Major banks should lead the way towards Green Banking

Green Banking is creating a buzz in the financial world. It is a form of banking taking into account the social and environmental impacts and its main motive is to protect and preserve environment. Although a new phenomenon, some countries have adopted it successfully in their day to day financial activities.

Banks in China are slowly committing to ethical banking, sanctioning loans keeping in mind the planet’s sustainability and Bangladesh Bank has also been offering loans with lesser interest rates for environmental friendly projects.

India on the other hand still has a long way to go. Recently, as a part of the ‘Green Initiative’, the Centre has suggested the NBFCs take proactive steps to promote day to day use of electronic payment systems, elimination of post-dated cheques and gradual phase-out of cheques in their business transactions. Similarly, the ministry of finance has directed all public sector banks, financial institutions and public sector insurance companies to take up e-governance.

Whereas, when a survey was conducted recently in Bangalore  as part of  a major research project work on green banking which also included public sector banks on the awareness of green banking and the initiatives undertaken on this regard, it was evident that it was still in its infancy. The findings of the study are as below:

State Bank of India has a green channel counter and the bank encourages paperless banking. There is no use of pay in slips, withdrawal forms, cheque leaves, remittance forms and the transactions are done through SBI ATM cum debit card. They have also won the ‘best customer initiative’ award for the green channel counter at the IBA Banking Technology Awards.

The initiatives of State Bank of Mysore includes use of energy efficient photocopier,energy efficient computers and CFL bulbs; need based printing to save paper, auto cut off for air conditioners, ban on plastic bags in the office building, curbed usage of lights during the day, eco-friendly corporate gifting policy, rainwater harvesting system, solar power generation systems, solar powered ATM’s, support for social forestry programmes, waste reduction and recycling, etc.

When questioned about its implementation, the official stated, “Being a public sector bank, there is no system in place and there is also failure in implementation.”

In Canara Bank, officials see green banking only as a form of paperless banking. “Foreign banks are implementing this form of banking only because they have the cream of employees, whereas in India, nobody is serious about it”, said an official. They thought that it will be enforced when the RBI insists on it. Canara Bank has been the initiater of paperless banking and is the highest financer for solar energy related projects. The bank is also known to be conducting carbon financing in Delhi and Mumbai.

Stationary expenses

According to an officer from Syndicate bank, ‘The processing of ‘Green Initiatives’ includes the application of electronic means.’ National Electronic Funds Transfer helped Syndicate bank in cutting off stationary expenses.

ATM transactions are more than the counter transactions, i.e., as of December 2011 counter transactions accounted for Rs 512.83 crore for the bank compared to Rs 970 crore through ATM counter. This is because banks encourage customers to use plastic cards. Also, more transactions are effected through net banking.

They have started recycling waste from April 1 2012 through authorised recyclers notified by the government. The bank is currently running 80 rural branches with solar powered UPS.

 According to an officer at Vijaya Bank, “The bank is replacing desktops and donating it to schools as part of its corporate social responsibility. We are doing waste recycling, document management system and 58 branches of the bank are working on solar projects.”

On the flip side, foreign banks are practising green banking on a much serious note. Here are some initiatives undertaken by Citi Bank and Standard Chartered bank. These banks have specific policies aimed at lending and environmental initiatives.
Citi Bank has developed environmental management system to guide its environmental initiatives:

*  Developed a comprehensive environmental and social risk management (ESRM) policy in 2003 and updated periodically which required adherence to International Finance Corporation (IFC) performance standards and its health and safety guidelines, which provide pollution prevention, safety and guidance to 63 specific sectors.
* Underwrote 158 environmentally beneficial projects in the US totaling more than $8.3 billion.

* Has established new set of environmental goals to be achieved by 2015. How far these initiatives are taken in India is not known.

Similarly, Standard Chartered Bank introduced a formal environmental and social (E&S) risk policy to govern lending activities in 1997. It has also been a signatory to the Equator Principles (EP) since 2003. Priorities since 2011 include, building on bank’s work to measure social and economic impact of lending, reduce annual paper consumption per full-time employee from 30 kg to 25 kg and continue to reduce energy and water consumption.

The Indian banks are still taking baby steps into a much evolved form of banking. In order to contribute better towards sustainable banking, financial institutions and the government will have to make drastic changes in their policies. Educating the masses about this form of banking will be a good way to start.