CHAPTER – 1

INTRODUCTION TO GREEN
BANKING

The "Introduction" chapter sets the stage for understanding the concept of green
banking within the banking sector, particularly in the region of Karnataka, India.
This chapter provides a comprehensive overview of the background, relevance, and
objectives of the study. It also outlines the structure of the chapter to guide the
reader through the subsequent sections.

1.1 Overview

Green Banking is the new phenomenon in the financial world which aims to
protect the environment by promoting environmental-friendly practices through
the introduction of Green Banking financial products and services and reduce the
carbon footprint from banking activities. Wherein, Green Banking products and
services include Online Banking, Mobile Banking, Banking trough ATMs,
Green Credit Cards, Green Mortgages and Loans, Green Deposits and Green
Rewards Checking Accounts. Carbon footprint is a measure of the impact of
activities on the environment. It relates to the amount of Green House Gases
(GHG) producing in day-to-day business while burning fossil fuels for
electricity, heating, transportation, etc. Banks can reduce their carbon footprints
by adopting the measures like Paperless Banking, Energy Consciousness, using
Mass Transportation System, Use of Solar and Wind Energy.
Green Banking offers various benefits over traditional banking which includes
digitization of banking processes, 24*7 access facility, time effective and
convenience. Green Banking is not only a Corporate Social Responsibility
(CSR) activity of an organization, but also it is about making the society
habitable without any considerable damage. For banking professionals, Green
Banking involves the tenets of sustainability, ethical lending, conservation and
energy efficiency.
The banking sector in India is the backbone of the economy and also plays a crucial role
in societal development. As of 2023, the Indian banking industry was valued at
approximately $2.16 trillion (Reserve Bank of India [RBI], 2023). The sector is
expected to continue growing, with predictions suggesting it will be the fifth-largest
industry globally by 2025 (PricewaterhouseCoopers [PwC], 2022). Traditional
banking practices have been criticized for their environmental impact, including
extensive paper usage and energy consumption, which contribute to deforestation
and greenhouse gas emissions. Recent shifts towards sustainable banking practices,
known as green banking, aim to address these issues by integrating environmental
considerations into banking operations. According to a report by the Indian Banks'
Association (IBA, 2023), approximately 35% of banks in India have implemented
some form of green banking initiative, with a higher adoption rate among private
sector banks (40%) compared to public sector banks (30%).

The banking sector in India is the lifeline of the nation. It is one of the largest
financial sectors in India. Indian banks have the potential to become the fifth
largest in the world by 2020 and the third largest by 2025. Banks have helped in
country’s economic development and have turned the hopes of people into
reality. In recent years, Indian banks have witnessed the growing trend and have
transformed its operational strategies to a large extent. The banking sector in India
has gone through many challenges which include a shift in consumer behaviors,
technological changes, regulatory changes, etc. It has faced various ups and
downs and has become adaptive to the changing environment.

The Traditional Banking sector in India can be defined as the banks whose primary
activity is to receive, keep and lend money. It acted as a payment agent for its
customers. It has provided many facilities to customers like opening of an
account, transfer of funds, providing of loans, clearing of cheques, clearing of
demand drafts, etc. They are financial intermediaries who act as the depository
institutions of the economy, having control on the economy’s money supply.
Traditional banks are the major players in the financial market of the economy.
They perform the activity of transferring household saving into loans for fostering
business organizations. The main objective of traditional banking is to increase
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 their financial leverage by making higher profits while neglecting the negative
impact of its activities on economy and environment.

The major issue of traditional banking is that the customers have to visit banks to
carry out their banking activities within the specified working hours only. This
involves a lot of time of the customers as it not only includes travelling but also
requires them to stand in long queues to perform their transactions.

Traditional banking also involves a lot of paperwork to carry out proper banking
functions, indirectly contributing to deforestation and affecting the environment.
As the impulsive usage of natural resources continues, the need for protecting
them and promoting sustainability led to the emergence of the concept- Green
Banking.

1.1.1 Overview of green banking as a global phenomenon

Green banking is a paradigm shift from traditional banking towards better

environmentally sustainable practices. Globally, the concept of green banking has
gained significance as financial institutions recognize their role in fostering
sustainable development. Green banking includes a range of practices that aim to
reduce the carbon footprint of banking activities, promote environmental
stewardship, and support eco-friendly investments (Sharma, 2013).

Green Banking is different from traditional banking as it is the concept of promoting

sustainable development in the country. Green Banking is the new phenomenon in
the financial world which concentrates on environmental and socially responsible
investing. As depletion of natural resources is continues to rise, organizations
have started performing their corporate social responsibilities. They have started
modifying their working techniques to maximize the sustainability and reduce the
impact of their activities on the environment.

Green Banking is also called as the ethical banking which aims to protect the
environment and reduce the carbon footprint from banking activities. It
encourages banks to carry out environment-friendly investments by combining its
operational improvements and technology know-how in banking business
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 activities. Green Banking has started lending priority to those industries which are
already green or putting its efforts to go green. The aim of ‘Going Green’ is to
increase the energy efficiency and use biodegradable products. The performance
of banks largely depends upon the performance of its clients. The banks have to
diligently check the customer’s projects are meeting all the legal and
environmental compliances as any failure can result in non-performing assets for
the banks.

Evolution of Green Banking in India Since the Early 2000s

The concept of green banking in India began gaining prominence in the early 2000s,
driven by the need to align banking operations with the country’s environmental
goals. The Indian Banks' Association (IBA) played a pivotal role in promoting green
banking practices among Indian banks, encouraging them to adopt environmentally
sustainable practices and finance green projects.

In 2010, the Reserve Bank of India (RBI) issued guidelines urging banks to integrate
social and environmental concerns into their operations, particularly in credit risk
management and corporate social responsibility activities (RBI, 2013). These
guidelines laid the foundation for the adoption of green banking practices in India,
with banks increasingly focusing on reducing their carbon footprint and supporting
environmentally sustainable projects.

