Page 38 - Banking Finance JANUARY 2017
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Paperless statements, product information guides and Green Banking through internal operations: It means
annual reports to customers and stakeholders. all bank should adopt green banking activities in their
Offering and promoting mutual funds that focus invest- day to day operations. These include adopting appro-
ment in 'Green' companies. priate ways to use renewable energy, automation and
minimizing their carbon footprint. In the past few years,
Credit cards and debit cards can be used while making
all the banks have incorporated paperless technologies
the payment of various expenses without carrying
in their internal operations to help the environment as
money.
well as provide their customers efficient and better ser-
Mobile banking is used for performing balance cheques, vices. In their day-to-day business operations, banks
account transactions, payments, credit appliances etc., ordinarily generate carbon emissions through the usage
via mobile phone or Personal Digital Assistant (PDA). of paper, electricity, stationary, lighting, air condition-
ing and electronic equipment. Green banking internal
Challenges of Green Banking operations include online account opening, online bank-
ing, mobile banking, net banking, electronic fund trans-
While adopting green banking practices, the banks would
face the following challenges: fer as well as the use of ATM, cash and cheque deposit
machines, credit and debit cards, e-statement SMS
Reputational Risk: If banks are involved in those projects
alert, mini image statement etc.
which are damaging the environment they are prone
lose their reputation. There are few cases where envi- Green Finance: Green Finance refers to banks that pro-
ronmental management system has resulted in cost vide financial assistance to environmentally responsible
saving, increase in bond value. projects. The purpose is to provide financial assistance
to green technology and pollution reduction projects to
Diversification Problem: Green banks restrict their busi-
ness transaction to those business entities who qualify reduce external carbon emissions. The bank support
industries that are resource efficient and emit low car-
screening process done by green banks. With limited
bon footprint. Priority is given to financing eco-friendly
number of customers they will have a smaller base to
business activities and energy efficient industries such
support them.
as waste water treatment plant, waste disposal plants,
Start-up face: Many banks in green business are very
bio-gas plants, renewable energy projects, hybrid car
new and are in start-up face. Generally it takes 3 to 4
projects and so on.
years for a bank to start making money. Thus it does
not help banks during recession.
Environmental Management by Banking
Credit Risk: Credit risk arises due to lending to those
customers whose businesses are effected by the cost of Institutions
pollution, change in environmental regulation and new Now a days, most of the commercial lending process in dif-
requirements of emission level. ferent parts of the world scrutinizes projects with a set of
tools by incorporating environmental concerns in their day-
High operating cost: Green bank requires talented and
to-day business. The financial institutions should encourage
experienced staff to provide proper services to custom-
projects which take care of the following aspects while fi-
ers. Experienced loan officers are needed; they give
nancing them.
additional experience in dealing with green business and
customers. There should be an Environmental Impact Assessment
(EIA) of each project recommending the measures
Green Banking Strategies needed to prevent, minimize and mitigate the environ-
mental negative impact before financing the projects.
According to Md Shafiqul and Prahalled (2013), green bank-
ing activities involve two major approaches i.e., green trans- While investing or funding the projects, the financial
formation of internal operation and environmentally respon- institutions should assess the sensitive issues like vulner-
sible financing. able groups; involuntary displacement etc and projects
38 | 2017 | JANUARY | BANKING FINANCE
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