Impact of Corporate Social Responsibility Initiatives of Indian Banking Sector

Vijay .P
Assistant Professor of Commerce
Kongunadu Arts and Science College
Coimbatore - 29
Divya .N
Assistant Professor of Commerce
A.G. Arts and Science College
Coimbatore - 29
ABSTRACT
The Corporate Social Responsibility (CSR) has emerged as a benchmark for judging corporate
excellence in the context of national and international banking business practices. The banking
industry has providing more facilities to customers as per the CSR concept in banking institutions
namely taking deposits from customers, granting loans and providing corresponding services in
banking institutions. The CSR concept helps to attain the goal of each and every business industries
and a quality service to the society. The objective of the study is to provide detailed information about
CSR activities in Indian commercial banks and showing the customer satisfaction towards the CSR
concept in selected Indian banking institution. The researcher has made an attempt to show the impact
of CSR in pre and post-period of implementation of CSR concept in Indian commercial banks. This
study is based on both primary and secondary data which are collected from 135 respondents and the
secondary data from the RBI website and various journals. The secondary data has taken from 2000-01
to 2012-13 in this study and the study delivers customer satisfaction, the consistency and structural
changes of selected commercial banks by descriptive analysis, trend co-efficient and chow test. The
banking industry has a significant change with CSR concept execution in India.
Keywords: Banking Industry, Corporate Social Responsibility, Co-efficient Analysis.
Introduction
In the liberalized economy, the Corporate Social Responsibility is very important one to every
banking business to achieve probable success. In that way to honor moral values, deal with legal issues
and contribute to economic development, while improving the quality of service and their banking
activities as well as the local community and society at large. Although such voluntary social measures
have become legal requirements, a number of business leaders in bank have gone further ahead by
utilizing their wealth to improve the living conditions of many people in the society. Simultaneously, a
change is already occurring from traditional humanity to healthy society development among the more
progressive of banking institutions. As a pillar of the economy, this banking sector plays a major role
in the economic development of the country. Thus the banking industry has been playing an important
role as growth catalyst. In recent years corporate social responsibility and corporate governance have
become an important issue at a global level. In this present study, the researcher made an attempt to
show the effectiveness of CSR activities in select Indian commercial banks.
Review of Literature
The researcher has taken more reviews from past studies related to CSR concepts in Indian
banking sector. Firstly, Ventura and Vieira (2007) have made a study to understand the dynamics of
institutionalizing corporate social responsibility in the field of Banking Organizations in Brazil and
found that from being an inaccessible trivial action, CSR in the past ten years is now a planned
accomplishment in banking organizations. Wise and Ali (2009) in their study on corporate governance
and corporate social responsibility in commercial bank of Bangladesh, through analysis of the annual
reports of these banks, found that the corporate social responsibility disclosures by the banks focus on
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initiatives undertaken to support two critical sectors within Bangladeshs economy: agriculture and the
SME sector. Sharma (2011) had made an attempt to analyze CSR practices and CSR reporting in
India with special reference to banking sector and concluded that banking sector in India is showing
interest in integrating sustainability into their business models but its CSR reporting practices are far
away from satisfaction. Jayashree and Neeta (2011) have discussed about the CSR practices and
ratings in Indian banking industry. CSR was a concept whereby financial institutions not only consider
their productivity and growth, but also the wellbeing of society and the environment by taking
responsibility for the impact of their activities on shareholders, employees, customers and civil society
represented by NGOs. This paper attempts to study the CSR practices carried out by the selected banks
and their ratings in the Indian banking sector.
Need for the Study
The Indian banking sector had been adopted Corporate Social Responsibility (CSR) concept to
serve and to ensure good quality of business. A various earlier studies were made an attempt to know
the status of CSR implementation in non-banking financial institutions and other business
organizations separately. But some of few studies were made in respect of CSR implementations in
banking sector. So, this study has made an attempt to provide effectiveness and activities of CSR
principles in Indian banking sector.
Objectives of the Study
The researcher has taken effort to offer detailed information about CSR activities in Indian
commercial banks. To know the customer satisfaction and the activities provide by CSR concept in
selected Indian banks and to distinguish the impact of CSR activities in pre and post-period of banking
industry activities in India.
Methodology