By 2022, nearly 50% of Indian banks had implemented some form of green banking
initiative, ranging from online banking services to financing renewable energy
projects (IBA, 2022). Public sector banks, such as the State Bank of India (SBI),
have been at the forefront to these initiatives, launching several green banking
products and services aimed at promoting environmental sustainability.

Regulatory Framework Governing Green Banking

The Reserve Bank of India (RBI) has played a pivotal role in encouraging banks to
adopt green practices, particularly through policy guidelines and regulatory
frameworks. For instance, in 2012, the RBI issued directives urging banks to

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 integrate environmental considerations into their risk management processes and
corporate social responsibility activities (RBI, 2013).

The regulatory framework for green banking in India is primarily shaped by the
guidelines and policies issued by the Reserve Bank of India (RBI) and other
regulatory bodies. The RBI’s 2012 guidelines on sustainable banking practices
emphasized the need for banks to integrate environmental and social considerations
into their business operations, particularly in areas such as credit risk management
and corporate governance (RBI, 2013).

In addition to the RBI’s guidelines, the Indian government has introduced various
policies and initiatives aimed at promoting green banking. For example, the
government’s focus on renewable energy and energy efficiency has led to the
development of several green finance products, such as green bonds and green
loans, which are designed to finance environmentally sustainable projects
(Government of India, 2022).

Moreover, the Securities and Exchange Board of India (SEBI) has introduced
regulations requiring companies to disclose their environmental, social, and
governance (ESG) practices, which has further encouraged banks to adopt green
banking practices (SEBI, 2023). These regulatory frameworks have been
instrumental in driving the adoption of green banking in India, ensuring that banks
contribute to the country’s environmental goals.

The concept of Going Green is new in India and has been adopted by the Indian
banks in many forms. Banks have started providing services of online banking,
mobile banking, green loans, E-statements, etc. They have been promoting their
services 24*7 to the consumers. Banks have started providing various services
like online opening of bank accounts, online payment of bills, online investment,
use of ATMs, etc. As the concept of Green Banking is at growing pace in India,
it has also entered in the State of Karnataka. Both private and public sector
banks in Karnataka have started providing Green Banking products and
services to its customers and have started contributing to the concept of
ethical banking. This study provides information about the Green Banking
activities carried out by various banks in Karnataka. This study also includes
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 awareness and perception about Green Banking activities among customers
and bank employees of the state.

The global banking industry has been instrumental in financing initiatives aimed at
reducing carbon emissions and promoting renewable energy. For example, the
European Investment Bank (EIB) allocated €24 billion to climate action projects in
2020, reflecting the growing commitment to sustainability within the banking sector
(EIB, 2021). Similarly, in North America, major banks such as JPMorgan Chase
have committed to investing billions in green projects to mitigate the effects of
climate change (Bank of America, 2022). These initiatives highlight the increasing
importance of green banking as a global phenomenon aimed at combating
environmental challenges.

1.1 Meaning and Concept of Green Banking

In today’s society, climate change is a most complicated issue. Nowadays, people are
more conversant with global warming and its inherent consequences on human
life (Sharma, 2013). So, change is imminent in present scenario for the survival,
and continuous efforts are made to the environmental management (Elkington,
1994) in a sustainable manner. It is the matter of concern for the government,
direct polluters and also for other stakeholders like financial institutions. This
includes banks, which are playing a fundamental role in the development of the
society. Although banking activities are not physically related to the environment,
yet it is an external impact of the customers which is substantial for them. To
reduce the carbon footprint from the environment substantially, banks are required
to promote those products, process and technology which adhere to it. Therefore,
banks are adopting green strategies into their buildings, operations, investments
and financing strategies.

Green banking is a concept that emphasizes the role of financial institutions in

promoting sustainability through environmental friendly practices. These practices
include reducing the carbon footprint of banking activities, promoting green loans
for eco-friendly projects, and encouraging customers to engage in online banking
to reduce paper usage. As of 2022, nearly 45% of Indian banks have introduced
green banking products such as green loans and green credit cards (KPMG, 2023).
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 In Karnataka, the adoption rate is slightly higher, with 48% of banks offering at
least one green banking service (IBA, 2023). This growing trend reflects a broader
societal shift towards sustainability, as customers increasingly demand that their
financial institutions act responsible towards the environment.

The banking industry in India witnessed many changes and introduced several
technical changes (Curry and Moutinho, 1993) that changed the definition of
banking. Many functions were included in the process other than the core
functions. However, in the twentieth century, banking industry went into yet
another revamp when everyone were hailing about sustainable development.
Many studies undertaken back then proved that banks were a major source
of environmental degradation and increased the level of carbon footprint. As per
the requirement, sustainable development was seen as the only option in order to
reduce the factors giving birth to global warming (Elkington, 1994). Advancement
has already been undertaken by the banking industry to support sustainable
development; Green Banking was taken to be a common answer to all the
environment related problems. With the widespread use of internet banking,
mobile banking and cashless transactions, it is easy to implement the concept of
Green Banking. In order to promote the use and implementation of Green
Banking, a general campaign was launched by NDTV under the name
‘Greenathon’. Inspired by this campaign, many banks started to finance such
projects which were eco-friendly and included provisions for providing energy
efficiency.

Differences in Green Banking Initiatives Between Public and Private Banks

There are notable differences in the approach to green banking between public and
private sector banks in India. Public sector banks, driven by government mandates,
often focus on financing large-scale green projects, such as renewable energy
installations and energy-efficient infrastructure. For instance, the State Bank of India
(SBI) has been a leader in financing wind and solar power projects, as part of its
broader commitment to environmental sustainability (RBI, 2023).

Private sector banks, on the other hand, tend to focus more on digital banking services
that reduce the carbon footprint of banking operations. For example, ICICI Bank
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 and HDFC Bank both have launched several digital banking products, such as online
banking, mobile banking, and paperless statements, which contribute to reducing the
environmental impact of banking activities (PwC, 2022). These initiatives reflect the
different strategic priorities of public and private sector banks in India, with public
sector banks focusing more on large-scale green projects and private sector banks
emphasizing digital banking services.

