural resources and emission of Greenhouse gasses. They are reducing the use of paper
through issuing e-transaction advices to their corporate customers, communicating through
electronic media with their high net worth customers and encouraging e-statements to their
retail customers. The bank is also promoting energy conservation by replacing conventional
lighting with CFL, switching off all the lights after 11 pm at all the branches and establishing
green data centers with state of the art technologies. The organization is exploring renewable
energy by setting up of 20 solar ATMs with a pilot ATM set up in Bihar, and by replacing
batteries in ATMs with Lithium-ion batteries. They are also managing their waste by tying
up with vendors for recycling of paper and plastic. The bank is procuring green products
which are compliant with the norms of the Central Pollution Control Board and which are
rated by Energy Star.

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7. Axis Bank Ltd: AXIS bank implementing several initiatives in green banking such as per
Axis Bank (2013):-In august 2011, the bank had initiated the process of collecting all the dry
waste generated from the corporate office and thirty four branch offices in Mumbai, and
recycle it to notepads, notebooks and envelopes. Till date, more than 1, 00,000 kgs of paper
has been recycled and converted to 12,000 notebooks, notepads and envelopes which are
used at corporate office and branches of the bank; The corporate office of the bank, located
in Mumbai, is designed and constructed as a Platinum LEED certified ‗Green Building‘; Car
pooling has been initiated by a bank to reduce carbon footprint; They are also encouraging
their customers to use e-statements and other electronic communications to reduce paper
consumption; Annual reports are being sent through emails; the organization had initiated
Independent ATM Deployment (IAD) model in which ten solar based ATM has been set up
in Coimbatore circle.

8. Kotak Mahindra Bank: Through the ‗Think Green‘ initiative, the bank had taken several
initiatives such as to reduce the paper consumption, the bank is encouraging their customers
to sign for e-statements and also they have become partners with ‗Grow- Trees.com‘ to plant
one sapling for every e-statement on behalf of its customers. 16,623 saplings were planted
FY 2012-13.The organization had established the ‗Social, Environmental Management
System Plan‘ (SEMSP) to evaluate the environmental and social risk of borrowers which is
based on an IFC sustainable framework and performance standards. As per the guidelines of
Ministry of Corporate Affairs (MCA), the bank had communicated to their shareholders to
adopt electronic copies of annual report instead of physical copies. In 2009, they had
consolidated their data centres into a single facility to improve power usage efficiencies. The
rain water harvesting tank has been installed in the premises and also used oil generated from
a diesel generator is disposed off through vendors approved by Pollution Control
Board.Bihari (2011) had also highlighted the green banking initiatives being taken by the
Indus IND Bank, SBI,Union Bank of India, IDBI Bank, ICICI Bank, YES Bank and ABN
Amro Bank.. According to the author, Mumbai, Delhi and Chennai are among the ten most
polluted cities in the world and the major industries which cause pollution are fertilizers,
paper and pulp, pesticides/insecticides, chemicals pharmaceuticals, metallurgical and textiles.
SIDBI had made significant changes in their lending principles and implemented a
precondition for sanctioning of credit. They had made it compulsory for a company to obtain
‗No Objection Certificate‘ (NOC) from the state pollution control board before establishing
the enterprise.

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Green Banking Implementation Year Name of the Banks

1996 Union Bank of India
2003 Citi Group INC, HSBC, ING Vyasa, RBS,
Royal Bank of Canada, Syndicate Bank,
Standard Charted
2005 YES Bank, Corporation Bank
2006 Bank of America, JP Morgan
2007 ICICI Bank, Oriental Bank of Commerce,
State Bank of India
2008 Bank of Baroda, Karnataka Bank, Industrial
Bank, DENA Bank
2009 HDFC Bank, Indian Overseas Bank,
Indusland Bank, Punjab National Bank,
ABN Amro, Karur Vyasa, Andhra Bank
2010 AXIS Bank, Kotak Mahindra, South Indian
Bank
2011 Canara Bank, IDBI Bank, EXIM
2013 IDFC

Publication dates of Green Banking adopted in Indian Banks

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Chapter 3 P a g e | 27

Case Study of IndusInd Bank

IndusInd Bank, which commenced its operations in 1994, caters to the needs of both Consumer
& Corporate customers. It has a robust technology platform supporting mult i - channel delivery
capabilities. The Bank enjoys a patronage of 2 million customers and has a network of 210
branches and 497ATMs spread over 168 geographical locations in 28 states and union territories
across the country. The Bank also has Representative Offices in Dubai and London.