This present study is based on the analytical and descriptive in nature and the study are taken
nine banks including top service providing various public sector banks and private sector banks. The
primary and secondary data have used for the study. The primary data was particularly collected from
the 135 respondents of selected bank customers. The convenient sampling technique was used by the
researcher for the study. The secondary data was based various journals and the bank annual report and
RBI reports. This paper is to know the status and the strategies adopted for CSR in the banking sector.
The study covers the period 2001 to 2013 and the chow test has used to know the impact of
commercial banks from pre and post period of CSR implementation in India.
Implementation of CSR in Indian Banking Sector
In our developing country, CSR are seen as part of corporate philanthropy in which
corporations augment the social development to support the initiatives of the government. However
with time, the scenario of CSR has changed from being philanthropic to being socially responsible to
multi stakeholders. The period of 1960s and 1970s saw an emergence of CSR activities being inbuilt in
corporate philanthropy. As per the instructions of the RBI, majority of its member Indian commercial
banks have started new programmes on social and economic welfare of the ample, keeping equality
with the guidelines. For emphasize the role of banks in CSR, the RBI disseminated a notice on
December 20, 2007 for all commercial banks, with title of CSR, Sustainable Development and NonFinancial Reporting Role of Banks. The key issues were argued in the notice were anxious CSR
activity, sustainable development, and non-financial institutions reporting.
The Basel Committee in the year 1999 had brought out certain important principles on
corporate governance for banking business which, more or less have been adopted in India. Basel
committee underscores the need for banks to set strategies for their functions. The committee also
maintains banks to ascertain accountability for executing these strategies, if there is not transparency
of information related to decisions and actions. It would be complicated for stakeholders to make
managements accountable and the underlying subject is accountability at all levels including the
boards.
Role of Corporate Social Responsibilities in Indian Banking Sector
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The banking industry has been providing more facilities as per the CSR concept to customers
are namely taking deposits to customers, granting loans and provide corresponding services and core
business of banking institutions. No matter that types of countries and types of culture, and types of
banking products to their investors. The banks require being responsible for their customers in a social
responsible way. The banking and finance organizations should have ethical standards for developing
the banking institutions and introducing new products. Specific ethical policies shall be put in place to
shape ethical behavior of staff. Besides, the importance of internal audit has been emphasizing,
particularly in banking industries. The importance of CSR emerged significantly in the last decade.
Over the time, CSR had expanded including both economic and social interests. Banks have become
more transparent in accounting and display public reporting due to pressures from various
stakeholders. It is possible for banks to behave in the desired ethical and responsible manner towards
customers, employees, communities, shareholders and environment. They have been started
incorporating their CSR ideas in their annual reports and its very essential reporting system for each
and every financial institution.
Challenges of Corporate Social Responsibility in Indian Banking Sector
It is important for CSR strategies to become central to business strategy and part of the longterm planning process. The stakeholders are questioning more on CSR initiatives of the banking
business today. They are challenging the banks decisions-making in this direction. It has become
imperative to incorporate stakeholders views. In our country, the CSR managers face more challenges
in managing CSR activities. The major problem is of lack of budget allocations followed by not having
support from employees and lack of required knowledge. The lack of professionalism is one more
problem faced by this sector and absence of training and undeveloped staffs are additional problems
for reduced CSR initiatives. The general public also does not take enough interest in participating and
contributing to CSR activities of banks as they have little or no knowledge about it. The increasing
demand for more transparency and accountability on the part of the banks and disclosure of
information through formal and improved reporting is also inevitable for the banks.
More the open and honest disclosure, the stronger and trusting relationships can be built with
the stakeholders and consumers. Small other organizations do not take adequate interest in CSR
activities and those which undertake them fail to disclose it to the society. In the process they drop out
on people and their trust in them. The disappointment of the government to come up with statutory
guidelines to give a definite direction to banking institutions taking up CSR activities, in terms of size
of banking business and profile of CSR activities also results into few banks practicing CSR concept
adequately.

