ASSIGNMENT

ON
SOCIAL RESPONSIBILITY OF BANKS

SUBMITTED TO
Dr. Jasbir Singh

SUBMITTED BY
Varun Patwal
BBA (B&I) 6th semester

Introduction

Corporate Social Responsibility (CSR) is often defined as corporate responsibility, corporate

citizenship, social enterprise, sustainable development, triple-bottom line, corporate ethics, and
in some cases, corporate governance. What binds these terms together is the expectation that
corporates (private and public enterprises alike) behave ethically vis--vis a broad group of
stakeholders - workers and their families, communities and the wider society.
In India, as in many other countries facing similarly large development challenges, the discourse
around CSR is increasingly about the crucial role corporates can play in bringing about positive
change in the area of human development and social inclusion. CSR is no longer seen as
corporate social assistance or philanthropy, but as essential to a good business strategy,
helping reduce investment risks and enhancing business profits by improving transparency and
accountability. It is about working together - with government, with civil society, and with the
community - to improve the lives of millions of people by making growth more inclusive.

Corporate Social Responsibility reflects Commercial Bank's commitment to the customers,

shareholders, employees and to the communities we serve. Our commitment impels us to
perform with the highest standards of governance and ethics; provide products and
services that meet the rising expectations of our customers; attract and retain quality
employees; provide support in our communities; and lessen the environmental impact of our
business practices.

SOCIAL RESPONSIBILITY OF BANKS

Socialistic pattern of society
Planning in India derives its objectives and social premises from the directive principle of state
policy enshrined in the constitution. The broad objective of indian planning is to promote a
pattern of development which would ultimately lead to the establishment of a socialistic pattern
of society in India. In such a society both public and private sector would be viewed
complementary and developed together

Social control of banks

prior to the nationalisation of 14 major banks in 1969, the government experimented briefly (for
19 months from December 1967 onwords) with the social control of banks. The basic objectives
of such control was to ensure the equitable and purposeful distribution, within the resources.
The main features are :1. Under social control the board of directors of banks were to be reconstituted and the majority of
the directors of banks had to be persons having special knowledge or practical experience in
agriculture, small-scale industries , cooperation and economies
2. New loans were prohibited to directors and the concerns in written
3. The outstanding loans to such directors must be paid back within 3 years
4. The National Credit Council (NCC) composed of representatives for various sectors was set up
in December 1967 to determine priorities of bank loans and advances
5. The government could acquire control over any commercial banks, if it failed to abide by the
social control policies and directions given by the R.B.I

Nationalisation of banks

Dissatisfied with the limited policy of social control, the government resorted to the
nationalisation of 14 major banks in july 1969. The ownership (rather than mere control) by the
government was considered important for the extension and diversification of banking services.
The role of nationalised banks was viewed as one of catalytic agent for growth.
Operationally, two main tasks were set before the public sector banks :
1. mobilisation of deposits through massive programmes of branch expansion, especially in
unbanked rural and semi-urban areas
2. diversification of bank credit to ensure flow of financial assistance to neglected sectors

Social banking
After nationalisation, the commercial banks in India have adopted a new policy orientation to
meet the socio - economic obligations of the country.
The important aspects of this social orientation are :1. Alignment of credit policy with the overall objective of the government
2. Allocation of credit in accordance with the requirements of the planned economic development
of the country
3. Reduction of regional disparities in the spread of banking to achieve the balanced development
of the country
4. A lead role in the development of credit at district level

In order to achieve the new social reorientation of banking, the banking system
was developed and in functioning changed in the following directions :
1. Expansion of bank offices in the rural and hitherto to unbanked areas.

