ABSTRACT

Environmental protection and awareness, and sustainable, ecological measures have emerged as significant themes of our age and an increasing number of green technologies are also finding their way into the banking branch. An increasing number of financial institutes are deliberately turning to the sustainability theme and, as studies demonstrate, not without good reason. This is because environmentally responsible behaviour on the part of banks is acknowledged by customers and thus strengthens their loyalty. Sustainability along the entire value added chain already commences during sourcing, which takes place in line with ecological principles. Further, environmental impact might affect the quality of assets and also rate of return of banks in the longrun. Thus the banks should go green and play a pro-active role to take environmental and ecological aspects as part of their lending principle, which would force industries to go for mandated investment for environmental management, use of appropriate technologies and management systems. This paper explores the importance of Green Banking, sites international experiences and highlights important lessons for sustainable banking and development in India small scale industries too.

Key words: Small scale industries in India Green technology

INTRODUCTION
The banking sector is major economic agent which influences the economic growth and development in terms of both quality and quantity, there by changing the nature of economic growth. Banking sector is one of the major sources of financing investment for commercial projects which is one of the most important economic activities for economic growth. Therefore, banking sector can play a crucial role in promoting environmentally sustainable and socially responsible investment. Banking sector is generally considered as environmental friendly in terms of emissions and pollutions. Internal environmental impact of the banking sector such as use of energy, paper and water are relatively low and clean. Environmental impact of banks is not physically related to their banking activities but with the customers activities. Therefore, environmental impact of banks external activity is huge though difficult to estimate. Moreover, environment management in the banking business is like risk management. It increases the enterprise value and lowers loss ratio as higher quality loan portfolio results in higher earnings. Thus, encouraging environmentally responsible investments and prudent lending should be one of the responsibilities of the banking sector. Those industries which have already become green and those, which are making serious attempts to grow green, should be accorded priority to lending by the banks. This method of finance can be called as Green Banking, an effort by the banks to make the industries grow green and in the process restore the natural environment. This concept of Green Banking will be mutually beneficial to the banks, industries and the economy. Not only Green Banking will ensure the greening of the industries but it will also facilitate in improving the asset quality of the banks in future. Banking and other financial institutions are more effective towards achieving this goal for the kind of intermediary role they play in any economy and for their potential reach to the number of investors. Environment is no longer the exclusive concern of the government and the direct polluters, but also the other partners and stake- holders in the business. It would certainly give the much needed impetus for the banking industry to expand the use of environmental information in their credit extension and investment decisions. In this background, the paper aims to discuss the issues of sustainability in banking and how banks can play a role for sustainable growth and development, particularly in the Indian context.

OBJECTIVES

To study the importance of green banking for banks and economy. To study management of environmental risk and identifying opportunities for innovative environmentally oriented financial products. To study environmental and control regulations regarding green banking in India. To design proper environmental management system in the investment projects. To create financial products and services that supports commercial development with environmental benefits.

IMPORTANCE OF GREEN BANKING

Environmental protection and awareness, and sustainable, ecological measures have emerged as significant themes of our age and an increasing number of green technologies are also finding their way into the banking branch. Until recently, environmental concerns were not considered relevant to the business operation of banks and financial institutions. Traditionally, banking sectors concern for environmentally degrading activities of clients is like interfering or meddling in their business affairs. However, now it is being perceived that dealing with environment brings risks to their business. Due to strict environmental disciplines imposed by the competent authorities across the countries, the industries would have to follow certain standards to run their business. In the case of failure, it would lead to closure of the industries leading to a likelihood of default to the bank.

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

Green banking strategies involves two components: (1) Managing environment risk and (2) 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 and financial institutions should prepare an environmental risk and liability guidelines on development of protective policies and reporting for each project they Finance or invest. They can also have an environmental assessment requirement for the projects seeking finance.

Environmental concerns are integrated into the international trade policy and often act as trade barrier for environmentally sensitive goods (ESGs). So adopting environmentally sustainable Technologies or modes of production is no more considered as a financial burden, rather it brings new business opportunities and higher profit

GREEN BANKING IN INDIA

Indian industry faces the challenges of controlling environmental impact of their business i.e. reducing pollution and emission of their clients. Though government has been trying to address the issue by framing environmental legislations and encouraging industry to follow environmental technologies and practices, public awareness and inability to derive competitive advantage by producing eco-friendly products. Indias is the worlds sixth largest and second fastest growing country in terms of producing green house gases. Delhi, Mumbai and Chennai are the three of the worlds ten most polluted cities. The major polluting industries in India are(a) Primary metal industries namely zinc, copper, steel etc. (b) Paper & pulp (c) pesticides/insecticides (d) Refines (e) Fertilizers (f) Tanneries (g) Sugar (h) Textiles (i) chemicals/pharmaceuticals etc. The banking operation and investment by financial institutions should take care of environmental Management of these polluting industries by improving the overall environment, the quality and Conversation of life, level of efficiency in using materials and energy, quality of services and Products. In this context, the role of banking sector, which is on major financing sources to the Industries, assumes high importance.

