Introduction:

Sustainability is typically associated with the effective use of natural resources and its effect on
profitability. However, sustainability as a core strategy extends well beyond energy-efficiency,
green investing. Sustainability in the banking sector is also about how we design, build and
execute our banking businesses for the long run, i.e., taking a holistic view of resources. High
sustainability companies are characterized by a coherent set of corporate policies related to the
environment, employees, community, products, and customers a considerably broader list of
components than the traditional notion of sustainability. Highly sustainable firms outperform the
others because their cultures and practices allow them to attract better human capital, establish
more reliable supply chains, avoid conflicts and engage in more product and process innovations
in order to be competitive.

Sustainable Banking:
This section focuses on the role of commercial and investment banks in sustainable development.
It examines recent trends in banking and sustainable development, innovative banking practices,
and events that have shaped the role of the banking sector in sustainable development. The
integration of sustainability into the banking sector has taken two key directions:
The pursuit of environmental and social responsibility in a bank's operations through
environmental initiatives (such as recycling programs or improvements in energy
efficiency) and socially responsible initiatives (such as support for cultural events,
improved human resource practices and charitable donations).

The Six Cs of Sustainable Banking:

Sustainability in the banking sector is also about how we design, build and execute our banking
businesses for the long run, i.e., taking a holistic view of resources. In this light, there are six Cs
of sustainable banking: clients, culture, compliance, compensation, costs and capital.

Clients
A client centric strategy, business model, processes, products and services all tied to client
delight is the heart of sustainable banking. Look at Apple. Clients are the heart of Apple. In
return, their clients are loyal, they wait for hours in line to buy the next gadget even if they
cannot rationally justify their purchase, and they pay premium prices for Apple products. Apple
delights clients.

Culture
There is a lot of talk about cultural change going on in banking. We have to change how our
people think, said one C-level banker to me recently. When I challenged him what that really
means, he could not provide concrete answers. Most banks adapt moderately well to technical
change: systems, processes, and the like, but when it comes to people, they are severely
challenged.

Compliance
Typically, economists have found that carrots do not work; only sticks do in motivating
compliance. In a recent conversation with a senior business risk manager, I was informed that
sticks are the only way to force adherence to compliance rules. I am not so sure it is so simple.
Tyler also found that people including bankers will take on the responsibility for obeying laws
when asked to do so by a legitimate authority. Most bankers follow the rules, but controls are
often lacking or inadequate. This is a critical component of sustainable banking.
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Compensation
There is an elephant in the room and it has a name: compensation. It is a proven fact and now
common knowledge that total compensation in the financial services sector worldwide is far
above the level of the real economy and industry. To be fair, many banks are reducing the amount
of cash bonuses paid out, extending the vesting time for stock-options from two and three years
to four and five years, but the overall level of compensation has not gone down. Compensation
levels must come down in order to ensure long-term sustainability.

Costs
Our research finds that the majority of cost-cutting exercises are not sustainable, nor do they
increase the quality of the customer experience. Dieting is not sustainable. Sustainable costcutting is about a true life-style change. Cost reductions via one-off cost-cutting initiatives tend
to creep back within two years. We have identified several life-style foci for banks which can
help create sustainable cost-cutting over the long-term. Since more than 50 percent of banks
costs are related to staffing, the number of people needed to process customer transactions is
phenomenal.

Capital
Capital provides banks with the financial backing to do business. Together with clients, capital is
the most important sustainability factor for banks. As the majority of banks have grown from
being a deposit and mortgage bank into providing more complex solutions for clients, with
increased risk to the bank, the need for additional capital is expected. Basel III provides clear
guidelines for all banks regarding their capital base, risk coverage and leverage in order to be
able to absorb losses in a crisis.

Some Important Indicators of Banking Sector Performance:

In terms of its banking sector performance Bangladesh has done well overall despite some
setbacks in the area of public banking. Indicators like the broad money (M2) to GDP ratio, which
is often used as an indicator of the depth of the financial sector, has risen from 12% in 1980 to
57% in June 2012, along with total bank credit as a share of GDP has grown from 14% to 55%
over the same period. In the absence of a well-developed capital market, the growth in private
credit has played a major role in supporting the expansion of the private sector in Bangladesh.

Figure: Indicators of Growth of Banking Activities

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One of the most important indicators of the health of the banking sector is the Non-Performing
Loan (NPL). There was a sharp decline in the share of non-performing loans (NPLs) from a high
of 41% in 1999 to the lowest point of 6.1% in June 2011 but it has been on the rise ever since.
Both SCBs and PCBs recorded impressive improvements in terms of addressing the NPL
problem. In particular, the NPL ratio of private banks declined to less than 3 percent in 2011,
compared with more than 27% in 1999 but increasing to 5.7% in 2014.