Several Indian banks, both in the public and private sectors, have responded to this call
by implementing various green banking initiatives. For example, the State Bank of
India (SBI) introduced Green Channel Counters to promote paperless banking,
while ICICI Bank has launched several products aimed at supporting green energy
projects (RBI, 2023). These initiatives are part of a broader effort to align banking
operations with national environmental goals, such as India’s commitment to reduce
carbon emissions by 33-35% by 2030 under the Paris Agreement (Government of
India, 2015).

The increasing adoptable symbol of Eco-consciousness in the world is moving

towards green. According to Indian Banks Association (IBA, 2014), “Green
Bank is like a normal bank, which considers all the social and
environmental/ecological factors with an aim to protect the environment and
conserve natural resources”. It is also known as an ethical bank or sustainable
bank. The purpose of these banks is to perform banking activities alongside
taking care of environment, ecology and natural resources including
biodiversity. The key reasons for going green are:

 Increase in consumption and of energy

 Increase in energy prices
 Increase in demand for environmental-friendly goods and services by
consumers
 Higher expectations by the public on ban’s environmental responsibilities
 The emergence of stricter regulatory and compliance requirements.

The concept of Green Banking or Green initiatives taken by Banks is making

technological improvements, operational improvements and changing client habits
in the banking sector. It means promoting environmental-friendly practices and
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 reducing the carbon footprint of banking activities. Green Banking is not only a
Corporate Social Responsibility (CSR) (Narwal, 2007) activity of an organization,
but also it is about making the society habitable without any considerable damage.
For banking professionals, Green Banking involves the tenets of sustainability, ethical
lending, conservation and energy efficiency. This comes in many forms, such as:

 Increase use of online banking and reduce use of branch banking.

 Performing online payments instead of using mails.

 Opening online bank accounts, instead of large multi-branch banks.

 Finding a local bank in their vicinity that supports local green initiatives.

The concept of Green Banking is mutually beneficial to the consumers, banks,

industries and the economy. For consumers, this shift towards Green Banking
means that more deposit and loan products will be available through online and
mobile banking. It also means better deposit rates on Green Deposits and Green
savings accounts and lowers interest rates for Green Mortgages. For banks,
adoption of Green Banking services leads to paperless banking, energy saving,
etc. This is an effort by the banks to make the industries grow green through
prudent use of Green Mortgages.

The importance of Green Banking is immense for the overall economy as it mitigates
Credit Risk, Legal Risk and Reputation Risk involved in the banking sector.

 Credit Risk: Customers affected by credit risks (Kiesel and Spohnholtz,

2017) due to lending are those whose businesses which are affected by
the pollution cost, changes in environmental regulations and new
requirements on emissions levels. It is higher due to the probability of
customer default arising due to uncalculated expenses for capital
investment in production facilities, loss of market share and third party
claims.
 Legal Risk: Banks are likely to face legal risk (Charlier, 2000) if they
violate environmental regulation rules. They may also face risk of direct
lender liability for cleanup costs or claims for damages, in case, they

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 actually take possession of pollution causing assets.
 Reputational Risk: Banks are prone to loss of their reputations
(Saleuddin, 2014) if they indulge in environment damaging projects.

1.2 Rise of Green Banking

Initially, the banking industry was perceived as a low-stress profession. Employees

typically completed their tasks by four in the afternoon and would often carry
over pending work to the next day. Manual posting of ledgers led to the
occurrence of backdated entries, which created chances of fraud. Moreover,
traditional banking had significant drawbacks, such as cash withdrawal and
deposit services being available only until two in the afternoon. After that time,
customers could neither withdraw nor deposit funds, which posed challenges
during emergencies when immediate access to money was required. In such cases,
individuals often had to rely on borrowing from relatives or friends, and there
were unfortunate situations where critical medical treatment was delayed due to
insufficient funds. Furthermore, the banking sector's extensive reliance on paper
contributed to environmental concerns, including deforestation.

In traditional banking, people with knowledge of debit and credit functions were
considered eligible for working as a banker. No specific technical qualifications
were required, and also no particular education was required to be undertaken as
in other professions like, doctors. These were the issues that required serious
adherence for improving the condition and structure of the entire banking
industry. The shortcomings were closely studied by PM Mrs. Indira Gandhi, and
apart from these, many other reforms were undertaken in her regime. The
nationalization of all the major banks running in the country was a major decision
taken back then.

Following the nationalization policy, one another concept launched in 1990 that was
the New Economic Policy or Liberalization, Privatization and Globalization
(LPG) policy. Under this policy, many of the private sector banks received
license. It was from here that a new chapter in the banking industry was
introduced. Automation of the core banking process was one of the major changes
that took place at that point in time. Since the liberalization policy was adopted by

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 the banking sector, a new term ‘tech-savvy’ came into existence. After the
launch of LPG, the banking sector experienced a reform on the whole. The major
impact was noticeable in the working culture. Prior to 1990, the employees were
habitual to working in banks from 10- 5, and after that, the bankers had to work
till the bank required them. As everything was computerized, backdate entries,
pending work and frauds nearly banished. For some time, the employees had to
struggle with learning the new process and bringing back the core banking
processes on track. Slowly, people also started to have higher expectations
regarding the quality of banking services and in terms of product range. This, in
turn, led to the evolution of a new era in the banking industry.

Post New Economic Policy, (Gorton, and Huang, 2002) the role of banking increased
manifolds, and their participation in the economy became more significant. Apart
from the core banking activities like accepting deposit and giving out loans,
banks started many other activities as well. The other activities included
insurance, debit card, credit card, message alert and insurance. Although the first
ATM (Sharma, 2013) in India was launched in 1989 by HSBC, it was not popular
among the clients as well as banks. Slowly after 1990, all banks started the
process of launching ATMs and debit cards in order to reduce the workload in the
branch as more and more people started using banking services. Despite ATMs
providing 24/7 cash withdrawal access, customers were hesitant to use them due
to their unfamiliarity with the technology and uncertainty regarding transaction.
Hence, even after having debit cards, customers rushed to the branches for
withdrawing money. To solve this problem, banks launched awareness campaigns
in which the customers were taught how to use ATM and its importance.