ENVIRONMENTAL REGULATIONS IN INDIA:The environmental regulations in India can be broadly classified into two broad categories Command and control regulations and Liability law.

1. The command and control regulations are ex ante regulations that are designed to dissuade environmentally damaging projects. This regulation is implemented by setting industry specific pollution standards, scrutinizing the projects and granting/denying permissions by the concerned authorities like Ministry of Environment and Forest.

2. The liability laws are ex post in nature and are implemented by enforcing authorities through imposing fines, closing down the defaulting industries etc.

Once legal framework for the environmental pollution standards are formulated in India, the polluting industries either have to close down or have to make necessary investment to comply with the standard. In this process these industries will lose their competitiveness in the international market, which would directly affect Indian economy and the banking sector. As far as Green Banking in India is concerned, the banking and financial institutions are running behind the schedules compared to global trends. The British business newspaper and Financial Times which together nominated following banks for Sustainable Banking Awards in 2006 for leadership and innovation in integrating social, environmental and corporate governance objectives into their operations did not find a single Indian nationalized bank or major private bank in the list except Yes bank. Banks need to be more careful in India about the environmental aspects of their clients and products because Future of exports and product market are going to go through strict environmental rules eco-friendly product will have better market. Increased demand for pollution controls equipments will require more financial assistance from banks. Reserve Bank of India (RBI) may follow environmental guidelines for the banks. and

Recent announcement of the government to use economic instruments for environmental control may include Banks in future.

Small Scale Sector in India and Green Banking: Industries irrespective of their size i.e. large, medium or small scale emit pollutants to the environment. Though the large-scale industries are more capable of degrading the environment, they have adequate financial resources to install pollution control equipment or waste treatment plants to control pollution. Moreover, these large-scale industries are always in the eyes of the government or the pollution control board, these industries strives hard to adhere to set emission standards. But small-scale industries (SSIs), on account of their financial constraints may unable to install the necessary equipment to meet the emission standards prescribed by the competent authorities. Also because of their small scale of operation, the SSIs escape from the eyes of the concerned authorities. SSI constitute major portion of Indian industry. These industries account for about 40 percent of industrial production and 30% of total manufacturing exports. Use of western technological systems in small scale industries produces enormous gaseous, liquid and solid wastes. However, they may not be in a position to bear additional expenditures on account of environment audit and pollution control equipments.

Therefore, banks need to apply different procedures to promote pollution controls like(1) Environmental pollution status of SSI (2) Environmental Clearance from the appropriate authorities and (3) Steps undertaken or proposed for disposal of solid, liquid and gaseous wastes before lending to SSI in India.

For green banking, Bank should begin implementing procedures like(1) Assessment of risk due to environment (2) Environmental audit management (3) Assessment of credit requirement and loan follow up before investing on different projects.

GREEN BANKING: INTERNATIONAL INITIATIVES The financial sectors growing adherence to environmental management system is attributed to the direct and indirect pressures from international and local Non Governmental Organizations (NGOs), multilateral agencies and in some cases the market through consumers. Some 200 financial institutions around the globe are signatories of this initiative statement to promote sustainable development within the framework of market mechanisms toward common environmental goals. The objective is to integrate the environmental and social dimension to the financial performance and risk associated with it in the financial sector. As the commitment of this UNEPFI statement goes, sustainable development is regarded basic to the sound business management. It advocates for a precautionary approach towards environmental management and suggests integrating environmental considerations into the regular business operations, asset management, and other business decisions of the banks.

PRODUCT
Home Mortgage

KEY PRODUCT DESIGN AND RESULT/POTENTIAL

Government led green mortgage initiative. 1% reduction on interest for loans that meet environmental criteria. Generation Green Home Loan. Offered to both new and old homes, so those with existing mortgages can take advantage of discounted rates.

BANK
Dutch Banks

REGION
Europe

Bendigo Bank

Australia

Commercial Building Loan

Green Loans for new condos. Developer (Tridel) repays loan with funds that would otherwise be spent on operating costs using conventional equipment and material

TAF/Tridel

Canada

Home Equity Loan

Environmental Home Equity Program. For customers using line of Visa Access Credit, bank will donate to an environmental NGO.

Bank America

of US

Bank signed a joint marketing agreement with Sharp Electronics Corporation Citigroup to offer customers easily accessible and convenient financing options to purchase and install residential solar technologies.

US

Credit cards

Climate Credit Card. Bank will donate to WWF. Sum of donation depends on the energy-intensity of the product or service purchased with the card.

Rabobank

Europe

Existing cardholders can donate Visa WorldPoints rewards to organizations Bank that invest in GHG reductions or redeem them for green merchandise. America

of US

Green banking initiatives by Banks.