Sl. No.
1

Table-1 CSR Activities in Indian Banking Institutions

Banking Institutions
CSR Activities in Banks
(a) Educational support.
Allahabad Bank
(b) Poverty eradication.
(c) Rural development.
(d) Vocational training to unemployed.
(a) Rural Clinic Service
Canara Bank
(b) Rural Service Volunteer Scheme
(c) Jalayoga Scheme
(d) Rural Resource Development Centre.
(a) Farmers Club.
Union Bank of India
(b) Village Knowledge Centers.
(c) Joint Liability Groups for promotion of SHGs.
(d) Rural Development.
(e) Educational support.
(a) Community Services Banking.
State Bank of India

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(b) Rural Community Development.

(c) Adoption of the Girl Child.
(d) Research and Development on Education.
(a) PNB Farmer Welfare Trust
Punjab National Bank
(b) Farmers Training Centers
(c) Model Villages
(d) PNB century Rural Development Trust
(e) PNB Swarozgar Vikas Santhan
(a) Educational support.
Bank of India
(b) Environmental issues.
(c) Financial support to weak sections of society through
micro financing.
(d) MSME financing.
(e) Dairy development.
(f) Agriculture development.
(a) Rural development.
Bank of Boroda
(b) Women's empowerment.
(c) Vocational training.
(d) Community Welfare.
(e) Physically Challenged.
(f) Poverty Eradication.
(a) Educational support.
ING Vysya Bank
(b) Environmental issues.
(c) Financial support to vulnerable sections of society.
(d) Community development.
(a) Educational support.
HDFC Bank Ltd
(b) Livelihood training and support.
(c) Vocational and technical education.
(d) Micro financing.
Source: Annual Reports of Banking Institutions.

The above table-1 provides corporate social responsibility activities in Indian banking industry.
The major public sector and private sector banks have been providing more services to customer which
they required from the banks. In the way, the CSR concept provided more products to people like
educational support, rural development schemes, women empowerment schemes and various MSME
financing support programmes in Indian commercial banks.

Sl.
No.
1
2
3
4
5
6
7

Table 2 CSR Rating with Select Commercial banks in India

Banks Activities
AHB CB UBI SBI PNB BOI BOB IVB
Educational Support
1
1
1
1
1
Rural Development
1
1
1
1
1
1
Poverty Eradication
1
1
Vocational Training
1
1
1
1
Micro Financing
1
1
1
1
Women Empowerment
1
1
Homes
1
CSR Total
5
3
4
4
3
5
Source: Calculated Value.
Note: 1- denotes that availability of those services in selected banks.

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1
1
1
1
1
1
1
7

1
1
1
1
1
5

HDFC
1
1
1
1
4

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The below table-2 shows the selected banks CSR service providing rating within particular
public and private sector banks in India. The Bank of Baroda (BOB) had providing all service in their
banking institutions. Secondly, the Allahabad bank, Bank of India and ING Vysya bank had rated with
5 points and it has providing varying products as per CSR concept in India. Lastly, the HDFC and
Canara bank, SBI and Union bank of India got 4 rating points within their banks. Hence, the banks
providing more services to their customer depend upon the banks both public sector banks and private
sector banks in India.