Eventually, the clients started using ATMs when a new concept of internet banking
was launched by ICICI bank. This facility allowed the clients to access all the
functions of the bank by themselves using the internet. They had to register for
the service and obtain an ID and password. Through this, they could access their
account by visiting the site of the bank. Online transfer, bill payments,
examination fee payment and online purchasing became much easy. Although
internet banking did not allow cash withdrawals or deposits, it simplified the
process of transferring payments to others. This led to an increase in the product

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 range of the bank making banking transactions very simple. Adding to the
innovations in banking industry, Union Bank became the first ever bank to
launch a talking ATM in 2012. These ATMs were specially designed for
physically challenged and visually impaired people. After the first launch, SBI
made it a point to launch real talking ATMs across India. Making it even easier
for the clients to operate, ICICI Bank launched the concept of mobile ATM. This
meant a van would carry an ATM from place to place and people could
withdraw and deposit money as in any other ATM. Similar to ATMs, the banks
launched another machine for depositing cash into the account through the debit
card itself. Through this step, RBI tried to reduce the movement of cash and
customers for cash transactions so that employees could manage branches easily.
It reduced the long queues in banks and also zeroed the time limitation on
withdrawal and deposit of cash.

1.3 Rise of Commercial Banking

Commercial banking was unknown to the Indian economy in the ancient era.
However, various accounts of the learned people and various travelers depict the
existence of merchants and moneylenders (Dadabhoy, 2013). They were rich and
used to run a type of unorganized banking sector, but only for lending money.
Other activities were absent. People used to preserve their wealth in the form of
gold that could be easily stolen. Thus, the gold was kept safely in the temples.
While in the Mughal period the moneylenders and rich merchants achieved a
significant position for providing and facilitating the exchange of trading
instruments. Finally, in the British period, these unorganized bankers were shifted
to the role similar to commercial bankers. These bankers were made to collect,
store and loan the money to the British government.

Commercially, the very first bank was established in India in Calcutta in the year
1770. The bank was started by a European agency M/s. Alexander &Co. It was
named The Bank of Hindustan. The main purpose of establishing the bank was to
facilitate the trading practices during that period. With the closure of Alexander
Company (Anitha and Rao, 1998), The Bank of Hindustan failed in 1832. The
new twist in the history of the banking sector of India came when the three
Presidency States set up their respective banks in their domains, namely, The
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Bank of Bengal (1806), The Bank of Bombay (1840) and The Bank of Madras
(1843). These banks were established by the East India Company in order to lend
and safeguard money. These banks (Bonin, 2016) enacted all the responsibilities
of a central bank and carried out the activities in their respected vicinity. The
entire banking evolution can be classified into four phases (Figure 1):

 Phase I- Pre-Nationalization Phase (prior to 1955).

 Phase II- Period of Consolidation and Nationalization (1955-1990).

 Phase III- Introduction of Partial Liberalization and Indian Financial &

Banking Sector Reforms (1990-2004).

 Phase IV- Period of Increased Liberalization (2004 onwards).

Figure 1: Evolution of Indian Banking Industry

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Source: D&B Industry Research Service, 2006

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The first proper commercial bank of India was established after the Joint Stock
Companies Act was passed in 1850. Following the suit, Oudh Commercial Bank
emerged on the horizon of Indian Banking industry in the year 1881 and in 1894,
Punjab National Bank was the next milestone. Following that period, the banking
industry experienced rapid growth, with banks emerging in every corner of the
country due to a lack of adequate rules and regulations. This led to the failure of
these banks at the same speed with which they have been coming up in the
competition. After analyzing the hardcore failure and crisis of different
commercial banks, the Indian government was compelled to pass the Indian
Companies Act in 1913. After that, the banking industry saw many changes, two
of them being the merger of three Presidency Banks into one single Imperial Bank
(1920) and the establishment of an apex bank for controlling all the banks, i.e.,
Reserve Bank of India (1935).

1.4 Traditional Banking v/s Green Banking

Table 1: Difference between Traditional Banking and Green Banking

Traditional Banking Green Banking

 The processes were time-  The processes have been

consuming and also had time digitized, and it takes a few
limitations. It means no minutes to realize one single
transaction could be carried out transaction. Also, there is no time
after the banks closed. limitation. One can do banking at
any hour of day or night.

 Everything was done manually,  As computerization has been

and there were increased chances adopted at every level, it has
of mistakes and frauds. become easier to track mistakes,
and it has also zeroed down the
chances of frauds.

 The cost of operation was very  The valuable resources like

high, as it involved usage of electricity and forests are saved,
electricity, paper, furniture, and as there is a diminishing need to
space. It also increased carbon establish more branches. People
footprint. need not visit the branches for
transacting. As a result, carbon
could be controlled easily.

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 Only visiting the branch could let  ATMs can be used both for
the account holder withdraw or withdrawing and depositing
deposit money which was tedious money. The account holder does
and inconvenient at times. not need to wait for the branch to
open up in order to take money
out of the account or deposit it.

 Cash was the only alternative for  With the introduction of debit
purchasing something or paying and credit cards, the need of
for any of the services. This carrying cash was reduced to
required a lot of cash in hand and minimum. Moreover, with the
involved a risk of theft or loss. online payment mode, the need
for even carrying the cards has
been abolished.

 Security of transactions is  There is a greater risk of hacking

guaranteed as they are performed as the transactions are carried out
in front of the clients. online. It is possible to hack the
passwords and other credentials
for hacking and using them for
own purpose.

 There is a huge requirement of  With the introduction of

human resource as the processes advanced technology, it is
are labor-intensive. The whole possible to get the work done
system with various designations with comparatively less number
is required in order to handle the of people. It is because maximum
banking process as well as the transactions have been digitized.
customers.
 There is no need of internet  Regular internet connectivity is
connection for the clients to carry required to carry out the
out their transactions. transactions. If the internet
connection fails, then the
transaction would be interrupted
in between.