1. IndusInd Bank launches solar-powered ATMsIndusInd Bank inaugurated Mumbais first solar-powered ATM as part of its Green Office Project campaign Hum aur Hariyali. It also unveiled a Green Office Manual - A Guide to Sustainable Practices, prepared in association with the Centre for Environmental Research and Education (CERE). IndusInds new Solar ATM replaces the use of conventional energy for eight hours per day with eco-friendly and renewable solar energy. The energy saved will be 1980 kW hrs every year and will be accompanied by a simultaneous reduction in CO2 emissions by 1942 kgs. The uniqueness of this solar ATM is the ability to store and transmit power on demand (in case of power failure) or need (time basis). In terms of costs, the savings will be substantial, Approximately Rs. 20,000 per year in case of a commercial user with grid power supply. And in areas with erratic power supply the solar will replace diesel generators and translate into savings as high as Rs. 40,200 every year.

2.State Bank of India's Green Banking PolicyThe State Bank of India (SBI), as part of its Green Banking Policy, will set up windmills to generate 15 MW of power in Tamil Nadu, Maharashtra and Gujarat for its own consumption. The SBI chairman inaugurated the windmills set up at Panapatti village in Tamil Nadus Coimbatore district on April 23, 2010. The mill in Tamil Nadu will generate 4.5 MW of power, while the Maharashtra mill will have a capacity of 9 MW and Gujarat 1.5 MW. SBI was the first Bank in the country to think of generating green power as a direct substitute to polluting thermal power and implement the renewable energy project for captive use. 3. Citizens Bank: Green$ense Rewards The Citizen bank Green$ense checking account will pay you ten cents every time you make a paperless transaction in your checking account. This can be a significant amount of paper saved for active bank customers who use a debit card, pay bills online, and set up automatic payments. You can earn up to $120 a year in rewards from Citizens Bank and the debit card that they send for your account is made out of recycled plastic.

FINDINGS
1. As of now, environmentally sustainable units in India are not implemented to a fuller extent because of the present set up of the companies. According to the environmental regulation of green banking in India, industries are supposed to have an eco-friendly set up but the present set up cannot be changed instantaneously as it would create a financial burden for the industries itself. 2. According to the legal frame work of green banking, the Polluting industries either have to close down or have to make necessary investment to comply with the standard. In this process these industries will lose their competitiveness in the international market, which would directly affect Indian economy and the banking sector 3. Despite of all the odds banks are still trying to do their part in sustainable development by using solar powered ATMs, Online and mobile banking initiatives etc, thus creating a path towards green planet.

SUGGESTIONS FOR ECO-FRIENDLY BANKING

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.

Online bankingConverting to an online savings account and mobile banking is the easiest way that you can do your part to bank green and help the environment.

Paper-less bankingGreen banking includes setting up direct deposit to receive your paychecks, receiving electronic statements from your bank and by paying bills online. All of these steps can drastically reduce the amount of paper produced by your bank. Online banking and mobile banking are also highly effective ways to keep track of your finances and to avoid late payment fees.

Remote deposits-

Another green banking step you can take is to suggest that the company you work for sign up for a product called "Remote Deposit". This service is offered by a growing number of banks to their commercial customers. Remote deposit is the digital scanning and processing of checks, instead of having bank customer have to physically deliver each check to their bank to make a deposit. Remote deposit also allow banks to easily clear checks digitally. Energy Consciousness: Developing energy- consciousness, adopting effective office time management and automation solutions and using compact fluorescent lighting ( CFL) can help banks save energy consumption considerably. Banks can conduct energy audits in all their offices for effective energy management. They can also switch over to renewable energy ( solar, wind, etc.) to manage their offices and ATMs. Using Mass Transportation System: PSBs can become fuel efficient organization by providing common transport for group of officials posted at one office.

Social Responsibility Services: As part of the green banking strategies, Indian banks can initiate various social responsibility services such as tree plantation camps, maintenance of parks, pollution check-up camps, etc.

CONCLUSION
There has not been much initiative in green banking by the banks and other financial institutions in India. It is time now that India should take some major steps to adhere to environment-sensitive parameters, apart from financial projects. In addition to mitigating risks, green banking opens up new markets and avenues for product
differentiation.

Not only Green Banking will ensure the greening of the industries but it will also facilitate in improving
the asset quality of the banks In future.

The survival of the banking industry is inversely proportional to the level of global warming. Therefore, for sustainable banking, Indian banks should adopt green banking as a business model without any further delay.

REFERENCES
Jan Willem van Gelder, (2006), Sustainable Banking in Practice: A closer look at the nominees for the 2006 Financial Times Sustainable Banking Awards, Banktrack., Profundo. Im Trend Banking Journal No.1_2010 Green Financial Products and Services A report of the North American Task Force (NATF) of the United Nations Environment Programme Finance Initiative. August 2007. Sustainable Green Banking:The Story of Triodos Bank by R.N. Dash.