CORPORATE SOCIAL RESPONSIBILITY IN INDIAN BANKING SECTOR

Dr.J.Francis Mary,

Director,

Dept. of Management Studies,

Shrimathi Indira Gandhi College,

Affiliated to Bharathidasan University

Trichy, India.

ABSTRACT:

Corporate Social Responsibility is a tool used by many corporate sectors to meet the people’s

demand, in order to more responsible to the environment they operate in. This paper

contributes in examining the role of banking sector in CSR including disaster period. India

being a developing country needs support from the entire sector in its upliftment. Banking

sector plays an important role in developing the economy not only by lending money, but also

by practicing CSR activities. Through CSR activities, Commercial banks provide various

benefits for the upliftment of the poor.

Keyword: Corporate Social Responsibility, Commercial Bank, Disaster Management, HDFC,

ICICI.

INTRODUCTION:

CSR focus on the principles of sustainable development by the companies. This inturn makes

the company economically viable, have a positive impact on society and respect and preserve

the environment.

According to Friedman (2006) "There is one and only one social responsibility of business-

to use its resources and engage in activities designed to increase its profits so long as it stays

within the rules of the game, which is to say, engages in open and free competition without

deception or fraud"

Increase in commercialisation and industrialisation in different sectors had resulted in

increase in global warming, green house gas mission and raising the level of waste which in

turn have harmful effect for the future generation. In order to protect the environment, a new

concept called Corporate Social Responsibility (CSR) emerges in new companies’ act that

was amended in December 2012.

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CSR is an Instrument for business to have radical change in attitude even in banking sector.

CSR is also known as Sustainable Responsible Business (SRB) or Corporate Social

Performance. It is a form of corporate self regulation which is integrated into business model.

REVIEW OF LITERATURE:

Dr.J.Francis Mary & Ms.K.Radha (2019) in the article analyse a large number of investors

are unaware of the happenings inside the company premises. It is also one of the rights of

each stakeholder to know what is happening within the premise. This article shows how the

corporate governance acts as a CSR for the society.

Erum Shaikh (2019) in his study, he analyse how the CSR activities influence on the

performance of the banking sector in Pakistan. The result revealed that there is a positive

relationship between CSR and Employees commitment towards the organisation. This

significantly shows in future, increase in CSR actions will increase the commitment level of

the employees, since the employees will feel proud to be the part of the organisation.

Nidhi (2016) in her paper, she studies about the corporate social responsibility in India. The

article had highlighted the major area of contribution like education, rural development,

Children and women, social community welfare by the banking sector in CSR activities. He

conclude that the banking industry in India is giving due importance to the Social

Responsibility and they try to cater all the important areas to be focused like health,

education, sanitation, etc.

Manisha Saxena & A S Kohli (2012) study the impact of Corporate social responsibility in

banking industry with respect to organisational financial performance. A relationship had

been analysed between CSR rating and Profit after Tax and also with Earning per Share. But

result indicates that there is insignificant impact of CSR on Profit After Tax and Earning Per

Share.

Shirley Yeung (2011) in his paper analyse the perception towards Corporate Social

Responsibility with respect to banking sector in Hongkong. In this article they analyse about

the Quality. He states that providing quality products and services not only sufficient, but also

developing responsible and ethical staffs are much more important.

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OBJECTIVES OF THE STUDY:

1. To analyse the status of CSR practices in Indian banking sector.

2. To acquire perception about various commercial banks in India.

3. To understand the CSR practices including disaster management activities during

disaster performed by the banks.

LIMITATIONS OF THE STUDY:

1. The study is restricted only on CSR activities including disaster time.

2. Only HDFC Bank and ICICI bank arc considered for analysis.

Evolution of CSR:

Corporate Social Responsibility is a self regulating business model that motivates each and

every organisation to be socially responsible.CSR is not a new term, it had been originated

long back in Mauryan history, where philosophers like kautilya focused on ethical practices

and principle while conducting a business .The CSR evolution has it 4 phase of development.

Phase I (Philanthropy): The first phase of CSR is driven by philanthropy and Charity.

Philanthropy is derived from a greek word “philanthropos” which mean “love of

humankind”. In Philanthropy, CSR are influenced by family values, traditions, culture and

religion. Till 1850, the wealthy men shared their riches to the poor by building temples,

religious institutions and providing granaries for the poor and hungry.

After Industrialisation, the Industrialists like Tata, Birla, Godrejs, Bajaj promoted the CSR

concept by setting up charitable foundations, educational and healthcare institutions.

Phase II (Globalised Risk): The second phase of CSR started during independence struggle.

