Sustainable Development Through Corporate Social Responsibility of Public Sector Banks in India

Introduction

Financial institutions constitute an important part of the economy as they perform multiple functions for its development. The financial sector reforms (1991) have altered the structure of business owing to deregulation, innovation, and technological advancement. The reforms have caused enormous changes in the financial markets as well as the banking sector. The adoption of new technologies, introduction of new products, and development of additional banking channels to service clients have all transformed the banking industry (Kochhar, 2012). Several initiatives, such as the liberalization of interest rates and the grant of functional autonomy to commercial banks, have increased competition in the banking industry. According to Fatma et al. (2014), the Public Sector Banking in India has begun using Corporate Social Responsibility (CSR) initiatives to set itself apart from its competitors and owns goodwill. CSR is the moral transaction of a business towards society at large. It entails interacting with the community, determining its requirements, and incorporating these needs into the corporation's overall objective. Additionally, it also refers to the consideration of the company towards the social, economic, and environmental facets of society as a whole. RBI established the Nachiket and Khan committees in 2013 and 2005, respectively, to include commercial banks under financial inclusion mandate and CSR activities for every bank. CSR is becoming increasingly vital for banking business in liberalized market like India because banks assist the local community and society with service quality. It also upholds moral support to foster development of an economy.

Simultaneously, a shift from traditional banking services to social banking in the PSBs has begun with the mandatory regulations of Reserve Bank of India in 2007. Socially responsible banking has recently gained attention in the financial services sector (Scholtens, 2008). Specialized banks in several OECD nations provide savings accounts to the public with the assurance that money would be used to support environment friendly projects or the operations of business owners who have trouble obtaining financing from more traditional institutions. Most marginalized groups in society include women and minorities. There are people in society who feel excluded from the political, social, economic, and educational spheres and are considered marginals. This exclusion can be attributed to various internal or external disparities. Adivasis, SC, ST, OBC, religious minorities, and women are examples of marginalized groups in the India. Since they are largely denied social, political, and economic opportunities and rights in the country. In light of this, banks are becoming more active in funding economic activities that promote sustainable development (SD) and provide microcredit to priority sectors and destitute (Hermes et al., 2005; Murdoch, 1999). The present research aimed to articulate the theoretical perspective of the need to implement CSR norms by PSBs in India. The study also analyses the CSR indicators that enhance SD through PSBs in India.