2. Gradual decline in the security and guarantee oriented approach and laying more emphasis on
the purpose, visibility and creditworthiness of the project for which the loan is required
3. Decline in the share of bank credit to large and medium industries
4. Lead bank scheme was introduced in December 1969 to evolve a consortium approach on the
part of the commercial banks to develop on the basis of area approach
5. Differential interest rate (DIR) scheme was introduced in 1972 to provide financial assistance to
the economically weaker sections of the society
6. Greater provision of bank credit has been made to the priority sectors like agriculture, small and
cottage industry , small road transport, exports etc

Rural Branch Expansion

This variable is used to measure the extent up to which the banks are following the financial
inclusion policy formulated by the Reserve Bank of India to promote balanced growth of the
economy. Financial inclusion is explained as the process of ensuring access to appropriate
financial products and services needed by vulnerable groups such as weaker sections and low
income groups at an affordable cost in a fair and transparent manner by mainstream
Institutional players. However, illiteracy and the low income savings and lack of bank branches
in rural areas continue to be a road block to financial inclusion in many states. Apart from this
there is inadequate legal and financial structure. Private ownership, good governance,
professional management, no caps on interest rates, and most importantly, commitment to local
areas and local community are a few factors that could lead to financial inclusion.
Jammu and Kashmir Bank is the top performer in rural branch expansion variable and YES
banks is the least performer in rural branch expansion variable among private sector banks.
Foreign banks are having lowest number of rural branches in three consecutive years, 0
(Minimum) and 2 (Maximum) rural branches only. CITI and Standard Chartered banks dont
have any branch in rural areas.

Priority Sector Lending

As described by the Reserve Bank of India, Priority Sector lending means lending to the
agriculture, small scale and ancillary industries, new and renewable sources of energy, cottage
industries, artisans, food and agro based processing, education, housing and weaker section.
While for domestic banks, both the public and private sectors are required to lend 40 per cent of

their net bank credit (NBC) to the priority sector, foreign banks are required to lend 32 per cent
of their NBC to the priority sector. It has been observed that while banks often tend to meet the
overall priority sector targets, they sometimes tend to miss the sub-targets. This is particularly
true in case of domestic banks failing to meet their sub-targets for agricultural advances. One of
the reasons banks often site for not lending to this sector is that recovery is often difficult.

Education
This variable is used to measure the contribution of banks in the field of education. In India Rao
(1964) and the Education Commission (1966) emphasised the links between education and
development. Fields (1980) and Tilak (1978) explained that education and poverty are inversely
related: the higher the level of education of the population, the lower would be the proportion of
poor people in the total population, as education imparts knowledge and skills that are
associated with higher wages. The major activities carried out by the banks in the field of
education are as follows:

Support to low income family students with financial assistance, free uniform and books
Motivational camps to go to school, for the students of rural areas.
Concession in interest on education loans for backward class students
Establishing library-cum-reading rooms in rural areas and providing fans, water coolers etc. to

schools.
Promotion and financial support education of special children,
Tie-ups with educational institutes for providing education loans, interest subsidy schemes for

students belonging to economically weaker sections

School adoption projects
Special educational sponsorships for the girl child
Educational assistance by giving donations
Opening of pre-schools and assistance in mid day meal programs for the students.

Environment Protection
This variable includes all the activities carried out by the banks for the purpose of environment
protection or to reduce the environmental harm by adopting different initiatives, replacing
traditional activities by eco friendly processes or activities in day to day business. A growing
number of companies in many sectors and geographic regions have discovered concrete value
and competitive advantage from socially responsible practices in pollution prevention, energy
efficiency, environmentally oriented design, supply chain management, and health and
sustainable agriculture initiatives, among others. For these firms, CSR has had a positive impact
on profits. The World Bank has also pressurized the banks not to finance the projects, which are
causing harm to the environment either directly or indirectly. The major activities performed by
banks in this field are as follows:

No credit to businesses involved in Ozone depletion, human rights violation, controversial

weapons, gambling or pornography activities.