Industrialisation emerges during this period; Mahatma Gandhi gave the concept of

trusteeship. As per trusteeship, he urges the industrialist to share their wealth for the benefit

of the poor. This concept helped in the socio economic growth of the country like rural

development, women empowerment and education.

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FIG 1: EVOLUTION OF CSR

Phase III (Citizenship): In the third phase, CSR was influenced by public sector

undertakings. Private sector undertakings are framed by the policy of industrial licensing,

high taxes, which resulted in corporate malpractices. This led to enactment of legislation

regarding corporate governance, labor and environmental issues. This made the active

involvement of private sector in the socio –economic growth. In 1965, the academicians,

politicians and businessmen set up a national workshop on CSR, where great stress was laid

on social accountability and transparency. This led to increased impetus in Industrial growth,

which in turn making companies to contribute more for social responsibility.

Phase IV (Sustainability): In the fourth Phase, with the emergence of globalisation and

economic liberalisation, there was a huge growth in economy in India. Therefore Indian

companies integrated CSR into Sustainable strategy.

In the current scenario in India, the new companies act amended in December 2012 mandates

the corporate to spend 2% of their average net profits of the last three financial years towards

CSR. This is applicable for companies with a turnover of 1000 Cr/ PAT of 5 Cr/ or net worth

of 500 cr. The new bill replaces the Companies act 1956 and emphasizes carrying forward the

agenda of Corporate Social Responsibility.

SOCIAL OBLIGATIONS AND CSR:

A good CSR practice will increase the morale of the workers, which inturn increase the

productivity .Indirectly religion, culture, tradition, family values plays a major role in

contributing toward CSR activities

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Zakaat is an Islam law which states that “a portion of one’s earning must be shared

with the poor in the form of donation.

Similiar to Islam’s Zakaat, Sikhs followed Daashant . This is sikh’s religious

obligation. One tenth of their earnings are contributed towards common resources of

community in the name of Guru.

Hindus followed Dharmada where the manufacturer or seller charged a specific

amount from the purchaser, which was used for charity. The amount was known as

charity amount or Dharmada.

In Atharvana veda it says “one should procure wealth with one hundred hand and

distribute with one thousand hands”.

Yajurveda says “enjoy riches with detachment; do not cling to them, because they

belong to public.”

In Rig Veda it states, “Need for the wealthy to plant trees and build tanks for the

community as it would bring glory to life in future”.

Our Earth is known as a Mother. This inculcates the feeling of to be responsible towards our

Mother Earth. Social obligations, Patriotism and responsibility made the banking sector to be

more focused on CSR activities.

INDIAN BANKING SECTOR:

Indian banking sector is well organised and regulated.

The Indian banking system consists of 18 public sector banks, 22 private sector banks,

46 foreign banks, 53 regional rural banks, 1,542 urban cooperative banks and 94,384

rural cooperative banks as of September 2019.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently

capitalised and well-regulated. RBI’s new measures may go a long way in helping the

restructuring of the domestic banking industry.

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The digital payments system in India has evolved the most among 25 countries with

India’s Immediate Payment Service (IMPS) being the only system at level 5 in the

Faster Payments Innovation Index (FPII).

Reserve Bank of India (RBI) has decided to set up Public Credit Registry (PCR) an

extensive database of credit information which is accessible to all stakeholders.

A Commercial bank is a financial institution where people do their banking activities like

deposits, checking account services, loans and savings, as opposed to investment bank

with a motive of profit making in 21st century. In spite of all these activities, Commercial

banks also concentrate on CSR activities.

TABLE 1: LIST OF SCHEDULED COMMERCIAL BANKS

Sl.No Public sector bank Private sector bank

1 State Bank of India Axis Bank Ltd

2 Allahabad Bank Catholic Syrian Bank

3 Andhra Bank City Union Bank Ltd

4 Bank of Baroda Development Credit Bank Ltd.

5 Bank of India Dhanlaxmi Bank Ltd

6 Bank of Maharashtra Federal Bank Ltd.

7 Canara Bank HDFC Bank Ltd

8 Central Bank of India ICICI Bank Ltd.

9 Corporation Bank IndusInd Bank Ltd.

10 Dena Bank Jammu & Kashmir Bank Ltd.

11 Indian Bank Karnataka Bank Ltd.

12 Indian Overseas Bank Karur Vysya Bank Ltd.

13 Oriental Bank of Commerce Kotak Mahindra Bank Ltd

14 Punjab National Bank Lakshmi Vilas Bank Ltd.

15 Punjab & Sind Bank Nainital Bank Ltd

16 Syndicate Bank Ratnakar Bank Ltd.

17 Union Bank of India Union Bank of India

18 United Bank of India Tamilnad Mercantile Bank Ltd

19 UCO Bank Yes Bank Ltd.

20 Vijaya Bank Bandhan Bank

21 IDBI Bank Ltd IDFC Bank Ltd.

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CSR INITIATIVES BY THE BANKING SECTOR:

Banking sector not only concentration in financial term, but also in upliftment of society. The

government provide data regarding the amount spent on CSR activities.