The Bank is driven by the state-of-the-art technology since its inception. It has multi-lateral tie-
ups with other banks providing access to more than 21000 ATMs for its customers. It enjoys
clearing bank status for both major stock exchanges - BSE and NSE - and three major
commodity exchanges in the country - MCX, NCDEX, and NMCE. It also offers DP facilities
for stock and commodity segments. The Bank has been bestowed with the mandate of being a
Settlement Banker for auctions at Kolkata, Siliguri, Coonoor, Coimbatore and Guwahati.
In a pioneering initiative in 'Green Banking' project, the Bank became the first bank in
Maharashtra to open a solar-power ATM. Subjects like sustainable development, social
responsibility and climate change are fast becoming part of the corporate vocabulary and
IndusInd is at the forefront of this change in the Indian banking sector.

In Q4, the Ban k received a series of awards commencing with the prestigious ‗Technology Bank
of the Year-2009‘ award in the private and foreign bank category from the Indian Banks‘
Association (IBA). The State Forum of Bankers Clubs, Kerala, bestowed the ―Excellence
Award‖, as the second best new generation Bank in Kerala. Recently, it has also been recognized
as the Bank with the Best Credit Quality in FE India‘s Best Banks, a publication brought out in
support by Ernst & Young, reflecting the robustness of Bank‘s credit assessment systems. The
Bank has been awarded the highest P1+ rat ing for its Fixed Deposits and Certificates of Deposit
by CRISIL. Recently, CRISIL has reaffirmed its P1+ rating of IndusInd Bank's fixed deposits
and certificates of deposit program. This reflects significant improvement in its asset quality. The
rating also factors in the Bank's resources and earnings profile, and average capitalization levels
Indus Mobile will allow the customers to bank anytime anywhere through their mobile phone
.Customers can access information and transact at absolutely no cost charged by the Bank and at
high level of safety. Customers will also be able to book movie tickets, pay their bills and even
perform Mobile to Mobile Funds transfer, NEFT and RBI‘s
Inter-bank Mobile Payment Service (IMPS).IndusInd Bank is the only bank in India which
allows its customers to initiate Card less Cash withdrawal transactions through the Mobile
Application; which means the beneficiary can withdraw Cash from select IndusInd Bank ATMs
without using an ATM/Debit Card. IndusInd Bank inaugurated Mumbai's first solar-powered
ATM as part of its "Green Office Project" campaign titled ―Hum Aur Hariyali". With the solar-
powered ATM, the bank expects to save around 1,980 Kw of energy annually besides reducing
carbon emissions by 1,942 kg. It also expects to save power bills of around Rs 20,000 per year in
urban areas, where it replaces diesel generators with solar panels .In a bid to reduce the carbon
footprint, Romesh Sobti, MD & CEO of IndusInd Bank, who describes "green banking" as his
mission, has also introduced thin computing (which reduces the need for many personal
computers), e-archiving, e-learning, e-waste management, paperless fax, energy conservation,
CNG cars and supporting finance programs with incentives to go green.

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IndusInd Bank is just one of the several leading Indian banks with similar plans. "There is
already a group of leading banks in India that recognize the importance of their role and the
commercial advantage this will give them," says Emily Farnworth, senior advisor on the finance
sector to The Climate Group, which acts as secretariat to signatories of the Climate Principles.

Solar Powered ATM by IndusInd Bank in Mumbai

Strategies:

 Set SMART (Specific, Measurable, Attainable, Realistic and Timely) green goals as the
internal targets to reduce your carbon footprint along with timelines. Develop criteria for
measuring progress towards the goals.
 Engage with key stakeholders and create awareness of environmental issues and their
impact on the economy, the environment, and the society. Also, explain to them the
business and environmental value and the necessity of greening the bank processes,
products, and services.
 Encourage, motivate, and energize the workforce to follow the green path and to come up
with and implement their own ideas. In addition, also encourage clients, suppliers, and
outsourcers to adopt green practices.
 Monitor the progress regularly; watch industry trends and new developments. Revise the
green policy as required.

