Vol-1 Issue-4 2016 IJARIIE-ISSN(O)-2395-4396

GREEN BANKING –AN OVERVIEW

Shakkeela Cholasseri

M.Phil Scholar in Commerce

Sree Narayana Guru College

Chaavadi,Coimbatore,Tamilnadu

Abstract
The problem related to environment, maintaining the ecological balance and environmental sustainability has
become issues for debate around the globe. The organizations as well as consumer have understood the
importance of the environment for the survival of human beings. The concept of Green banking is comparatively
a new concept. It is a paperless banking, which not only reduces the cost of banking activities but also helps in
environment
sustainability. It promoting environmental friendly practices and reducing carbon footprint from banking
activities. It helps in reducing the use of paper, power and energy. This paper covers introduction, meaning,
ideal benefit of green banking, methods in green banking and green banking product and services.

keywords; green banking, environmental protection, green banking products and services.

Introduction

The banking industry influences economic growth and development, both in terms of quality and quantity,
leading to a change in the nature of economic growth. There for banking sector plays an important role in
promoting environmentally sustainable and socially responsible investment. Banks may not be the polluters
themselves, but they usually have a banking relationship with some companies or investments or projects that
are polluters are cold be in future. Banks can utilize green banking as an opportunity to gain advantage in the
market by creating a difference in their strategy making process. Also, banks need to be more active in
communicating the green banking concept and its associated benefits to the consumers. It was also observed that
green banking consciousness is high in the higher levels of management in the banks and this consciousness
reduces with the lower levels of management and least with the employees who are in day to day direct touch
with the customers. Thus, the banks must focus on promoting the consciousness and benefits of the green
banking to the employees who are in direct touch with the customers. Green banking is a pro-active way of
energy conservation and environment protection. The prime benefit of the green banking approach is the
protection of the natural resources and the environment. Green banking avoids paper work to the optimum level
and focuses on electronic transactions like use of ATM, mobile banking, online banking etc for various banking
transactions by the customers. Electronic transaction not only aids towards sustainability but also provides
convenience to the customers as well as to the banks. Less paperwork means less cutting of trees. For
implementing eco friendly business, banks should adopt environmental standards of lending as it improves the
asset quality of the banks. This activity of the bank also has a very significant influence on the environmental
performance of its clients.

Meaning
Green banking means promoting environmental friendly practices and reducing carbon footprint from banking
activities. It 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 called as an ethical bank or a
sustainable bank. They are controlled by the same authorities but with an additional agenda toward taking care
of the Earth's environment/habitats/resources.

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Definition
According to RBI (IDRBT, 2013), green banking is to make internal bank processes, physical infrastructure and
Information Technology effective towards environment by reducing its negative impact on the environment to
the minimum level.
Institute for Development and Research in Banking Technology defines Green Banking as Green Banking is an
umbrella term referring to practices and guidelines that make banks sustainable in economic, environmental, and
social dimensions. It aims to make banking processes and the use of IT and physical infrastructure as efficient
and effective as possible, with zero or minimal impact on the environment‟.

Objectives
1. To study the concept of Green Banking.
2. To know the products and services in Green Banking.
3. To identify methods and challenges in Green Banking.

Ideal Benefits of Green Banking

1. Basically Ethical (Green) banking avoids as much paper work as possible and rely on
online/electronic transactions for processing so that you get green credit cards and green mortgages.
Less paperwork means less cutting of trees.
2. Creating awareness to business people about environmental and social responsibility enabling them to
do a environmental friendly business practice.
3. Green (Ethical) banks adopt and implement environmental standards for lending, which benefit our
future generations.
4. When you are awarded with a loan, the interest of that loan is comparatively less with normal banks
because ethical banks give more importance to environmental friendly factors - ecological gains.
Natural resources conservation is also one of the underlying principles in a green bank while assessing
capital/operating loans to extracting/industrial business sector.
5. Green banks gives more importance to environmental friendly factors like ecological gains thus
interest on loan is comparatively less.
6. Free electronic bill payment services.
7. Online account opening form for opening green account.
8. Cash back will be credited to all new customers, opening “green accounts”.

Methods in Green Banking.

I. GO ONLINE: Online banking is a developing concept; it helps in conservation of natural resources. It
saves paper, energy and expenditure of natural resources. It also help customers to save money by
avoiding late payments and also save their time
II. USE OF GREEN CHECKING ACCOUNTS: Customers can check their accounts on ATM. They can
avail services including online payment, debit cards and online statements.
III. USE OF GREEN CREDIT CARD: Some of banks use green credit cards; by using it the banks will
donate funds to an environment friendly non-profit organization
IV. SAVING OF PAPER: Banks should purchase recycled paper products with highest post customer
waste content. This includes monthly statements, ATM receipts, annual reports, envelopes etc.
V. MOBILE BANKING: By using it customer can check balances, transfer funds or pay bills from the
phone. It also helps to save time and energy of the customers.
VI. DIRECT PEPOSITS: Most employers will give employees the option to receive their paycheck
electronically. It saves time, saves paper and lots of paper work
VII. ONLINE (NET) BANKING: It means customers can perform most of their banking related functions
without visiting the banks personally. For this customer must possess an internet banking ID, a
password provided by the bank in which customer has an account. Online banking includes use of
credit cards, debit cards, online bill payment and electronic fund transfer.