 Skill was not a mandate to  In order to perform various

handling daily transactions as functions provided by Green
there were simple debit and credit Banking, it is necessary to have
operations to be carried out. technical expertise. Working on
computers and understanding of
various technologies is important
in order to work.

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1.5 Green Process

A Green Bank requires each of its functional units and activities to be green i.e.
environmental friendly and to help improve environmental sustainability (Al-
Tekreeti, and Beheiry, 2016). Several opportunities are available for banks to
green their functional units and activities. Key among them is:

 Supply Chain Management

 Adopt techniques and plans to minimize inventory
 Adopt networked design using a carbon footprint
 Enterprise Resource Management
 Facilitate paperless transactions
 Adopt techniques for workforce and parts optimization as well as
intelligent device management.
 Customer Relationship Management
 Use electronic means, wherever possible, to maintain contact and
correspond with customers, potential customers and minimize paper-
based correspondences.ssss
 Sourcing and Procurement
 Select vendors by the sustainability rating of their products, services and
operations.
 Product Life Cycle Management
 Design and offer banking products and services in such a way that
consume fewer resources and energy and thereby reduce carbon
footprint.
 Implement effective systems for product end-of-life management that have
minimal impact on the environment.

1.6 Green Banking Products and Services

There is a greater scope of Green Banking in India as constant planning and

efforts have been laid in the field. As per the Happy Planet Index, India is making
steady progress towards reducing the carbon emissions. The index shows that,
while in 2006 India stood at the 90th position in the race of reducing carbon
emissions. The same index in 2009 showed an improvement in the position of
17
India, and it moved from the 90th to the 35th place. Continuing the progress India
is aimed at reduce the carbon emissions by 20-25% by 2020. Thus, it shows that
the economy of the country, especially the banking sector has been working in
order to prevent further environmental damage by reducing carbon emissions. The
banking sector has thoroughly built its strategy keeping in mind the six major
factors i.e. the 3Cs and the 3Ps. 3Cs stands for Cost, Control and Customer
Service; 3Ps stand for Profit, Planet, and People.

The 3Cs are the important part of banking operations, and with the help of Green
Banking, it all can be achieved by the companies. Green Banking promotes online
transactions, and it is the best way to enhance better customer services. The
customers can avail all the facilities with minimal effort. They can access
important information through laptops or even through smart phones. Thus, Green
Banking has huge advantages for the banks as well as for the society. Green
Banking has two folds; one is promoting environmental practices through the
introduction of Green Banking Financial Products and Services and second is
reducing carbon footprints from banking activities on the environment.

1.7.1 : Green Banking Financial Products and Services

i. Green Deposits: Banks offer higher rates on commercial deposits,

money market accounts, checking accounts and savings account if
customers opt to conduct their banking activities online.
ii. Green Mortgages and Loans: The green mortgage is a type of debt
given to the customers for making their homes more energy efficient
friendly. Banks offer a green mortgage with better rates or terms for
energy efficient houses. The Ministry of Non-renewable Resource in
association with some nationalized and scheduled banks undertook an
initiative to go green by paying low-interest loans to the customers who
constructs houses or buildings with energy efficient designs and install
gadgets that are environmentally safe like solar equipment, energy-
efficient windows, geo-thermal heating or water heaters (Rouf, 2012).
The savings in monthly energy bills can offset the higher monthly mortgage
payments and save money in the long run.

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iii. Green Credit Cards: Green credit cards are helpful in reducing the
individual emissions carbon footprint of each and every client. The
scheme is mainly launched in order to increase the use of plastic
money (debit and credit cards) in place of currency notes. A green credit
card facilitates cardholders to earn rewards/points through redeeming it
for contributions to eco-friendly charitable organizations. These cards
offer an excellent incentive for consumers to use them for their
expensive purchases. As per a research, if a person spends $1 from
his/her green card, then the carbon emissions would be reduced by two
to four pounds. It means that if a person is spending $100 per week
through green card then as per the calculations, it would be possible to
stop 20,000 pounds of carbon emissions per year.
iv. Green Reward Checking Accounts: It is a bank product called reward
checking accounts which pays a bonus to customers who are going
green. This account helps the environment by utilizing more online
banking services (Roux, 2015) like online bill payment, debit cards, and
online statements. Customers can earn higher checking account rates if
they meet monthly requirements that might include receiving electronic
statements, paying bills online or using a debit or check card. Higher
rates and eco-friendly living goes hand-in-hand with this banking
product.
v. Mobile Banking: Mobile banking has the ability to check balances,
transfer funds or pay bills from a mobile phone, which saves time and
energy of the customers. It also helps in reducing the use of energy and
paper of the bank. Most of the Indian banks have introduced this
paperless facility.
vi. Online Banking: Online banking is the developing concept in young
and corporate India. Online banking helps in additional conservation of
energy and natural resources. Online Banking includes:
 Paying bills online,
 Remote deposit,

19
  Online fund transfers, and
 Online statements.
It creates savings by using less paper, less energy, and less expenditure
of natural resources for banking activities. Customers save time by
avoiding standing to queues and paying the bills from home online.
vii. Banking through ATMs: ATMs are becoming more powerful than
before and banks are consciously driving its usages with the concept of
branchless banking. A visit to an ATM helps customer accomplish
myriad value-added transaction services like utility payments, pre-paid
mobile re-charge, credit card payments, tax payments and much more.