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Initiatives:

 Electronic and telephone banking, facilitating customers to perform most of their banking
needs anytime, anywhere.
 Automatic payments reduce the need to write and send cheques by mail.
 Electronic (paperless) statements, product information, guides and annual reports to
customers and stakeholders
 Offering and promoting mutual funds that focus investment in 'green' companies
 Offering a special line of credit to help homeowners invest in energy-efficiency upgrades
for their home.
 Offering credit cards co-branded with environmental charities.

Customer Knowledge and Awareness

Customer Knowledge Level:

Knowledge part is divided into three categories, i.e. Green Banking in General, Green Lending
Policy, and e-Banking services. Based on the result, the customer knowledge level towards all of
categories is at the average level. The category with
Highest level of customer knowledge is Green Banking in General; with the percentage is
53.04%. This category is consisted of six statements about green banking concept and green
banking implementation. The next is the category of Green Lending Policy with the percentage
reaching 49.25%. This category is consisted is two statements about green lending
implementation and green lending concept. Based on the result, the customer knowledge level on
the statements in the category of Green Banking in General and Green Lending Policy has a
reverse correlation with the age background of the customers. The older customers have lower
knowledge level. It is probably due to the concept of green banking and green lending policy
usually found journals and articles that is more often read by younger people. Meanwhile, the
older people are usually less active in reading due to the function of the sense of sight that has
been reduced.
The lack of customer knowledge level towards green banking and green lending policy can be
caused by the lack of dissemination. Based on the brainstorming, the banks admit that the
concept of green banking and green lending policy has never been introduced to the customer
previously. This concept should be disseminated widely to the customers so they can support and
participate in this program. The dissemination method will determine the successfulness of the
delivery of information. The dissemination through printed media; such as journals and articles,
and written information on the website will be less effective to the characteristics of Indian
people who are less active in reading. It requires the methods that lead directly to the customers
without requiring them to do more activities in getting the information. The most appropriate
methods are providing the ads in the public television and in the banking hall television, and
conducting seminar or talk show. The dissemination through public television will be effective to
the characteristic of Indian people who are less active in getting the information because the
information presented in the form of video is without requiring the customers to actively read. It

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also considers the appropriateness for the older customers who usually spend their time at home
and mostly watch television. The dissemination through television at the banking hall will also
be effective for the customers who get tired of waiting. The video designed in the form of
animation contains of the banks adverse impacts in environmental damage, the concept of green
banking, and the concept of green lending policy. The video will be displayed repeatedly. Thus,
the information will be ingrained in the brain of customers. Besides, seminar or talk show will
also accommodate customers who have an interest to know green banking in more detail and
deeper. At a seminar or talk show, the information is presented in detail and thoroughly by the
information provider without requiring the activeness of the participants. In addition, participants
can ask a few questions about the information that overwhelms them which has not been
conveyed by information providers.

The customer knowledge level towards the category of e-Banking services is also at the average
level; with the percentage is 46.77%. Each e-Banking service is consisted of two statements
about the features and media access. Based on the result, ATM is the most known e-Banking
service. The knowledge level is at the good level, with the percentage reaching 73.25%. The high
knowledge level due to the ATM is the most widely used services, in which 99% of bank
customers have used this service to perform their daily banking transactions. Unfortunately,
ATM is the only e-Banking services with the level of knowledge at the good level. SMS
Banking, Mobile Banking, and Internet Banking are at the average level. Meanwhile, e-Money
and e-Billing are at the poor level. This is related to the number of customers using those e-
Banking services, in which there are approximately 30% to 45% of customers using SMS
Banking, Mobile Banking, and Internet Banking, while less than 10% of customers using e-
Money and e-Billing. Based on the cause identification, the lack of customer knowledge towards
e-Banking services due to the customer low interest in reading, the customer less concern on the
environmental issues, the customers needs which have been already fulfilled by the banking
services used, the lack of dissemination, the less appropriate dissemination methods, the
incomplete and unorganized information, and the inadequate infrastructure are identified. Based
on the brainstorming, some of disseminations of e-Banking services have been performed by the
banks, such as providing the explanations and offers directly by the customer service, providing
ads in the public television as well as in the banking hall television, on banners, billboards, and
brochures, and also on the official website. However, the bank emphasizes the dissemination for
some e-Banking services only. For example, Bank B just disseminates ATM, SMS Banking,
Mobile Banking, and Internet Banking services. Meanwhile, e-Money and e-Billing has not been
intensively disseminated to the customers. Bank should disseminate the e-Banking services more
intensively, not only for several services but also for all services provided by the banks. The
selection of appropriate dissemination methods will determine the successfulness of the delivery
of information. The other causes of lack of customer knowledge towards green banking are the
customer low interest in reading. This causes the dissemination through writing information
which will be less effective. It requires the dissemination method that leads directly to the
customers without requiring the customer activeness in seeking information. The appropriate
dissemination methods are like the ads in public and banking hall television, and on the

