Green Banking in India: Prospect and Challenges

Mr. Suryawanshi Santosh D

Assistant Prof, Department of Economics
Shri Sant Damaji College, Mangalwedha
Email ID: sant.sury@gmail.com
Prof. Kasabe D.S
Associate Prof, Department of Economics
Shri Sant Damaji College, Mangalwedha

Abstract:
The term of Green banking is opposite from traditional banking, as green banking
emphasis on stimulating environment friendly banking practice. Green Banking means
certifying environment friendly practices in banking sector and thus dropping carbon
footprints. Banking industry is usually not deliberated as polluting industry. But it impacts
the environment in terms of increasing energy consumption, paper consumption. This paper
attempts to define the terminology of Green Banking and green Banking product used in
Indian banks. Moreover to study the green banking initiative taken by the nationalized
banks. Nationalized banks such as State Bank of India, Bank of India, bank of Baroda, Dena
bank are taken initiative in adopting green practices.
Keywords:
Green bank, e- banking, mobile banking, green loan, green Deposits, e-statement
Introduction:
The term 'green banking' has gained popularity all over the world from 2009. Green
banking is defined as the operation of banking activities while giving special attention to
social, ecological and environmental factors with the aim of the conservation of nature and
natural resources. Without changing its main banking functions, a green bank can grow
through applying environmentally friendly policies throughout every sector of its activities.
Green Banking is not an isolated bank. Green Banking are certifying environment friendly
practices in banking sector and thereby reducing internal and external carbon footprints.
Banking industry is commonly not measured as polluting business. But it impacts the
environment in terms of increasing energy consumption, paper consumption. A wider view
of this is that banking business is linked to the external environment as it offers funds to
others and hence finances their activities. Banks are a source of funds. So they can contribute
to environment by ensuring environmentally responsible investment and a carefully
evaluated lending. Green Banking therefore covers two aspects. The first one being

judicious use of all resources, energy and reducing carbon footprints and second being
encouraging and financing only environment friendly investment. So Green Banking is not
only about making sustainable use of resources but also about environment friendly
dispensation of credit. A proper scrutiny of all projects that are financed in terms of
environment is another major element of Green Banking.
Considering the nature of banking processes and infrastructures, this report offers guidelines
for greening banking in two levels.
Making day-to-day business operations, banking products and services greener by following
simple practices and making them environmentally friendly.
Terminology of Green Banking:
The Terminology of Green Banking appeared in 2009(Green Bank Act-US) with
coming of the first Green Bank based in Mt. Dora, Florida, United States. The Institute for
Development and Research in Banking and Technology established by RBI defines Green
Banking as:
Green Banking is an umbrella term referring to practices and guidelines that make
banks sustainable in economic, environment, and social dimensions. It aims to make
banking processes and the use of IT and physical infrastructure as efficient and effective as
possible, with zero or minimal impact on the environment.
Green Banking Products
Thus green banking supports to generate active results of a range of environmental problems
and at the same time recognize occasions that benefit the customers.
i. Go Online: Online banking is the emerging concept in India. Online banking aids
in additional saving of energy and natural resources. Online Banking includes: a.
Paying bills online, remote deposit, online fund transfers and, 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.
ii. Green Deposits: Banks offer higher rates on commercial deposits, money market
accounts, checking accounts and savings account if customers opt to conduct their
banking activities online.
iii. Green Checking Accounts: Customers can check their accounts on ATM 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.

iv.

v.

vi.

vii.

viii.

Green Credit Card: Some of the banks introduced Green Credit Card. The benefit
of using a green credit card is that banks will donate funds to an environmentfriendly non- profit organization from every rupee you spend on your credit card to
a worthwhile cause of environment protection.
Saving 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.
Mobile Banking: - Mobile banking is very important. On the one hand, it is great
to have the ability to check balances, transfer funds or pay bills from your 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.
Energy Consciousness: Developing energy awareness, accepting effective office
time management and automation solutions and using compact fluorescent lighting
(CFL) can help banks save energy consumption considerably. Banks can conduct
energy audits in all their offices for effective energy management. They can also
switch over to renewable energy to manage their offices and ATMs.
Green Building: The Indian banking industry uses more than one lakh premises for
their offices and residential houses through the country. These banks should develop
and use green buildings for their office and employee accommodation.

