Green Banking Vis-a-Vis Ethical Banking - A Business Model for Sustainable Banking in India

Sustainable development can be achieved by allowing markets to work within an appropriate framework of cost efficient regulations and economic instruments. In a globalised economy, the industries and firms are vulnerable to stringent environmental policies, severe law suits or consumer boycotts. Since banking is one of the major stake holders in the Industrial sector, it can find itself in credit risk and liability risks. Further, environmental impact might affect the quality of assets and also bank's rate of return 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, cites international experiences and highlights important lessons for sustainable banking and development in India. The findings indicate the need to create awareness, implement and follow green banking as much as possible in today's business world of innovative technologies so as to make our environment sustainable.