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homepage of the official website in the form of pictures or video. The ads in the public television
can be designed in the form of animation video which only contains the invitation to use e-
Banking services by presenting the convenience and the environmental message carried by each
service. Meanwhile, the ads in the banking hall television is designed with the more complete
information, such as the brief explanations, features, how to register and how to use, cost, as well
as the term and conditions. The video is displayed alternately and repeatedly. Thus, the
information can be ingrained in the brain of the customers. The ads on the homepage of the
official website also should be contained of the invitation to use e-Banking services only.
Therefore, in order to meet the customer information needs about the entire e-Banking services,
it requires a special menu that contains all information about the e-Banking services. A link of
the menu can be displayed on the picture or at the end of the video of e-Banking services ads in
order to facilitate the customers to find the detailed information about e-Banking.

E-Banking Services Knowledge Level Criteria

SMS Banking 46.88% Average
Mobile Banking 45.50% Average
Internet Banking 46.13% Average
ATM 73.25% Good
e-Money 34.38% Poor
e-Billing 34.50% Poor
Customer Knowledge Level towards Each E-Banking Service

Customer Awareness Level:

Awareness part is also divided into three categories. Those are Green Banking in General, Green
Lending Policy, and e-Banking Services. All of the categories are at the good level of awareness.
The customer knowledge level towards Green Banking in General is 75.33%. This category is
consisted of three statements about the banks adverse impacts on the environment, the bank role
in the environment improvement, and the green banking contribution in the environment
improvement. The result shows the customer knowledge on the statement of green banking
which is at the excellent level. Meanwhile, the customer knowledge on the statement of the bank
role in the environment improvement and the banks adverse impacts on the environment are at a
slightly lower level not at the good level. It seems that some customers are less amenable that the
bank has an adverse impact on the environment.

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They assume the bank system only produces very little impact when compared to any other
business activities, whereas it shows the indirect impact through the loans provided to the
industry that not environmentally responsible and causes huge impact. The category of Green
Lending Policy is consisted of three statements about the contribution of green lending policy in
the environment improvement. This category is the lowest level of awareness, with the
percentage reaching 74.40%. The customer awareness on the statement of the green lending
policy contribution in the environment improvement is the highest level of awareness in this
category; with the percentage is 75.80%. The second is the statement of the green lending which
can help the government to increase the number of projects environmentally; with the percentage
is 74.20%. The last is the statement of the green lending which can help government to increase
the number of the industry environmentally, with the percentage reaching 73.20%.

Green lending policy is one of the important green banking programs. Customers are supposed to
be aware of the contribution of the green lending policy in the environment improvement,
especially customers with occupation backgrounds as private employees and entrepreneurs who
are directly related to this program. However, based on the result, the customers with the
occupation backgrounds as private employees and entrepreneurs do not have a higher awareness
level when compared to customers with other occupation backgrounds. The category of e-
Banking services is also consisted of three statements. Those are the statements of e-Banking
services which can reduce the use of paper, the air pollution, the use of fuels. In overall, the
customer awareness level towards e-Banking services reaches 74.72%. E-Banking service with
the highest awareness level is Internet Banking; with the percentage is 77.80%. This percentage
is only slightly different to the customer awareness level towards SMS Banking and Mobile
Banking, with the percentages reaching 77.27% and 77.60%. The customer awareness level
towards ATM, e-Money, and e-Billing services are quite lower when compared with the three e-
Banking services described earlier. The low level of customer awareness towards ATM service
can be caused by some customers that are less amenable that the ATM can reduce the use of
paper, the air pollution, and the use of fossil fuels. In fact, the ATM service is still using the
paper, but the paper used when conducting the transactions via ATM is less than the transactions
at the teller bank. In ATM service, paper is only used to print out the transaction receipt, while in
at the teller bank more paper is used for the transaction request, transactions receipt for
customers, and transactions receipt for the bank. In addition, ATM provides the option whether
to print out the transaction receipt or not. Therefore, customers may choose the option to reduce
the environment adverse impacts. The customers are less amenable that the use of ATM service
can reduce the air pollution. By using vehicles to get to the ATM machines instead of walking is
one of the actions to reduce the air pollution. The number of ATM machines available is more
than the number of bank branches. It makes the distance to conduct the banking transactions is
shorter. Therefore, by using the ATM can reduce the air pollution and the use of fossil fuels,
although the contributions are still lower than the other e-Banking services. The low customer
awareness level towards e-Money and e-Billing also occurs because there are still many
customers who are not familiar with these services. Based on the brainstorming, the banks do not
disseminate these services intensively. It is caused of inadequate infrastructures. Merchant e-