Benefits of Green Banking

Green Banking comes with a bundle of benefits such as i. Avoids Paper Work
ii. Creating Awareness to Business People about Environment
iii. Loans at Comparatively Lesser Rates
iv. Environmental Standards for Lending
v. Online Account opening form for opening Green Account
vi. E-Statement will be generated and sent to the customers' email.
vii. E-Remit services for remitting funds to the customers' home country which is a
unique service.
viii. Free Electronic Bill Payment Services.
ix. Cash back will be credited to all new customers opening Green accounts

Objective of the Paper:

The objective of the paper is to study the green philosophy in banking. The study embraces
following aspects.
1. To define the terminology of Green Banking.
2. To study the green Banking product used in India.
3. To study the green banking initiative taken by the nationalized banks.
Methodology:
This research paper is mainly based on secondary data. Relevant secondary data
were collected from several official sources. The sources of secondary data are annual
reports of Reserve banks of India, Indian bank association and various nationalized Banks,
and related research work. In addition, the data is also collected from nationalized banks'
websites. The data are analyzed in aspect of prospect and challenges of green banking.
Green Banking initiative by Nationalized banks in India:
As a part of Green banking Practices, Reserve Bank of India has issued guidelines for
banks to take active steps for increasing the use of electronic payment systems, elimination
of post- dated cheques and gradual phase out of cheques in their day-to-day business
transactions. On behalf of this, other banks such as NABARD, SIDBI, EXIM Bank etc
would take up the e-governance initiatives in a proactive manner. Through these initiatives,
it is expected that on one hand, the quality and efficiency of the service delivery will improve
and on the other, banks will gradually move towards less paper based transactions.
Green banking practices by SBI:
i. Introduced Green Channel Counters and no queue banking in over 5000 branches
across India
ii. SBI had launched Green Channel Counter (GCC) facility at their branches in 2010
to change the traditional way of paper based banking (SBI, 2014).
iii. 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
iv. 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
v. 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 Aston field
Renewable Resources and Group T-Solar Global SA for building solar plant in India.
vi. 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.

vii.

The bank had organized more than 290 Tree Plantation Drives.

Challenges of Green Banking for nationalized banks

i. Green banks restrict their business transactions to those business entities who qualify
screening process done by green banks. With limited number of customers they will
have a smaller base to support them.
ii. Many banks in green business are very new and are in startup face, generally it takes
3 to 4 years for a bank to start making money thus it does not help banks during
recession.
iii. Green banks require talented, experienced staff to provide proper services to
customers. Experienced loan officers are needed with additional experience in
dealing with green businesses and customers.
iv. If banks are involved in those projects which are damaging the environment they are
prone to loss of their reputations. There are also few cases where environmental
management system has resulted in cost saving, increase in bond value
v. Credit risks arise due to lending to those customers whose businesses are affected
by the cost of pollution, changes in environmental regulations and new requirements
on emissions levels. It is higher due to probability of customer default as a result of
uncalculated expenses for capital investment in production facilities, loss of market
share and third party claims.

Conclusion:
Green banking is emerging banking practice in India. There is an increase in
awareness about the environmental issues. In the Green Banking integrates management of
environment with banking activities and its main aims is reducing carbon footprints. There
are so May initiative taken by the various nationalized banks in India. Last 10 year
communication sector Indian are developed rapidly. It is helping for green banking practice
in India. After 8th November 2016 green banking practices may be more effectively helping
for cashless economy in India. In the coming year in India green banking practices will be
raising rapidly due to demonetarization of 500 and 1000 rupees. Moreover after
demonetarization government of India undertaken so many imitative for promoting cashless
transaction. So its direct positive impact on green banking in India

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