Green Banking in India: A Research Study on Strategies

Have you heard of the terminology “Green Banking in India”? If not, don’t worry! Here we discuss all about Green Banking in India, a complete study on the strategies followed towards this interesting way of sustainable development.

Banks play a significant role in environmental protection and economic growth by promoting environmentally sustainable and responsible institutions. This kind of bank is termed as “Green Banking”. For the required economic innovation banks can provide powerful leadership that will provide new opportunities for investment policies and financing. 

Green Banking signifies combining technologies, operational improvements and changing customer habits in the business of banking. Adopting Green Banking practices won’t just be valuable for the environment, but it is also beneficial in cost reduction, fraud, a lower vulnerability annual error, greater operational efficiencies in activities of the banks.

Indian banks are not polluters themselves but normally they have a banking relationship with certain investment or companies projects which are polluters or it could be so in the future. Through lending in customers enterprises banks also contribute to ecological footprint indirectly or directly. 

Green Banking In India: Means

Green Banking means reducing carbon footprint from daily banking activities and promoting environmental friendly activities. This can be done in various forms i.e. paying online bills instead of mailing them, using online banking service instead of branch banking, the opening of money market accounts and commercial deposits in online banks etc.

Green banking refers to the successful and systematic use of computers to optimize the use of waste-less paper, servers and printers. By promoting the use of online banking among customers, banks can implement green banking and this will also help them to reduce operational costs and increase efficiency.

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Green Banking: Financial Products and Services

Different strategies and products/ services for Green Banking include:

1. Online Banking 

Online banking is the easiest way to make the banks green and help the environment. It is also known as virtual banking, internet banking, mobile banking and e-banking. Online banking is an electronic payment system that permits other financial institutions or customers of a bank to conduct a range of financial transactions through the banks’ website. 

2. Green Mortgages and Loans 

Banks offer green mortgages with lower interest rates than the market rates for the retail customers who are ready to invest in retrofits or purchase new energy-efficient homes. This will also permit customers to invest in energy-efficient appliances. Generally, green home mortgages are called Energy Efficient mortgages (EEM’S).

3. Green Credit and Debit Card

This can be used while making the payments of expenses without carrying the money. Banks offer an excellent incentive to the credit cardholders in the form of points which they can redeem for their next purchase.

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4. Green Car Loan 

With the below-market interest rates, many green car loans encourage the purchase of cars which give a demonstration of higher fuel efficiency. 

5. Deposit Capture (RDC)

This facility permits you to scan cheques even remotely and via an encrypted internet connection, transmit the cheque images to a bank for the deposit. Once the bank gets the cheque image, it posts the deposit to the account of the customer. Usually, banks offer this facility to business customers instead of providing this to individuals.

Green Banking in India: Benefits to Know

Following are the numerous benefits of green banking in India:

• Less use of paperwork means less cutting of trees. Green banking avoids paperwork and relies more on electronic/online transactions for processing so that the customers can get green mortgages and green cards. 
• When we get a loan from the green banks, the interest of that loan is less as compared to the normal banks since green banks give more value to environmental friendly factors (ecological gains). One of the underlying principles in a green bank is “natural resources conservation” while assessing operating/capital loans to the industrial business sector. 
• To do environmental friendly business practice, green banks create massive awareness to business people about social and environmental responsibilities.
• To benefit our future generations, green banks implement and adopt environmental standards for lending.
• Green banks provide electronic free bill payment services.
• For opening a green account they provide an online account opening form.
• Also, for opening green accounts, cashback will be credited by the green banks to all new customers.

Hence, green banking comes packed with a lot of advantages to offer to the environment and humanity in general.

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Green Banking India: Challenges to Face

While following and accepting green banking practices, the banks would face the challenges which are:

• Many banks in green business are start-up face and very new. Normally, to start making money it takes 3 to 4 years for a bank. Hence, it does not help green banks during the recession.
• Sometimes banks are prone to lose their reputation because banks are involved in those projects which are socially and environmentally damaging.
• To provide proper services, green banks require well-trained loan officers and other staff, they give an extra experience while dealing with different set of customers, due to this banks have to face high operating costs.
• Credit risk arises when banks lead to those firms whose business were affected by a change in environmental regulation, by the cost of pollution and new requirement of emission level.
• Security concerns and technical breakdowns are also one of the biggest challenges for green banks.

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Green Banking Initiative in India

On green initiatives, the Government of India has issued instructions/guidelines to banks. To implement the guidelines, all centralised, regional rural and public sector banks were asked to:

• Enhance the usage of electronic payment methods.
• Increase the use of CBS (Core Banking Solution)
• Encourage the use of video conferencing.
• Offer centralised payment systems like RTGS and NEFT. 

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Green Banking: Key Takeaways

It should be the responsibility of the BFSI i.e. Banking, Financial Services, and Insurance Sector in creating a greener and a more sustainable environment in India. Banks believe that, for making a greener future, every small but necessary step taken today would go a long way towards contributing for a better global environment.

Moreover, tons of channels have still to be explored by the banks for turning into greener financial activities. Till now, green practices have been adopted in selected branches owing to different challenges. 

However, the concept of Green Banking is valuable not only for the banking arena, but the economy and the country as a whole. Ultimately, Green banking will not only sew up the greening of the industries, but in future it will also ease in improving the asset quality of the banks.

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What are your views on the concept of Green Banking in India? Should this be followed aggressively and at a large-scale to further promote a human friendly environment? Let us know in the comment section.