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Money which is available in India is still highly limited. Therefore, the banks consider the
dissemination of e-Money to customers in India will be less useful.

E-Banking Services Knowledge Level Criteria

SMS Banking 77.27% Good
Mobile Banking 77.60% Good
Internet Banking 77.80% Good
ATM 73.80% Good
e-Money 71.60% Good
e-Billing 70.27% Good
Customer Awareness towards Each E-Banking Service

Correlation between Consumer Knowledge and Awareness Level:

Based on the result, the level of customer knowledge towards green banking is still at the
average level. However, the customers are already aware that this program contributes to the
environment improvement. The lack of knowledge makes the customers cannot support this
program properly, even though they are aware that this program is good for environment. This is
shown by the small number of customers using the e-Banking services, in which there are less
than 50% of the customers using e-Banking services, except the ATM service. If the customers
are informed about this program, they will be able to give their role as stakeholders in the
implementation of green banking by using e-Banking services that contributes to
the environment improvement, for instance.

The lack of customer knowledge towards green banking can be caused by the lack of
dissemination. This has been recognized by the banks that they have never done the
dissemination of green banking before. While the dissemination of e-Banking services deems to
be lacking and the dissemination methods consider less appropriate to the characteristics of the
customers. This requires the banks to be more aggressive in disseminating the green banking,
both the concepts and products. Thus, the customers can support the program by participating.

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Findings

 Basically Green banking avoids as much paper work as possible and rely on online/
electronic transactions for processing so that we get green credit cards and green
mortgages. Less paperwork means less cutting of trees. It also involves creating
awareness to banking business people about environmental and social responsibility
enabling them to do an environmental friendly business practice.

 Green Ethical banks adopt and implement environmental standards for lending, which is
really a proactive idea that would enable eco-friendly business practices which would
benefit our future generations.

 When we are awarded with a loan, the interest of that loan is comparatively less with
normal banks because green banks give more importance to environmental friendly
factors - ecological gains.

 Natural resources conservation is also one of the underlying principles in a green bank
while assessing capital/operating loans to extracting/industrial business sector.

 Green Banking as a concept is a proactive and smart way of thinking with a vision for
future sustainability of our only Spaceship Earth - as design science explorer Richard
Buckminster Fuller called our Earth.

 The value proposition for corporations to go green includes many of the same issues as
eliminating paper waste, but they are also extremely concerned with eliminating or
decreasing errors due to manual processing and with creating a profitable bottom line.
For these reasons and more, corporations are actively pursuing green programs, many
companies are taking active steps to reduce waste, implement sustainability measures and
increase profitability by going green. That for individual consumers but on a much large
scope and with additional concerns. Corporations may share a desire to reduce carbon
footprint and enhance security.

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Chapter 4 P a g e | 35

Conclusions
Green Banking has been boosting to improve the environment and promoting economic growth.
Until a few years ago, most traditional banks did not practice green banking or actively seek
investment opportunities in environmentally-friendly sectors or businesses. Indian banks are far
behind their counterparts from developed countries. If Indian banks desire to enter global
markets, it is important that they recognize their environmental and social responsibilities. Only
recently have these strategies become more prevalent, not only among smaller alternative and
cooperative banks, but also among diversified financial service providers, asset management
firms and insurance companies.

Further, those industries which have already become green and those, which are making serious
attempts to grow green, should be accorded priority to lending by the banks. This concept of
"Green Banking" will be mutually beneficial to the banks, industries and the economy. Not only
"Green Banking" will ensure the greening of the industries but it will also facilitate in improving
the asset quality of the banks in future. There are lot of opportunities and challenges for Indian
banks in adopting ‗Green Banking‘ as profitable business. Green banking if implemented
sincerely will act as an effective ex ante deterrent for the polluting industries that give a pass by
to the other institutional regulatory mechanisms. Therefore, for sustainable banking, Indian
banks should adopt green banking as a business model without any further delay.