TABLE 2: LIST OFCSR SPENT TOP TEN COMPANIES

RANK FY 2017-2018 FY 2016-17 FY 2015-16 FY 2014-2015

1

Reliance

Industries

Limited

Reliance Industries

Limited Reliance Industries Limited

Reliance Industries

Limited

2 ONGC ONGC NTPC Limited

Oil And Natural

Gas Corporation

Limited

3

Tata

Consultancy

Services Limited TCS ONGC Infosys Limited

4 Hdfc Bank

Limited Hdfc Bank Limited TCS

Bharat Heavy

Electricals Limited

5

Indian Oil

Corpn. Limited Infosys Limited ITC Limited

Tata Consultancy

Services Limited

6 Infosys Limited NTPC Limited Central Coalfields Limited Itc Limited

7

Mahanadi

Coalfields

Limited ITC Limited NMDC Limited Ntpc Limited

8 NTPC Limited Oil India Limited Tata Steel Limited Nmdc Limited

9 Wipro Limited

Indian Oil Corpn.

Limited Infosys Limited Tata Steel Limited

10

Housing

Development

Finance Corp. Wipro Limited

Power Finance Corporation

Limited

ICICIBank

Limited

SOURCE: https://www.csr.gov.in/

Major areas of CSR along with their expenditure on CSR activities:

1) HDFC Bank :

HDFC Bank is a big player of private sector bank which is well established in working. HDFC Life is committed to being a socially responsible corporate and its CSR framework is

governed by a formal policy. Besides, the Company’s employees also actively embrace and

participate in the Company’s community initiatives to accelerate inclusive growth and

strengthen environment protection. Areas of CSR intervention includes Empowering through

Sustainable Livelihood Initiatives, Financial Literacy and Inclusion, Promoting Education,

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Skill Training and Livelihood Enhancement, Promoting Healthcare, Environmental

Sustainability, Eradicating Poverty and Rural Development.

TABLE 3: HDFC CSR ACTIVITIES ( in Crores )

CSR

Project(s)

Development

Sector(s)

FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18

1 Environmental

sustainability

9.50 7.20 1.01 0.73

2 Vocational skills 124.70 179.90

3 Education 161.53 34.59 25.11 41.29

4 Health care 72.40 82.60 23.19 15.19

5 Rural development

projects

801.80 93.04 220.13 295.85

6 Poverty hunger

malnutrition

13.6 4.46 4.18

7 Skill Training and

Livelihood

Enhancement

30.04 17.31

Average Net Profit 98.56 124.00 15,199.60 18,246.45

CSR SPENT 1.19 12.72 305.42 374.54

SOURCE: https://www.csr.gov.in/

2) ICICI Bank :

ICICI Bank is the second largest bank in India in terms of assets and market

capitalisation. The bank has a network of 5,275 branches and 15,589 ATMs across

India and has a presence in 17 countries including India. ICICI’s CSR activities

includes Education, Health care, Skill development and sustainable livelihoods,

Financial inclusion, Support employee engagement in CSR activities and Capacity

building for corporate social responsibility.

TABLE 4: ICICI CSR ACTIVITIES (in Crores )

CSR

Project(s)

Development

Sector(s)

FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18

1 Education 7.39 6.9 0.93 3

2 Environmental

Sustainability

3.23

3 Livelihood

enhancement projects

41.28

1 47.5 56

4 Vocational skills 1.70 45.00

5 Health care 0.62 0.9 3.61

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6 Prime Minister

National Relief Fund

3.70

3.87

7 Rural development

projects

130.00

140 130.33 104.06

8 Armed Forces

Veterans War

Widows/ Dependants

5

Average Net Profit 8,578.96 10600 9,986.39 8510.12

CSR SPENT 155.00 172 182.36 170.2 SOURCE: https://www.csr.gov.in/

Banking sector Contribution during Disaster Period:

Natural disaster affects everyone in the same manner irrespective of region and sector. The

social and economic cost that the society had occur is irrecoverable. But because of CSR

activities these disaster are overcome by the affected people. The corporate in India have

always played a major role in post-disaster relief, rehabilitation and reconstruction efforts in

the affected regions. Likewise the banking sector plays the critical and catalytic role in

streaming the disaster management area.

