The term green banking is the opposite of traditional banking, as green banking emphasizes on stimulating environment-friendly banking practices. Green Banking means certifying environment-friendly practices in the banking sector and thus dropping carbon footprints. The banking industry is usually not considered as polluting industry. But it impacts the environment in terms of increasing energy consumption, and paper consumption. This paper attempts to define the terminology of Green Banking and green Banking products 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, and Dena Bank have taken the initiative to adopt green practices.
Green bank, e-banking, Mobile banking, Green[P1] 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.
- 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.
- 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.
- 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.
- 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 environment-friendly 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 –
- Avoids Paper Work
- Creating Awareness to Business People about Environment
- Loans at Comparatively Lesser Rates
- Environmental Standards for Lending
- Online Account opening form for opening Green Account
- E-Statement will be generated and sent to the customers’ email.
- E-Remit services for remitting funds to the customers’ home country which is a unique service.
- Free Electronic Bill Payment Services.
- Cash back will be credited to all new customers opening Green accounts
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:
- Introduced Green Channel Counters and no queue banking in over 5000 branches across India
- 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
- 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
- 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.
- 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.
Challenges of Green Banking for nationalized banks
- 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.
- 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.
- 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.
- 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
- 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.
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.