Role of Commercial Banks and Specialized Banks:

Commercial Banks are the greatest mobilize of domestic savings and suppliers of working
capital to trade, commerce, industry and agriculture. There are different types of Commercial &
Specialized Banks in our country that are playing a vital role in our economic and social
conditions. Some examples of different Private Commercial & Specialized Banks are given
below:
Objectives of Grameen Bank:
To extend the banking facilities to the poor men and women.
To eliminate the exploitation of the money lenders.
To create opportunities for self-employment for the vast un-utilized and under-utilized
manpower resource.
To bring the disadvantaged people within the fields of some organizational format
which they can understand and operate, and can find socio political and economic
strength in it through mutual support.
To reverse the age-old vicious circle of law income, low savings, low investment, low
income into an expanding system of low income, credit, investment, more income.

Objective of Bangladesh Krishi Bank:

To provide credit facilities for all kinds of agricultural and agro-based economic
activities keeping in view the needs of small and marginal farmers.
To promote cottage and other allied industries in rural and urban areas.
To assist farmers in adopting appropriate technologies.
To ensure availability of agricultural inputs e.g. seeds, agricultural machineries,
equipments, fertilizers etc.
To earn a normal profit for meeting the operational expenses, building of reserve and
expansion of activities to cover wider geo-graphical area.

Social Investment Bank:

Social Investment Bank Limited an interest-free Shariah bank in Bangladesh. The bank
provides all types of commercial banking services and it conducts business on the Islamic
principles of musharaka, murabaha, bai-muazzal and hire purchase transactions. The broadspectrum operational aspects of the bank have been set out to encompass three sectors formal,
non-formal and voluntary in a comprehensive program. In the formal corporate sector, the bank
offers banking services through deposit and investment accounts, trade financing, collection of
bills, money transfers, lease of equipment and consumers durable, hire purchase and installment
sale of capital goods, investment in low-cost housing and real estate management, and financing
projects in agriculture, transport, education and health sectors.
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Large Companies
While commercial banks are substantial lenders to large companies, as well as providing a
variety of other financial services, such as transaction processing and treasury management, their
ability to influence larger corporations is relatively limited, as competition is strong and these
services are rarely central to large corporations. The greater influence on larger corporations will
come from the investment sector and is discussed in the next chapter. These can include
environmental considerations. While many banks will conduct an environmental risk review as
part of the credit assessment this tends to be historic, and few (other than development banks)
appear to actively impose and enforce environmental conditions. Environmental impact
assessments can be a useful tool with such projects for identifying environmental project risk and
suggesting risk management procedures. Liability regimes will also have an impact on risk
assessment of such financings.

SMEs
Banks are the most significant source of external finance to SMEs, and can exert considerable
influence on them - most SMEs have a banking relationship. When lending to SMEs, banks
consider the quality of management and other risks, which can include environmental factors.
Thus banks can explicitly factor in environmental considerations when deciding whether to
extend funds, in conditions (e.g. covenants) they impose on lending and in the terms they offer.
Financial institutions are a major source of information for companies, particularly SMEs, and
there is potential for financial institutions to act as a conduit of information in the environmental
area. There are already a number very promising initiatives here.

Corporate Sustainability:
Bank sustainability does not necessarily imply higher costs, more bureaucratic processes and
lower financial returns. Sustainability is firmly rooted in a business perspective where socio
environmental performance goes hand in hand with economic performance a change of paradigm
that prioritizes permanence and perpetuation of the organization. In some situations,
improvement in the socio-environmental performance can generate short-term financial gains for
the organizations see, for example, opportunities from carbon credit trading. A third group of
companies is concerned with both dimensions.

Environmental Insurance
Environmental insurance is a reasonably new practice in the worldwide financial sector, mostly
found in European banks. The product consists basically of covering expenses incurred by
polluting activities, for example, relating to damages and losses caused to third parties, body and
material damages, cleaning and even legal costs, which would therefore play a compensatory
role in the event of an environmental accident. In Bangladesh, none of the bank in the study was
found to offer this type of product. This could therefore be a better explored market in the future
by the major Bangladeshi financial institutions, depending, of course, on increased demand.

Socio-Environmental Criteria in Selecting Suppliers

Considering the large number of suppliers to financial institutions, screening suppliers for the
inclusion of social and environmental aspects is particularly relevant. A service provider that
overworks its employees, for example, could influence work productivity, the quality of the
service provided and the operations of the financial institution itself. In many ways the socioPage 4 of 7

environmental behavior of the suppliers can have a direct influence on the financial result of the
Bangladeshi banks and their image.

Information Security
The growing virtualization of money is making it possible for banks to better understand their
clients consumption habits. Technologies such as magnetic cards, online-banking, mobile
banking and e-wallet1 are some examples of catalysts of the convergence of the IT industries and
financial services. Although this movement brings with it substantial benefits for the financial
institutions and their clients, it is also a major threat to client privacy. The Bangladeshi financial
sector, as a whole, is already aware of how important this question is. The websites of most
banks in this survey disclose policies relating to security and privacy of information, which is
also a major requirement in the questionnaires on sustainability ratios.

