Dr. D. Mukhopadhyay
The mother Earth is the abode of more than 700 crores people. There has been a growing consensus among the environmental scientists all over the world that it has been drastic change in the climatic conditions and environmental imbalance in the earth owing to global warming in particular and misuse of the blessings of science and technology by the habitants of the earth. The economically developed countries became more concerned and serious than that of the developing countries in environment management and ecology protection. Banking institution is an economic entity having greater influence over the society and banks have been catalytic agent in the countries like the United States of America, Canada France, Germany and other developed countries in the globe to bring about revolutionary thinking in developing delivery mechanism by the banks to their customers and clients in such a manner so that green environment can be restored in the nature.
The USA is the country where the first green bank was promoted in Eustis and Clermont, Florida whose basic objective was to create awareness about going for green banking. The principal business of the banks is to offer loan to the business community through evaluating the feasibility studies of the projects under different business schemes. Banks are to encourage those projects which express interest in environment management and consequently launch environment protection initiatives and mechanism.
The green banking products include by and large green mortgage, green loans, green savings account, mobile banking, net banking, green credit cards so that there shall be minimum requirements and needs of paper. It is a fact that more consumption of paper leads to more felling of trees and more felling of trees means less rain, less rain leads to less natural vegetation and hence the environmental disaster. Trees are one of the most important constituents of green environment and we need to reduce the consumption of paper to save the trees. Banking industry is one of the mentionable consumers of paper. It is, therefore, the need of the hour to make paperless financial transaction as far as possible and practicable in order to save the earth from ongoing environmental torture being committed every now and then. The banking industry and other enterprises are required to have interest in formulating and establishing time honored strategies that would help to take care and address issues concerning environment. Environment protection is one of the corporate social responsibilities of business and this was held in the famous M. C. Mehta Case by the Punjab and Haryana High Court in early 1990s and the Hounourable Supreme Court of India has delivered many historic decisions in favour of the role of the corporate organizations in environment protection from time to time.
But still the degree of awareness about going for green in India is insignificant. So far ever, State Bank of India has taken certain steps for going to have green banking. Earlier, cheques/withdrawal slips were needed to withdraw money from banks but adoption of technology in banking transaction say ATMs are serving the purpose to a great extent. Other Indian banks are also following the footprints of the State bank of India but at a very slow rate. Banks should develop environmental standards that to be mandatorily adhered to before any loan application should be processed by the banks. A paperless banking operation through CORE Banking Solution is revolutionary technological development and this saves lot of papers in doing banking transactions. The concept of green banking is not taking off at very high speed in the developing countries. Banking sector of the Indian economy can play an important role in promoting environmentally sustainable and socially responsible investments.
The carbon footprint from banking activities can be reduced by making the banking operation more and more technology driven. The Reserve Bank of India, the friend, philosopher and guide of the commercial banks in particular can play an effective role in developing green Banking Standards. The responsibility for developing of such standards may be given to the premier Professional Institutes in the field of Finance such as the Institute of Chartered Accountants of India (ICAI) and the Institute of Cost Accountants of India (ICAI). Moreover, the concept of green banking operational audit may be helpful to examine the extent to which green banking initiatives are in operation. Green Banking Transaction Audit can be entrusted to the Chartered Accountants (ACAs/FCAs) and the Cost & Management Accountants (ACMAs/FCMAs) who are essentially the Members of the Institute of Chartered Accountants of India and the Institute of Cost Accountants of India respectively. There is a Reserved Bank of India sponsored institute namely the Institute for Development and Research in Banking Technology (IDRBT) and it can play also an important role in developing banking technology for processing banking transaction in paperless environment. India is having a wide network of different kinds of banks and huge quantum of paper is consumed by them in a day. In order to sustain in the competitive business environment, cost control and cost reduction plays a great role for any industry and the same is not exception to banking industry in any way.
Making paperless banking transaction or with minimum use of paper in day to day banking operation is expected to reduce the transaction cost of the banks and more rationally, the service of the Cost & Management Accountants may be hired for designing a cost effective paperless mode of banking transactions. Banks contribute towards carbon emission in day to day banking operations like any other organizations in terms of consumption of energy in lighting, air-conditioning etc. and green banking can increase sustainability by reducing overall external carbon emission and for this purpose, banks should finance green projects as well as pollution reducing projects.
The rate of interest for lending for the environment-friendly projects should be less than other projects so that business houses shall be encouraged to go more and more for green projects. Banks cannot renounce their responsibilities towards the society since they are part and parcel of the community of corporate citizens. The green banking concept is expected to take care of ecological factors so that it can ensure conservation of natural resources and making the earth a congenial home for the mankind. There has been enough damage to the earth and now it is the time to remain restrained from environment destructive habits by hook by crook.
In early 1990s, the United Nations Environment Programme (UNEP) launched UNEP Finance Initiative whose basic purpose is to take care of environmental and social relevance and impacts on the financial performance and the degree of risk that remain involved with financial sector. In the similar way, the city of London had launched London Principles on Sustainable Finance at Johannesburg Earth Summit in 2002. India is one of the important countries in the world who can contribute much in creating mass awareness about green banking initiatives. But the initiative is not very encouraging except initiatives taken by the State Bank of India and green banking initiative adopted by ICICI Bank. The globalization has enhanced the extent of market and banks should play a prominent role in taking care of the environmental and ecological perspectives in such a manner that business houses could go more and more for environmentally sustainable projects.
It is true that no development is possible without certain loss inevitably but now loss of biodiversity, adverse climate and ecological imbalance etc. are crossing the tolerable limits and sustainable strength of the earth for which banks are responsible as others are. The essence of green banking is to make the customers of the banks environment friendly and for this purpose, banks are to design their products in such length and breadth so that it would induce the enterprises to be environment directed and environment driven. Green banking makes the banks discharge their social responsibilities.
Global warming is a major threat to the cause of mankind and sustainable development is possible only when commercial institutions work in conjunction with the social institution. Banks are the major commercial institutions who can afford to make the environment pollution free through its influential interaction with large customers’ base in the financial market. The lending norms of the banks should be framed in such way so that the borrowers would take into cognizance that environment friendly projects can get cleared favourably by the banks. The Government of India should make stringent legislations for green banking.
It is very common to see that no action when it is prescribed to be adhered voluntarily works in the developing countries and enactment of law is necessary for compliance and the Companies Act, 2013 is a good example to contain mandatory provisions for spending certain percentage of profits for the cause of corporate social responsibility. It is therefore high time to ponder over the issues concerning going for green banking in order to make sustainable development in place. Banks should be strict for compliance of environment protection norms by the borrowers so that environment can remain in sustainable state and civilization is free from environmental threats.
(The author is Professor of Management, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir.)
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