1.7.2 : Carbon Footprint Reduction

Carbon footprint is a measure of the impact of activities on the environment. It

relates to the amount of Green House Gases (GHG) (Gibbs and O’Neill, 2012)
producing in day-to-day business while burning fossil fuels for electricity,
heating, transportation, etc. Banks can reduce their carbon footprints by adopting
the following measures:

i. Paperless Banking: Banks are switching their customers to Online

Banking and Mobile Banking to promote paperless banking.
ii. Energy Consciousness: Banks save their energy consumption by
developing energy consciousness, adopting effective office time
management and automation solutions and by using compact fluorescent
lighting (CFL) which helps them considerably. In order to manage their
offices and ATMs, banks are switching over to renewable energy (solar,
wind etc.) resources.
iii. Using Mass Transportation System: Banks are becoming fuel efficient
organizations by providing common transport for a group of officials
posted at one office.
iv. Use of Solar and Wind Energy: To go green, usage of solar and wind
energy is a preferable option. State Bank of India (SBI) has become the
first bank in the country to venture into a generation of green power by
installing windmills for captive use. As part of its Green Banking

20
 initiative, SBI has installed 10 windmills with an aggregate capacity of
15 MW in the states of Tamil Nadu, Maharashtra and Gujarat.

1.7 A SWOC Analysis: Green Banking

a) Strengths

1. Green Banking practice saves the time of customer as well as the

bank.

2. It reduces the cost of bank operation and cost to the customer too.

3. The transaction can be done at any time and any place.

4. By financing in solar energy and wind energy program, the bank is

reducing the carbon footprint from the environment.

b) Weaknesses

1. Lack of knowledge among the employees has been noticed.

2. There are some geographical barriers for the implementation of Green

Banking practices.

3. All banks are not participating equally for the practice of Green Banking.

4. Green Banking practices may create problem of security.

c) Opportunities

1. People are becoming more computer literate, so it is easy to start

Green Banking practices and shift the customers toward the activities.

2. Most of the customers are using ATM card only. So, it is a time to
start all the initiatives for Green Banking practices.

3. Mobile banking and Internet banking is increasing day by day, so it is

a time to spread Green Banking practices.

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 d) Challenges

1. Startup face: Since it is a new concept, the customers will take the time
to adopt this.

2. Higher operating cost: Green Banking requires talented and

experienced staffs to provide proper services to customers and pricey
technology. It requires renewable and recycling techniques, which is
again costly.

3. Diversification problems: Green banks restricted their business

transactions to those business entities who qualify screening process
done by green banks. With a limited number of customers, they will
have a smaller base to support them.

4. Credit Risk: Credit risks arise due to lending to those customers whose
businesses are affected by the cost of pollution, changes in
environmental regulations and new requirements on emissions levels.
It is higher due to the probability of customer default as a result of
uncalculated expenses for capital investment in production facilities,
loss of market share and third-party claims.

5. Reputational Risk: If banks are involved in those projects which are

damaging the environment, they are prone to loss of their reputations.

1.8 Role of Green Banking in sustainable growth

Green Banking could create awareness by imparting education to attain

sustainable development through communication. The first step would be defining
target groups and means of communication. The whole system can be divided into
internal and external sub-system (Figure 2). For internal subsystems (Page and
Jones, 1989), banks could create awareness on this issue by weekly broadcasting
green news on the internet, clearing programs, high-level meetings, bank’s
newsletter, publication, etc. and targeting on managers and other personnel. For
external subsystems (Choi, 1994), effective means could be followed like

22
websites, capacity building, road shows, events meetings, benchmarking, media,
etc. whereas clients, subsidiaries and the general public are target groups.

Figure 2: Green Banking in Sustainable Growth

Source: Bahl, 2012

Further, the importance of green banking in the current environmental context

cannot be overstated. As global temperatures rise and environmental degradation
continues, the need for sustainable financial practices becomes increasingly urgent.
23
The World Bank (2023) has emphasized the role of financial institutions in driving
sustainable development by financing projects that contribute to environmental
preservation and by adopting eco-friendly operational practices.

In India, where rapid industrialization and urbanization have led to significant

environmental challenges, green banking represents a critical tool for promoting
sustainability. Banks can reduce their environmental impact by offering green
financial products, such as loans for energy-efficient homes or renewable energy
projects, and by implementing practices that minimize their carbon footprint, such as
reducing paper usage and optimizing energy consumption in bank branches (World
Bank, 2023).

1.9 Development in the Subject of Green Banking

1.10.1 : International Status

The idea of environmental sustainability came in 1969 with the formation of the
National Environmental Policy Act (NEPA, 2014) in the United States whose
purpose is to maintain productive harmony between man and nature. After that an
independent agency was established in 1970 “Environmental Protection Agency”
(EPA) with the aim to protect the natural resources, human health and to preserve
the quality of the environment. Since then, several other organizations are formed
which are working towards environmental management like US Green Building
Council (USGBC), IFC (International Finance Corporation) etc. to fosters the
sustainable growth. In the early 1992, United Nations Framework Convention on
Climate Change (UNFCC) is an international treaty which was joined by
countries to limit the average increase in global temperature.

Then United Nations Environment Program (UNEP) launched what is known as

the UNEP finance initiative (UNEPFI) and 200 financial institutions around the
globe are signatories of this initiative statement to promote sustainable
development. It will be noteworthy to mention that Netherland based ABN-
AMRO bank has developed certain Reputational Risk Management (RRM)
policies to identify, access and manage non-financial present within it business
engagements. In 2002, a global coalition of NGOs formed a network named

24
“Bank Tract” to promote sustainable finance in the commercial sector.

Across the world various voluntary rules have been set up for the classification,
assessment and management of ecological risk in project financing like Equators
Principles(EPs)which are adopted by financial institutions (currently 79
institutions in 35 countries) for assessing, determining and managing social and
environmental risk in projects(Equator Principles Association, 2014). In India,
Centre for Environmental Research and Education (CERE), Centre for
Environmental Education (CEE) and Indian Green Banking Council are principal
organizations to promote environment sustainability. Other initiatives like S&P
BSE-GREENEX and “Green Coin Rating system” introduced by RBI are playing
an important role in promotion of sustainable development in India.