Chart 1 CSR Rating of Selected Indian Banking Institutions

Source: Based on Calculated Value.
9. Analysis of Corporate Social Responsibility Performance by the Sample Respondents
This present study has studied about the respondents satisfaction and usage of Indian banking
service by the CSR concept. The researcher has made an attempt to study the customers satisfaction
and the availability of CSR concept in Indian banking sector. In this study, 135 respondents are there
includes 67 per cent of males and 33 per cent of female respondents. The below table-4 depicts that 36
per cent of the respondents belonged to age group of 40-50 years. There 28 per cent of the respondents
belonged to 30-40 years old. The educational qualification of an individual has a greater impact on
decision making. The educational qualification of respondents are 45 percent of respondents graduates
and 42 per cent of respondents are studied up to higher secondary other illiterates in this study. The
majority of customers are married of 59 per cent and other 41 per cent persons are unmarried in this
study. Most of number respondents of 52 per cent are employed and 26 per cent of respondents are
home maker and doing work in women welfare centers. Here, other respondents are student and 6 per
cent of respondents are unemployed in this study. The demographic factor is providing more changes
in customer satisfaction due to CSR activities in Indian banking institutions.
Table 3 - Demographic Factors of Selected Bank Customers
Particulars
Details
No. of Respondents
Percentage (%)
Age
Below 30 years
30
22
30 - 40 years
38
28
40 - 50 years
48
36
Above 50 years
19
14
Total
135
100
Gender
Male
90
67
Female
45
33
Total
135
100
Education
Illiterate
18
13
Upto HSC
56
42
Above UG/ PG Degree
61
45
Total
135
100
Marital status
Married
80
59
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Unmarried
55
41
Total
135
100
Occupation
Employed
70
52
Unemployed
8
6
Home maker and related to
35
26
Women welfare development
Students
22
16
Total
135
100
Source: Primary data
The above table-3 shows that the demographic factors of the present study. The researcher has
been collected primary data from respondents regarding that customer satisfaction and the CSR
activities in selected Indian banks. In this study questionnaire contains more important questions
related to customer satisfaction and about CSR activities in Indian bank sector. The below table shows
that satisfaction and CSR concept coverages in India.
Table 4 Customer Satisfaction and CSR Activities in Selected Indian Banks
Sl.
No. of
Percentage
Nature of Respondents
No.
Respondents
(in %)
1.
CSR provides more Customer Satisfaction
Agree
120
89
Disagree
15
11
Total
135
100
2.
CSR is a tool to Gain Competitive Advantages
Agree
90
67
Disagree
45
33
Total
135
100
3.
CSR has a significant role in establishing a Banks
Image
Agree
119
88
Disagree
16
12
Total
135
100
4.
CSR may Influence the Customers Behavior
Positively
Agree
107
79
Disagree
28
21
Total
135
100
5.
The Customer using CSR concept related banking
facilities
Yes
114
84
No
21
16
Total
135
100
6.
The CSR concept differs from the Other Banks
Agree
25
19
Disagree
110
81
Total
135
100
7.
It behave ethically and contribute to economic
development
Agree
126
93
Disagree
9
7
Total
135
100
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8.

It helps to Women Welfare and Skills Development

Agree
89
66
Disagree
46
34
Total
135
100
9.
Overall CSR activity has been available in selected
banks
Yes
129
96
No
6
4
Total
135
100
Source: Primary data.
The above table-4 contains questions and the bank customers responses related to customer
satisfaction and performance of CSR concepts in selected Indian banking institutions. The result shows
that the customer satisfaction of 89 per cent in selected banks towards CSR activities. There is a
competitive advantage of CSR activity of 67 per cent and 88 per cent of respondents said that the CSR
has a significant role in establishing a banks image. In the study the 84 respondents say that selected
bank have influencing behavior positively. The 93 per cent of respondents say that the CSR norms are
ethically contribute o economic development. The women welfare and skills development are used by
66 per cent from 135 respondents in select banking institutions. Finally, the 96 per cent of respondents
are using the Corporate Social Responsibility and it has been working in their banking institutions.
From the overview these results of the selected nine bank customers have more satisfaction towards
CSR activity and it differs from the other selected banks in India.
Table - 5
Correlation - Relationship between the Demographic Factors and
Customer Satisfaction in CSR Concept
Marital
Age
Gender
Education
Occupation
Satisfaction
Status
1
Age
0.456
1
Gender
0.989
0.763
1
Education
0.543
0.677
0.554
1
Marital Status
0.895
0.422
0.768
0.231
1
Occupation
0.999
0.754
0.943
0.344
0.945
1
Satisfaction
Note: Significance at 5 percent level.
The above table-5 shows that the relationship between the demographic factors and customer
satisfaction of CSR concept in selected Indian bank. There is a significant relationship at 5 per cent.
The customers age have more positive significance at 0.999 and the education has 0.989 points. The
customer satisfactions of the selected banks have more positive relationship with an education and
occupation. So, the CSR activities have providing more satisfaction to the educational people and
gender wise particularly the women in selected banks.
10. Overall Performance and Impact of CSR Initiatives in Indian Commercial Banks
After the banking liberalization period 1998, the banking industry has been changed with more
technical aspects of RBI. Since 2007, the RBI has made changes in Indian commercial banks with
implementation of Corporate Social Responsibility concepts. The Corporate Social Responsibility
(CSR) is a concept that companies have an obligation to consider the interest of customer, employees
and shareholders in all respect of their operations. The CSR is closely linked with the principle of
sustainable development, which disputes that companies should make decisions based not only on
financial factors such as returns or dividends, but it also based on the long term social and
environmental consequences of their operations. It is an amalgamation of policies, programs
education and practices which extend throughout a corporations operation and into the communities.
However, there are many gaps in the disclosures in Indian banking system with Basel norms at the
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Page 35

