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ISBN - 978-93-81583-46-3

Sustainable Banking in India: The Road Less Travelled
Dr. Prita D. Mallya Associate Professor Dept. of Economics & Banking, VVM’s Shree Damodar College of Commerce & Economics, Goa pritamallya@yahoo.com; pritamallya@gmail.com

National Conference on Emerging Challenges forSustainable Business 2012 311

Sustainable Banking in India: The Road Less Travelled

Sustainable Banking in India: The Road Less Travelled Abstract Although the concept and practice of socially responsible and sustainable investing (SRSI) or more simply, sustainable finance, is yet to catch on in India, it represents a potentially hugely rewarding business opportunity. This paper begins with the wider concept of sustainable development and business, then highlights the importance of sustainable banking – why it makes economic sense for banks to seriously venture into this area; it lists various international initiatives to promote SRSI, identifies global best practices in the area of sustainable finance and presents the Indian banking sector’s sparse efforts in this direction. It also identifies some financial products that offer opportunities for sustainable banking in India. Since sustainable banking in India is in its infancy, the scope for empirical work in this area is extremely limited. This limitation can be overcome in the future as more bankers accept and follow this essential practice. Key words: green banking, responsible banking, sustainable banking, sustainable finance, sustainable development

1. Introduction

National Conference on Emerging Challenges forSustainable Business 2012 312

Sustainable Banking in India: The Road Less Travelled

There have been several paradigm shifts in the understanding of the concept of economic development (Meier 2005, Todaro & Smith 2011). In the early days of development economics following the end of the Second World War, development was seen as being concomitant with economic growth, and Gross Domestic Product and per capita income were the tools of measurement of a nation’s level of development. Several ‘less developed countries’ (LDCs) passionately followed the path of industrialization and modernization in the hope of achieving higher levels of economic growth and development. But disillusionment quickly set in, as these countries continued to be plagued by widespread poverty and its associated miseries. In the late 1960s, Dudley Seers engineered the first paradigm shift in the understanding of economic development when he interpreted the term to mean a reduction in poverty, inequality and unemployment. By the end of the 20th century, Nobel Laureate Amartya Sen (1999) was defining development as reducing deprivation or broadening choice. Sen’s concept of deprivation represents a multidimensional view of poverty that includes hunger, illiteracy, illness and poor health, powerlessness, insecurity, humiliation, and a lack of access to basic infrastructure. In the three decades between these two interpretations of development, there emerged the equally important concept of sustainable development, i.e. “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987) There is as yet some disagreement about the exact definition and meaning of development, but there is clear consensus about the need to ensure rapid growth and reduce hunger, poverty, illiteracy, preventable disease, gender inequality, and unsustainable environmental damage (Nafziger 2005). Today, economic development is commonly understood to encompass human development and sustainable development. With growing awareness of the significance of the natural environment in terms of its economic and non-economic value, sustainable development is gaining ground as the only feasible path to the long-term growth, development and progress of a nation It is but a small step from sustainable...
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