Similarly, World Bank E&S Norms, Carbon Disclosure Project, Comprehensive

Environmental Response, Compensation, and Liability Act of 1980 (CERCLA),
ISO 14000 etc. are other guidelines for Green Banking. The Financial Times and
International Finance Corporation (IFC), a member of the World Bank Group had
launched the Sustainable Finance Awards for the institutions that are integrating
social, environmental and corporate governance considerations into their business
operations.

1.10.2 : National Status

As far as Green Banking in India is concerned, the banks are way behind the
schedule compared to the global trends. None of the Public Sector Banks or the
Private Sector Banks has adopted “EQUATOR PRINCIPLES” of risk
management framework for determining, assessing and managing
environmentally and socially risk projects. Only few of the Indian Banks are
signatories to UNEP-FI (United Nations Environment Program - Finance
Initiative). This declaration is endorsed by over 200 civil society organizations
including banks which give a clarion call to all the financial institutions and banks
to embrace six commitments and take immediate steps to implement the same in
fostering the sustainability. Further, very few banks are also signatories to Carbon
Disclosure Project (CDP)-India, an initiative to prevent dangerous climate change
and protect our natural resources. Six Indian Banks have willingly agreed to
25
include “Principles of Colle Vecchio Declaration”. It seems there is no systematic
attempt to integrate the environmental concerns into the business operations by
Indian Banks. Further, there are no particular RBI guidelines for banks on Green
Banking. However, RBI has issued circular advising banks to integrate social and
environmental concerns in their business operations. The RBI has also advised the
banks to put in place an appropriate plan of action for sustainable development,
albeit all this is voluntary on the part of the banks. Green banking has potential to
transform the Indian economy. The concept of green banking is catching up in
India and banks are actively looking for ways to portray themselves as a Green
Bank.

1.10.3 : Its potential contribution to knowledge in the field of social relevance

or National importance

The importance of Green Banking is immense for both the banks and economy by
avoiding the risks involved in banking sector. The adoption of green banking
strategies will help the bank to deal with credit risk, reputation risk and legal risk
involved in their business operation.

Green banking strategies involves two components:

 Managing environment risk, and

 Identifying opportunities for innovative environmentally oriented financial
products.

To manage environmental risk, the banks have to design proper environmental

management systems to evaluate the risks involved in the investment projects.
The risks can be internalized by introducing differential interest rates and other
techniques. Moreover, bank can withdraw itself from financing high-risk projects.
The second component of green banking entails creating financial products and
services that support commercial development with environmental benefits. This
includes investment in renewable energy projects, biodiversity conservation,
energy efficiency, investment in cleaner production. Thus, the banking activities
impose significant impact on society and thus are considered of a great national
significance.
26
1.11 Relevance of the Study

1.11.1 The Significance of Customer Awareness in the Adoption of Green

Banking Services

Customer awareness plays a crucial role in the adoption and success of green
banking services. Without adequate awareness and understanding of these services,
customers are less likely to engage with them, which can limit the overall impact
of green banking initiatives. A study by KPMG (2022) revealed that only 40% of
banking customers in India were aware of green banking products, such as green
loans and e-statements, highlighting a significant gap in customer education.

This lack of awareness is a major barrier to the widespread adoption of green

banking services. For example, despite the availability of green loans for energy-
efficient home improvements, the uptake of these loans remains relatively low,
with only 15% of eligible customers applying for such loans in 2021 (IBA, 2022).
By increasing customer awareness through targeted educational campaigns and
marketing strategies, banks can significantly enhance the adoption rates of green
banking services, thereby contributing more effectively to environmental
sustainability.

In the context of Karnataka, understanding the levels of customer awareness across

different demographics—such as age, income, and education level—is essential for
tailoring effective awareness campaigns. This study aims to fill this gap by
providing a comprehensive analysis of customer awareness of green banking
services in both public and private sector banks in Karnataka.

1.11.2 Rationale for Comparing Public and Private Sector Banks in Karnataka

Karnataka is a key state in India’s banking sector, with a strong presence of both
public and private sector banks. The state’s capital, Bangalore, is known as the
"Silicon Valley of India" and has a highly tech-savvy population, making it an
ideal location for studying the adoption of green banking services.

27
Public and private sector banks in Karnataka operate under different mandates and
face distinct challenges. Public sector banks, often guided by government policies,
may prioritize social and environmental objectives but may struggle with
operational inefficiencies and slower adoption of new technologies (RBI, 2023). In
contrast, private sector banks, driven by competition and profit motives, are
typically quicker to adopt innovative practices, including green banking, but may
focus less on broad-based customer education (KPMG, 2022).

A comparative study of these two sectors in Karnataka provides valuable insights

into how different banking models influence customer awareness and adoption of
green banking services. By identifying best practices and areas for improvement,
the study can inform strategies to enhance the effectiveness of green banking
initiatives across the state.

1.12 Research Objectives

Assess Customer Awareness Levels

The primary objective of this study is to assess the current level of customer
awareness regarding green banking services offered by public and private sector
banks in Karnataka. This involves measuring how well customers understand the
concept of green banking, their familiarity with specific green banking products,
and their awareness of the environmental benefits associated with these services.

According to preliminary data, only 45% of banking customers in Karnataka are

aware of at least one green banking service, such as paperless statements or green
loans (Survey data, 2023). This research aims to identify the factors that contribute
to this awareness, including demographic variables like age, education, and income
level.

Compare Adoption Rates of Green Banking Services

The study also aims to compare the adoption rates of green banking services
between customers of public and private sector banks in Karnataka. Adoption rate
refers to the percentage of customers who have used or are currently using green
banking services. Previous studies suggest that private sector banks have higher
28
 adoption rates for digital banking services, including green banking, compared to
public sector banks (IBA, 2023).

For instance, in 2022, 30% of customers in private sector banks in Karnataka

reported using green banking services, compared to only 20% in public sector
banks (RBI, 2023). This research objective will explore the reasons behind these
differences and identify strategies that could help public sector banks increase their
adoption rates.