Green Banking Products and Services

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1. GREEN DEPOSITS: Banks can offer higher rates on CDs, money market accounts, checking accounts and
savings account if customers opt to conduct their banking activities online.
2. GREEN MORTGAGES AND LOANS: A bank can offer green mortgage with better rates or terms for
buyers of energy –efficient houses. Some green mortgages allow home buyers to add as much as an
additional 15 percent of the price of their house into loans for upgrades including energy –efficient indo s,
solar panels, geothermal heating or water heaters. The savings in monthly energy bills can offset the higher
monthly mortgage payments and save money in the long run. An Energy Efficient Mortgage (EEM) is a
type of HUD –approved green mortgage that will credit you for your home’s energy efficiency in the
mortgage itself. Many home improvements also qualify for the energy tax credit. Anyone undertaking an
energy–saving house project should shop around for a bank that offers a special rate for a green mortgage
or loan.
3. GREEN CREDIT CARDS: A green credit card allows cardholders to earn rewards or points which can be
redeemed for contributions to eco-friendly charitable organizations. These cards offer an excellent
incentive for consumers to use their green card for their expensive purchases. Imagine the millions of
dollars that could be raised for worthwhile environmental groups if green credit cards really took off.
4. GREEN REWARDS CHECKING ACCOUNTS: Rewards checking accounts may pay a bonus rate for
customers who go green. 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. With this type of banking product, higher rates and eco-friendly living go hand-in-hand.
5. MOBILE BANKING: By using it customer can check balances, transfer funds or pay bills from the phone.
It also helps to save time and energy of the customers.
6. ONLINE BANKING: It means customers can perform most of their banking related functions without
visiting the banks personally. For this customer must possess an internet banking ID, a password provided
by the bank in which customer has an account. Online banking includes use of credit cards, debit cards,
online bill payment and electronic fund transfer.
7. GREEN CDs: With a Green Bank CD, customer can earn a guaranteed rate of interest over a term that
customer can choose. Banks offer a wide variety of certificates, ranging from seven days to five years.
Interest on these accounts can be compounded quarterly, paid monthly by check or transferred to a Green
Bank deposit account.

Challenges of Green Banking

Green banks while adopting green banking face following challenges:

I. DIVERSIFICATION PROBLEMS: Green banks restrict their business transactions to those
business entities who qualify screening process done by green banks. With limited number of
customers they will have a smaller base to support them
II. STARTUP FACE: Many banks in green business are very new and are in startup face,
generally it takes 3 to 4 years for a bank to start making money thus it does not help banks
during recession.
III. HIGHER OPERATING COST: Green banks require talented, experienced staff to provide
proper services to customers. Experienced loan officers are needed with additional experience
in dealing with green businesses and customers
IV. REPUTATIONAL RISK: If banks are involved in those projects which are damaging the
environment they are prone to loss of their reputations. There are also few cases where
environmental management system has resulted in cost saving, increase in bond value.
V. 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 probability of customer default as a result of
uncalculated expenses for capital investment in production facilities, loss of market share and
third party claims.

GREEN BANKING -A SWOC ANALYSIS

An analysis of strengths weaknesses opportunities challenges (SWOC):

1 .Strengths

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

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Transition can be done any time and at any place.

financing in solar energy and wind energy program the bank is reducing carbon footprint from the
environment.
2. Weaknesses

There are some geographical barriers for the implementations of green banking practices.
All banks are not coming equally for the practice of green banking.

3. Opportunities
’s easy to start green banking practice and grape the
customer toward the activities.

practices.
sing day by day so it’s a time to spread the green banking
practice.

3. Challenges
s a new concept and customer will take time to adopt this.

It requires renewable and recycling technique which is costly.

e.

CONCLUSION

Indian economy is an emerging economy and there is a huge potential of growth of Indian banks by adoption of
innovative approach in their strategy making process. There is a need of an approach towards paradigm shift by
setting up of the business model which would consider all the three aspect of triple bottom line approach i.e. the
people, the planet and the profit. The future of green banking seems to be very promising in India as lots of
green products and services are expected in the future. Green excellence awards and recognitions, Green rating
agencies, Green investment funds, Green insurance and Green accounting and disclosure are some of the things
that would be heard and seen in operation in the near future. Proper green banking implementation will act as a
check to the polluting industries. Banks can act like a guideline towards the economic transformation and create
a platform that would create many opportunities for financing and investment policy and contribute towards
creation of a low carbon economy.

REFERENCES

1. Institute for development and research in banking technology (2013). Green Banking.
Accessed 09 September, 2013 at www.idrbt.ac.in/.../Green%20Banking%20Frame
work%20(2013). pdf .
2. Jha, N. & Bhome,S. (2013). A study of green banking trends in India. Abhinav, 5 (2), 127-132.
3. Nishant Jha and Shraddha Bhome May (2013). “A Study of Green Banking Trends in India”,
ABHINAV International Monthly Refereed Journal of Research in Management & Technology,
volume II, PP 127-131.
4. Komal Singhal, Krishna Singhal & Monika Arya (June 2014). “Green Banking: An Overview”, Asian
Journal of Multidisciplinary Studies, 2(6), ISSN 2321-8819(online), 2348-7186(print), pp 196-200
5. Mrs. Pratiksha C. Khedekar (2014). “Banking with Technology-Green Banking”, Renewable Research
Journal, Rex Journal, 3 (1), pp 167-170

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