international standards, mainly in the area of risk management strategies and risk parameters, risk
attention, performance measures, component of capital structure. The below Table-6 shows the growth
level of total deposits and advances of total commercial banks in RBI during the implementation of
CSR practices.
Table 6 - Development and Impact of Indian Commercial Banks
during CSR implementation Period
(In Rupees)
Year
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12

Total Deposits
9,891
11,311
13,117
15,422
17,328
21,090
26,119
31,969
38,341
47,525
56,159
64,537

Advances & loans

5,292
6,090
7,464
8,655
11,243
15,070
19,311
24,769
30,009
34,971
42,975
50,746

Gross NPA
637
708
687
648
593
510
504
563
683
847
979
1,423

Investments
4,918
5,872
6,937
8,042
8,697
8,665
9,509
11,773
14,494
17,191
19,236
22,305

Total Assets
12,954
15,364
16,991
19,740
23,559
27,858
34.599
43,261
52,413
60,251
71,834
82,994

2012-13

75,342

55,664

1,765

26,667

93,224

20.60

6.53

16.22

18.24

CAGR %
17.03
Note: Calculated Value

The above table-6 shows that the growth of commercial banks during the initiation of CSR
activities in India. The aggregate deposits of commercial banks are 17.03 per cent growth during the
initiation of CSR concept in Indian Commercial banks. The Compound Annual Growth Rate (CAGR)
of total deposits and advances from 2001 to 2013 period was 17.03 per cent and 20.60 per cent. The
investments and assets of commercial banks always increased by 16.22 per cent and 18.24 per cent. It
means that a performance of commercial banks in terms of deposits was much better and the
commercial banks have been adopted CSR concepts as per the RBI regulations in India.
11. Structural Changes Select Indian Commercial Banks in Pre and Post CSR Implementation
Period
The Chow test is a statistical and econometric test of whether the coefficients in two linear
regressions on different data sets are equal. The Chow test is most commonly used in time series
analysis to test for the presence of a structural break. It is posed as a partitioning of the data into two
parts of size n1 and n2.The Chow test and trend co-efficient analysis is often used to determine whether
the independent variables have different impacts on different subgroups of the population and examine
the significant level to the study.
RSSc ( RSS1 RSS2 ) / k
Chow test, F
RSS1 RSS2 / n 2k
Where, RSSC = Residuals of Combined Period; RSS1& RSS2= Pre and Post period residuals;
K = Probabilities; N- No. of observations.
Accordingly, a Chow test was performed on data for each year separately, and values for the
parameters are shown in Table-7. The Chow tests were significant at p<.0001. These significant F-tests
indicate that not all the independent variables have uniform effects for pre and post reform period, but
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do not indicate where these differences lie. In December 2007, the Reserve Bank advised banks to put
in place a suitable and appropriate plan of action to raise the level of awareness and focus the attention
of banks in India on issue of Corporate Social Responsibility, with the approval of their boards.
Given the effect of large group sizes, compared to the number of predictor variables used in the study.
Here, pre-period is 2000-01 to 2006-07 and post period is 2007-08 to 2012-13 in this study.
Table 7 - Chow Test and Trends across Pre and Post of CSR
Implementation Period of Commercial Banks
Deposits in Rs.
Advances &
Gross NPA
Investments
Total Assets
Loans
in
Rs.
Avera
Trend
Avera
Trend
Avera
Trend
Avera
Trend
Avera
Trend
Particul
ge
Coge
Coge
Coge
Coge
Coars
(in
efficie
(in
efficie
(in
efficie
(in
efficie
(in
efficie
Rs.)
nt
Rs.00
nt
Rs.00
nt
Rs.00
nt
Rs.00
nt
Pre645
675
0.348
185
597
0.078
2,836
0.167
0.019*
0.058*
0)
0)
0)
0)
Period
(0.97)
(-1.89)
(1.46)
*
(2.06)
(-2.65)
Post
18,850 0.896 13,885 0.00*
608
0.00** 7,416 0.167 23,478 0.272
Period
(-0.13)
(1.46)
(-1.15)
(3.94)
(5.16)
Total
9,970 0.00* 7,111
402
0.00*
0.00** 4,089 0.210 13,409 0.819
Period
(1.28)
(-0.23)
(-7.20)
(5.76)
(7.66)
Chow
27.56
27.96
26.89
24.98
22.09
test % Note: * and ** indicates 1% and 5% significance level respectively.
The table-7 shows trends in total deposits and advances of select commercial banks in RBI
across the pre-reform and post-reform periods. The trend coefficients across the two sub-periods
reveals decline in deposits, investments, assets, and gross NPA during pre-reform period and increased
in post reform period. The trend coefficients of loans and advances, total assets and investments are
positive growth in pre-CSR period and post-CSR period was negatively sloped in select commercial
banks. Whereas a growth in deposits, advances, and investments emerge positive, but insignificant in
both the pre and post-CSR periods for commercial banks. The chow-test results for deposits and
advances and investments clearly indicate the existence of significant structural difference between the
sub-periods. The deposits of commercial banks have structural change of 27.56 per cent, followed by
advances and loans are 27.96 per cent, Gross NPA is 26.89 per cent and investments of commercial
banks are 24.89 per cent in India. Hence, the structural changes of select commercial banks shows that
the stability and growth of the banking activities through CSR in India.
12. Findings of the study
Indian bank sector has been increasing the satisfaction level of customers and stockholders in
banking sector through the good Corporate Social Responsibility. Based on the CSR, the select
commercial banks have providing more banking products to customer. The Indian banking industry
has higher growth rate in deposits, loans, assets and NPA after the implementation of good CSR
concepts. The banking industry has consistency and the chow test is providing the higher structural
break between pre and post period of implementation of CSR in commercial banks.
In this study, 135 respondents are there includes 67 per cent of males and 33 per cent of female
respondents. The study depicts that 36 per cent of the respondents belonged to age group of 40-50
years. The educational qualification of an individual has a greater impact on decision making. The
educational qualification of respondents are 45 percent of respondents graduates and 42 per cent of
respondents are studied up to higher secondary other illiterates in this study. The majority of customers
are married of 59 per cent and other 41 per cent persons are unmarried in this study. Most of number
respondents of 52 per cent are employed and 26 per cent of respondents are home maker and doing
work in women welfare centers. The CSR activities have providing more satisfaction to the
educational people and gender wise particularly the women in selected banks. The structural changes
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Page 37