Banks are responsible corporate citizens. Banks believe that every small 'GREEN' step taken
today would go a long way in building a greener future and that each one of them can work
towards to better global environment. 'Go Green' is an organization wide initiative to lead banks,
their processes and their customers to cost efficient automated channels. This will help in
reducing carbon-footprint as well as in building awareness and consciousness about
environment, nation and society. All over the world, banks and financial institutions are
concerned about the overall impact of depletion of environment. To sustain the development of
the Indian economy bank and financial institution have to work more hard as compare to big
foreign banks as they are playing important role in maintaining the sustainability of their country
economy. Overall, green banking is really a good way for people to be more aware about global
warming and will contribute a lot to the environment and make this earth a better place to live for
future generations. There is definitely a huge opportunity in clean, renewable energy
technologies, emissions reduction and reduced-carbon transportation which can be slowly and
steadily be achieved if we get cooperation from all sectors of the economy and bank being an
integral part of our economy must lead from the front. Currently, in India, the concept of green
banking is catching up and banks are actively looking for ways to portray themselves as a Green
Bank.

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Recommendations

Green banking is an integral part of the Bank‘s environmental policy as applied through its wider
Corporate Social Responsibility strategy. The adoption of green banking strategies will help the
bank to deal with these risks involved in their business operation.

 Engage with key stakeholders and create awareness of environmental issues and their
impact on the economy, the environment and the society.

 Banks can involve themselves in carbon credit business, wherein they can provide all the
services in the area of clean development mechanisms and carbon credit business

 Banks can support projects ranging from community cleanups to national initiatives on
climate change, water, air, biodiversity and more.

 Ginovsky had emphasized that in order to implement ecologically friendly practices,

banks should launch new banking products which promotes the sustainable practices and
also needs to restructure their back office operations.

 Set SMART (Specific, Measurable, Attainable, Realistic, and Timely) green goals as the
internal targets to reduce carbon footprint along with timelines.

 The banks can manage environmental risk by designing proper environmental

management systems to evaluate the risks involved in the investment projects. Thereafter,
those risks can be internalized by introducing differential interest rates and other
techniques. Also, the bank can withdraw itself from financing high-risk projects.

 Green banking signifies generating such financial products and services that support
commercial development with environmental benefits.

 The banking institutions should prepare an environmental risk and liability guidelines on
development of protective policies and reporting for each project they finance or invest.

 Make customers more and more aware about green banking through their website.

 Promoting different forms of electronic banking.

 Creating customer‘s awareness through the media.

 Carbon footprint reduction by saving energy and paper.

 Providing environment friendly rewards to customers.

 By financing more and more environment-friendly projects

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 Social Responsibility services done by banks.

 Clear policies are required to altering the present management systems to incorporate
sustainability issues.

 Training and development of relevant skills within bank employees so that they can use

Road Ahead:

The perception towards complying with environmentally-safe norms and standards is changing
over time. People are gradually becoming more conscious about environmental issues.
Therefore, the banks have huge scope to attract them to adopt environment friendly green
banking practices. Environmental friendly or green technologies also make economic sense for
the banking industry. Today it is believed that adopting environmentally sustainable banking
saves costs and time, minimizes the risk, enhances the reputation of banks and contributes to the
common good of environmental sustainability. So it serves both the purposes of commerce as
well as social responsibility. Realizing its importance, more and more people are gradually
becoming computer literate and number of mobile and internet users is increasing day by day,
thereby, facilitating widespread implementation of green banking practices throughout the
country.
However, banks need to be more cautious in India about the environmental aspects of their
clients and products because
 The future of exports-market is likely to experience stringent environmental rules and so
eco-friendly products will have better market.
 Increase in demand for pollution-control technologies will require more financial
assistance from banks.
 Reserve Bank of India (RBI) may follow environmental guidelines for the banks on the
lines of IFC and Asian Development Bank.
 Big investment projects supported by international organizations like the World Bank and
ADB require Environmental Impact Assessment (EIA), so the banks should lay roadmaps
and chalk out plans to implement procedures like:-
o Assessment of risk due to environment
o Environmental audit management
o Assessment of credit requirement and loan follow up before investing on
different projects.

Green Banking in India: A Study of Various Strategies Adopted by Indian Banks for Sustainable Development