Money Laundering
Money laundering concerns the privacy of information and ethical working standards. This issue
attracts special attention in many countries reports (in particular Swiss) on socio-environmental
responsibility, since it has been a target of international criticism by facilitating traffic of illegal
funds. In Bangladesh, this question is quite relevant considering the frequent accusations of
corruption in the different spheres of society. The ban on money laundering is a legal obligation
provided in Law. It arises from the practice of disguising the origins of illegally-obtained money
(drug dealing, corruption, accounting fraud and other types of fraud, and tax evasion, etc.)
through banking channel and the proceeds of crime are made to appear legitimate (Wikipedia).

Current Trends and Innovations of Banking Sector:

Interest Rate Policy

Under the Financial Sector Reform Program, banks are free to charge/fix their deposit and
lending rate other than export credit. At present, loans at reduced rates (7 percent) are provided
for all sorts of export credit since January 2004. At present, banks can differentiate interest rate
up to 3 percent considering comparative risk elements involved among borrowers in same
lending category. With progressive deregulation of interest rates, banks have been advised to
announce the migrate of the limit (if any) for different sectors and the banks may change
interest 1.5 percent more or less than the announced mid-rate on the basis of the comparative
credit risk.
Percentage of gross and net non-performing loans (NPLs)
The most important indicator intended to identify problems with asset quality in the loan
portfolio is the percentage of gross and net non-performing loans (NPLs) to total assets and
total advances. FCBs have the lowest and DFIs have the highest ratio of NPLs. NCBs have
gross NPLs to total assets of 14.6 percent whereas in case of PCBs, FCBs and DFIs, the ratios
are 5.6 percent, 0.9 percent and 26.6 percent respectively. Similarly, NPLs net of provisions and
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interest suspense to the total assets is 9.1 percent, 2.1 percent and 10.5 percent for NCBs, PCBs
and DFIs. FCBs are having excess provision for loan losses.
Electronic Banking in Bangladesh

Electronic Banking is transforming the financial services industry through various impossible
innovations. The quantity of cross-border trading and other financial activities is increasing
geometrically make possible by technology. It has been made possible by technology,
particularly information technology to generate, collect and process information about bank
operation and bank customers efficiently and effectively. It provides the ability to create more
effective systems of controls in individual institutions and in the market themselves. Compared
to the paper based operation, Electronic Banking Systems, in its most proficient form, offer
instant verification and transfer and reduces the flow of costly paper in the record keeping
process.

Electronic facilities given by different bank in Bangladesh

The following Electronic facilities are providing by different Foreign and Private Commercial
banks (PCBs) in Bangladesh Bank accounts: Savings, Current, FDR, PDS, and Term Deposit
Scheme. All these accounts are maintained in electronic way for the sake of customer
satisfaction in Bangladesh. People can deposit their money through electronic device and also
can withdraw their money such way. These are the common bank accounts which maintained
by the bank customer every now and then and bank is also given high priority or facilities in
this regards to their customer.

Debit Point- of-Sale: An advanced payment system which enables consumers to use
an AT M Card to pay for goods and services, electronically debiting the cardholders
account and crediting the account of the merchant.

Cards: Credit/Debit Card: There are two different types of card. One is debit which
designate to withdraw own money from the bank in any time. Another one is a credit
system which provided by bank to their customer. Customer can enjoy their credit
amount while they are in shopping, withdraw cash etc.

Internet Banking : Customers need an Internet access service to handle this type of
banking. As an Internet Banking customer, he/she will be given a specific user ID and
a confidential/secret or secured password so that they can access to their own account.

Green Banking
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Banks usually provide dedicated public services for profits. It is believed that profit should not
be earned at the expense of the world's most pressing environmental problems. Thus the concept
of green banking is evolved in response to the global initiative to save environment. It is a kind
of welfare banking for the society at large, it responses to be green in daily operations and
financing of nature conservation projects. The present paper aims to highlight the green banking
road map in Bangladesh and the status of its implementation.

Conclusion
For banking to be sustainable, bank boards and top management need to have a clear vision and
plan regarding sustainability. In this article, we see that our approach to clients, culture,
compliance, compensation, costs and capital all need to be simultaneously reviewed, analyzed,
redesigned and implemented. We know all too well that this requires vision, resources, planning,
time and deep action. It is a process, not a goal per se. And yet, the success of banks will be
determined by these common, and yet differentiating, factors in the years to come. There are
clear processes and techniques for change. Waiting out the storm is not a viable option. Smart
banks and bankers are adapting their strategies, goals, business, economic and operating models
to these paradigm shifts in order to have a sustainable future. Sound profitability and growth of
banks in Bangladesh has a major impact on internal capital generation. The commercial banking
system dominates Bangladesh's financial sector. Bangladesh Bank is the Central Bank of
Bangladesh and the chief regulatory authority in the sector that control other banks. The
activities of bank in Bangladesh are presenting the increasing trend. In the most sectors the
banking operation plays the significant role for economic development

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