of select commercial banks shows that the stability and growth of the banking activities through CSR
in India.
13. Suggestions to the Banking Industry
RBI has been providing several policies to adopt corporate social responsibility practices by the
commercial banks in India. But, it still remains inactive in such Indian commercial banks. The study
suggests that banks should disclose the amount spent on CSR activities in their annual reports
implements based reports. The Indian banks should increase the return on assets in banking business.
The selected banks should be adding more facilities in CSR concepts to cover all age groups and
uneducated people for more customer satisfaction in India.
14. Conclusion
In Indian banking industry, the concept of CSR concept has been adopted as element for
success and survival of banks along with fulfilling social objectives and development of economy.
However, the challenge for the banking institutions is to determine a strong and innovative Corporate
Social Responsibility strategy, which should deliver elevated performance in ethical, environmental
and social areas. The banking institutions under this CSR concepts have recognized their responsibility
towards the society and are making their contribution in the field of employment generation,
education, health care, women welfare and women empowerment. These activities are more
developments and higher returns by the deposits and loans of commercial banks. The study suggests
that banks should disclose the amount spent on CSR activities in their annual reports. Along with
financial reporting, non financial reporting should become revision for the banks for social, economic
and ecological betterment of the society. The sample respondents have more satisfaction and are using
more CSR practices in the banks. Hence, the study concludes that the selected Indian banking
institutions have been developed after the implementation of strong CSR concepts and it have been
providing more satisfaction to bank customer.
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School of Management. Journal of Applied Economics and Business Research. pp.103-115.
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