Identify Factors Influencing Customer Perceptions

Understanding the factors that influence customer perceptions of green banking

services is crucial for enhancing their adoption. This objective focuses on
identifying both positive and negative perceptions of green banking among
customers. Factors such as trust in digital platforms, perceived security risks, ease of
use, and the perceived environmental impact of green banking services will be
analyzed.

A study by PwC (2022) found that 60% of customers cited security concerns as a
major barrier to adopting digital banking services, including green banking. In
contrast, customers who were more environmentally conscious were 70% more
likely to adopt green banking services (KPMG, 2022). This research will delve
into these and other factors to provide a comprehensive understanding of what
drives customer perceptions in Karnataka.

1.13 Scheme of Chapterisation

This part contains the entire structure of the report with a brief introduction of
each chapter included in the study. The complete research work is completed in
six well-knitted chapters along with a rich bibliography and questionnaire.

29
Chapter 1: Introduction to Green Banking

Sustainability is one of the major driving forces for establishing techniques

that would not only promote business but would also help in looking after
the environmental damage. With the passage of time each and, every
industry is evolving techniques that make a profit along with bringing eco-
friendly. Green banking is one such concept put forward by the banking
industry. The first chapter includes the overview, meaning, concept of
Green Banking. In this chapter, it becomes evident that how and what led
to the evolution of Green Banking and also understanding its various
advantages. In this section, the emphasis is laid on identifying the gap
between Traditional Banking and Green Banking. So, a comparison table
is prepared to study the differences between Traditional Banking and
Green Banking. Majorly the adverse effects like increased carbon footprint
and excessive use of non-renewable sources of energy in banks through
traditional banking are posing a great threat to the environment, and thus,
green banking has been considered to be the possible solution to it. Hence,
this chapter would show as to how it can be possible to make this concept
a worldwide used technology.

Chapter 2: Literature Review

The second chapter is related to the literature review of Green Banking.

Total 80 reviews were collected, out of which 35 are reviews of
international authors and 45 are of Indian authors. This chapter reveals the
internal information related to Green Banking. Various questions like what
is Green Banking, why its need was felt, who and where it was invented,
scope and future aspects of Green Banking, etc. are answered in this
chapter. The implications of Green Banking and how much the customers
are happy with the technology is discussed here which decides its future in
India. Hence, this chapter also reveals that how Green Banking can
become a better option than traditional banking in terms of convenience,
time consumed, ease of access, processing time, etc. This chapter
determines the key points that influence the banks as well as customers to
go in for Green Banking and its various advantages that distinctly identify

30
 its importance in the growing environmental crisis.

Chapter 3: Research Methodology

In this chapter, initially background, focus and significance of the study is

discussed. Further, Objectives and hypotheses are framed. The main
objective of the research study is to assess the awareness level of
customers and bank staff regarding Green Banking. Further, the objective
of the study is to assess the behaviour and obstacles experienced by the
customers and employees of the banks when they are adopting Green
Banking services. Moreover, the basis of the research is to study the nature
of Green Banking in both the public and private sector banks of Karnataka
and also to study the factors that are hampering the implementation of the
Green Banking services.

The concept of Research Onion is also highlighted in this chapter which

includes six layers i.e. Research Philosophies, Research Approaches,
Research Strategies, Research Choices, Time Horizons and Research
Techniques and Procedures. Theses layers are studied with reference to
present Research study. In this study, a sample of 600 customers is
selected from selected 4 banks i.e. SBI, BOB, ICICI and HDFC (2 public
and 2 private sector banks) from 2 different cities of Karnataka State i.e.
Bengaluru and Mysuru. Out of 600 customers, only 426 customers gave
proper responses, which are considered for the
evaluation of results. Further, to analyze the awareness level of Banking
Staff regarding Green Banking, a sample of 40 employees is taken from
selected 4 banks of 2 different cities of Karnataka state.

Chapter 4: Green Banking practiced by Banks under the Study

This chapter talks about the nature of Green Banking Services provided by
selected 4 banks (SBI, BOB, ICICI, and HDFC) operating in the 2 cities of
Karnataka (Bengaluru and Mysuru). These four banks operate at very
large scale, and the impact of their Green Banking practices is
witnessed in the entire banking industry. The banks have adopted two-way
approaches to support the mission of Green Banking. One approach is that
31
 the banks have implemented Green Banking practices within their banking
operations and the second approach is that the banks have introduced
certain lucrative schemes for their customers that boost their morale to get
involved in green practices. In this way, banks are motivating customers
and common people in an indirect manner to become supporters of green
environment. Thus, this chapter embeds the combined effect of practicing
Green Banking in both public and private banking sectors.

Chapter 5: Data Analysis and Results

This chapter of the research is related to analysis of data collected from

customers and employees through questionnaire method. In this study,
data analysis process is carried out in two ways that are qualitative
analysis and quantitative analysis. Qualitative analysis is done by the
means of Thematic Analysis, which is done in order to understand the
awareness and perception of Green Banking among respondents. In this
analysis, certain themes are prepared in order to identify and analyze the
patterns within the data.

The quantitative analysis applies various statistical tools in finding out the
outcome of the study. In this study, T- test, Chi Square test and Regression
analysis is done by using the SPSS software in order to test the
dependency demographic characteristics of respondents and
usage/adoption of Green Banking. This analysis also focuses on the flaws
of traditional banking system and benefits offered by Green Banking
approach. Moreover, the analysis helps in understanding the obstacles
which are faced by customers and employees for adopting the Green
Banking practices.

Chapter 6: Findings, Suggestions and Conclusion

This chapter of the research is related to derivation of conclusion based on

findings of the study. Also, suggestions are provided to make Green
Banking Services more popular among customers. From the study, it is
seen that the customers of the banks are not fully aware of the Green
Banking services and its products. However, most of the bank employees

32
 are totally aware of the Green Banking products and services. Moreover,
from the thematic analysis, it can be seen that the perception of the
customers towards the Green Banking services is not 100 percent positive.
The customers still fear in carrying out the Green Banking activities as
they are of the view that carrying out the online transactions are not safe
and can be easily hacked by anyone.

Conclusion

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