All disaster relief expenditure to count towards CSR. Besides disaster relief activities,

the lists of activities that can be counted towards CSR include, hunger and poverty

alleviation activities, promotion of education and vocational training, and promotion

of gender equality.

Our society is facing major challenges due to Global warming, pollution etc. In order

to retrieve the resources for future purpose many activities had been followed by the

corporate.

The Confederation of Indian Industry (CII), was the first industry Organization to

constitute a Disaster Management committee in May 2001.

The Gujarat Cyclone of 1998 with two landfalls and a wind velocity between 170-200

kmph, ripped through the industrial heart of Gujarat and inflicted an economic loss of

nearly Rupees 2,500 crores.

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Gujarat being one of the most industrially advanced state in the country had suffered

due to Bhuj Earthquake in 2001. The earthquake caused nearly ten thousand industrial

units to go out of production as it struck the industrial heartland of the State. The total

economic loss was assessed at over Rupees five thousand crores.

By adopting the villages and contributing to the reconstruction of social and

community asset during the disaster of Orissa’s Super cyclone 1999 and Bhuj

Earthquake 2001 , the CII had undertaken extensive relief, rehabilitation and

reconstruction work.

The people affected by the 2004 Indian Ocean earthquake and tsunami were able to

rebuild their lives and communities. Many lost their basic needs to live. It is due to the

helping hand provided by many corporate sectors and banks rebuild their life.

State bank of India, Indian Overseas Bank and ICICI Bank are permitted to accept

donations to the Chief Minister Public Relief Fund ( CMPRF ) and to credit the

proceeds in Indian rupees to CMPRF account maintained by Indian Overseas bank.

During 2004-05, HDFC Bank, in conjunction with a non-government organization

(NGO) launched a Payroll Giving Program through which employees can make

contributions from their monthly salaries to support causes of their choice. in response

to the tragic tsunami disaster which caused huge loss of life and property in the

coastal belt of South India, HDFC Bank’s employees made generous monetary

contributions to the Prime Minister’s Relief Fund with HDFC Bank making an

equivalent contribution to this cause.

Chennai flood is one such disaster, which was unexpectable. The 2015 South India

floods resulted from heavy rainfall generated by the annual northeast monsoon in

November–December 2015. They affected the Coromandel Coast region of the South

Indian states of Tamil Nadu. Supplies of basic necessities, including milk, water and

vegetables, were affected due to logistical difficulties. Many lost their houses.

Funding had also been obtained from the World Bank and from the Asian

Development Bank for climate-change impact reduction initiatives.

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In addition to natural disaster, the society is also facing industrial and chemical

disaster due to rapid industrialisation. The Bhopal Gas Tragedy of 1984, involving a

sudden release of about 30 tonnes of methyl isocynate (MIC) caused severe health

and respiratory problems and birth of deformed and still-born children.

worst Chemical disaster.

Presently in 2020, we are facing a major disaster – COVID 19. WHO declared

COVID- 19 as Pandemic disease. The virus had spread worldwide.

Banks to offer emergency funds to aid pensioners, salaried, self-help groups, MSME,

large corporate of a salary loan of up to 20 times of his/her last drawn monthly gross

salary, up to Rs 2 lakh. Emergency pension loans can also be availed by senior

citizens, up to 15 times their monthly pension, capped at Rs 2 lakh.

Kotak Mahindra Bank contribute 50 crore toward covid 19 in PM Care fund.

Day by day the society is facing many disasters, which is really challenging activity to

overcome it. Without corporate sectors, Banks, Financial institution and many helping hands

it is difficult to overcome the situation.

Government also started Prime Minister’s National Relief Fund (PMNRF). PMNRF was

established in 1948 by then the Prime Minister Pt. Jawaharlal Nehru. It was established with

only public contribution. The resources of the PMNRF are utilized to render immediate relief

to families of those killed in natural calamities like floods, cyclones and earthquakes, etc.

CONCLUSION:

The analysis shows that the Indian banks are making efforts in the CSR practices. HDFC

Bank and ICICI bank are being in the top ten lists in CSR Portal. Both the banks had

contributed major part in rural development. HDFC bank also contributed towards education,

Vocational skills and Health care. In disaster period, banks also helped the society. Hence,

this analysis proves that CSR practices made by the banking sector is giving due responses to

the societal contribution for the upliftment of the poor and needy.

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Websites

15. www.csr.gov.im

16. www.ibef.org

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