Awareness programs about avoiding the usage of plastic bags and reduced use of paper in

offices.
Promoting and financing energy saving and solar energy projects.
Encouraging, financing and setting up of non-conventional energy generation units,
Assistance for rain water harvesting tanks
Wild animal protection projects
Tree plantation drives
Projects related to reduction of carbon emissions

Women Welfare
This variable indicates the activities done in the direction of welfare of women and girl child.
Some of the activities which banks are performing in the field of the women welfare are as
follows:

Free or concessional education for poor girls, scholarships to girl students

Concessions on the interest rate for girl student,
Project for Women Weavers in Varanasi,
Insurance policies specially for rural and urban poor women,
Special credit cards issued for women
Women empowerment through donation of sewing machines for self employment,
Maternal Nutrition Project,
Support to Indian School of Microfinance for Women (ISMW)

Farmers Welfare
Indian economy has always been an agriculture based economy. Although the contribution of
agriculture to the GDP of the country has decreased in past years, a large portion of population
still depends upon agriculture for its survival. However, the agriculture sector is still in a meagre
state. Due to the poor economic health of agriculture sector, India observes a large number of
cases of suicide among the farmers. It has been felt that there is an urgent requirement to
promote investments in this sector and welfare of the farmers. Some of the major activities done
by the banks under the farmers welfare are as follows:

Agriculture Debt Waiver & Debt Relief Scheme

Loan for Solar Water Heating Systems at concessional rate,
Rural Extension Education Programmes enabling farmers & entrepreneurs to improve their
productivity/production,
Establishment of Farmers clubs,
Farmers Training Centres (FTCs),
Special credit cards for farmers,
Agriculture knowledge sharing Programs,
National insurance programs for agriculture

The Principles of Corporate Social Responsibilities in Banks:

1.

The financial institutions should take into consideration the environment, social equity and
economic justice into their business strategies.

2.

If any way, the environment is harmed by the institution, the full responsibility should be
accepted.

3.
4.

They should have transparent business policies and dealings.

They should be accountable to their shareholders and to the community where they
operate.They should frame good corporate governance policies and follow them sincerely.

Some of the examples of the Corporate Social Responsibilities in Banks:

1.

Blood Donation camps, free medical check ups, free medicines and donating Ambulances by
Banks.

2.
3.
4.

Scholarships to the deserving candidates to promote Education.

Some banks provide financial assistance to the weaker section of the society.
The Banks of India has a policy of recruiting blind and disable individuals, and it also have a cell
to prevent the sexual harassment at work place.

5.

BOI also helps the NGOs in noble causes like Eye Donation and Blood Donation camps.

Benefits of ethics in Banks:

Improved customer perception: Ethical companies tend to be viewed positively by customers.
In some cases Body Shop being a pioneering case in point when ethical trade is built into
the DNA of the brand it can become a major selling point.
Cost: A commitment to recycling or carbon reduction can become part of a virtuous circle that
ultimately brings down costs.

Recruitment: Ethical policies can often help business attract and retain high quality staff, while
also creating a positive atmosphere in the workplace.
Legality: All businesses must be compliant with legislation and regulation, but those who
operate according to ethical values that comply with the spirit as well as the letter of the law are
less likely to run into legal difficulties.

Drawbacks of Ethical Banking

Business ethics reduce a company's freedom to maximize its profit. For example, a
multinational company may move its manufacturing facility to a developing country to reduce
costs. Practices acceptable in that country, such as child labor, poor health and safety, povertylevel wages and coerced employment, will not be tolerated by an ethical company.
Improvements in working conditions, such as a living wage and minimum health and safety
standards reduce the level of cost-savings that the company generates. However, it could be
argued that the restrictions on company freedom benefit wider society.

Conclusion
With changing times the Indian banks are making are effort in the CSR areas but still there is a
requirement of more emphasis on CSR. The country still has some banks which are not able to
meet the regulatory requirement of Priority sector lending and rural branch expansion. Even
after the RBIs guidelines for financial literacy programs the banks have not take substantial
steps in this direction. The RBI may be more stringent in enforcing such regulatory
requirements. The banks have focused on the community welfare and farmers welfare
programs but the efforts for women welfare and education are not sizeable. Moreover, the public

sector banks have overall highest contribution in CSR activities. Private sector banks and
foreign banks are still lagging in this area.
Banks are usually judged from the point of view of their financial performance but this study has
explored a new dimension for analysing the performance of banks. It could be inferred from the
study that certain banks like ICICI bank, HDFC bank and State Bank of India which are top
performers in terms of profitability and growth are not at the top in CSR activities.