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CSR BY INDIAN BANKING SECTOR Mrs. Jayashree Patil-Dake, MA (Eco-Hons), MBA(Mkting), NET, SET Senior Asst. Prof. Coordinator PGDMIB,MBA Dept, Badruka College.

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Presentation on theme: "CSR BY INDIAN BANKING SECTOR Mrs. Jayashree Patil-Dake, MA (Eco-Hons), MBA(Mkting), NET, SET Senior Asst. Prof. Coordinator PGDMIB,MBA Dept, Badruka College."— Presentation transcript:

1 CSR BY INDIAN BANKING SECTOR Mrs. Jayashree Patil-Dake, MA (Eco-Hons), MBA(Mkting), NET, SET Senior Asst. Prof. Coordinator PGDMIB,MBA Dept, Badruka College Post Graduate Centre, Kachiguda, Hyderabad- 500 027 Kachiguda, Hyderabad- 500 027

2 Introduction In 1970, the Nobel laureate and late economist, Milton Friedman of New York Times rightly wrote: the social responsibility of business is to increase profits. This view is often held and propounded by those who do not see much merit in companies being engaged in issues of Social Responsibility other than the making of profit. However, increasingly, the profit case, evident indicators that are tangible and the altruistic/ philanthropic/ ethical case, evident in the intangibles are getting blurred. In this context the purpose is to highlight the need for a paradigm shift in the importance of greater investment in intangibles to enhance corporate value. In 1970, the Nobel laureate and late economist, Milton Friedman of New York Times rightly wrote: the social responsibility of business is to increase profits. This view is often held and propounded by those who do not see much merit in companies being engaged in issues of Social Responsibility other than the making of profit. However, increasingly, the profit case, evident indicators that are tangible and the altruistic/ philanthropic/ ethical case, evident in the intangibles are getting blurred. In this context the purpose is to highlight the need for a paradigm shift in the importance of greater investment in intangibles to enhance corporate value. Corporate Social Responsibility or the CSR is the deliberate inclusion of public interest into corporate decision-making and the honoring of a triple bottom line: People, Planet, and Profit. The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts have used definition, "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". Corporate Social Responsibility or the CSR is the deliberate inclusion of public interest into corporate decision-making and the honoring of a triple bottom line: People, Planet, and Profit. The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts have used definition, "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large".

3 According to Former UN Secretary-General Kofi Annan, The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives. The paper discusses the need for financial inclusion in India to achieve social inclusion. According to Former UN Secretary-General Kofi Annan, The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives. The paper discusses the need for financial inclusion in India to achieve social inclusion.Kofi AnnanKofi Annan The Government of Indias Committee on Financial Inclusion in India begins its report by defining financial inclusion as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as the weaker sections and low income groups at an affordable cost (Rangarajan Committee 2008). The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players. (Dr. K.C. Chakraborty, 2009) The Government of Indias Committee on Financial Inclusion in India begins its report by defining financial inclusion as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as the weaker sections and low income groups at an affordable cost (Rangarajan Committee 2008). The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players. (Dr. K.C. Chakraborty, 2009)

4 Objectives The study attempts to analyze contribution of Indian Banking sector as a whole under the supervision and guidelines of RBI in implementing the financial inclusion through No frill accounts etc. The attempt of financial inclusion can bring about social inclusion which is the contribution to rural and urban India through the efforts of banking sector by banking the unbank. The study attempts to analyze contribution of Indian Banking sector as a whole under the supervision and guidelines of RBI in implementing the financial inclusion through No frill accounts etc. The attempt of financial inclusion can bring about social inclusion which is the contribution to rural and urban India through the efforts of banking sector by banking the unbank.

5 Corporate Social Responsibility The World Business Council defines, "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". The World Business Council defines, "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". According to Former UN Secretary-General Kofi Annan, The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives. According to Former UN Secretary-General Kofi Annan, The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.Kofi AnnanKofi Annan

6 Process and Phases of Financial Inclusion in India 1950-70: Consolidation of the banking sector and facilitation of industry and trade. 1970-90: Focus on channeling of credit to neglected sectors and weaker sections. 1990-2005: Focus on strengthening the financial institutions as part of financial sector reforms. 2005-onwards: Financial inclusion was explicitly made as a policy objective. The process of financial inclusion in India can broadly be classified into three phases. During the First Phase (1960-1990), the focus was on channeling of credit to the neglected sectors of the economy. Special emphasis was also laid on weaker sections of the society. Second Phase (1990-2005) focused mainly on strengthening the financial institutions as part of financial sector reforms. Financial inclusion in this phase was encouraged mainly by the introduction of Self- Help Group (SHG)-bank linkage program in the early 1990s and Kisan Credit Cards (KCCs) for providing credit to farmers. The SHG-bank linkage program was launched by National Bank for Agriculture and Rural Development (NABARD) in 1992, with policy support from the Reserve Bank, to facilitate collective decision making by the poor and provide door step banking. During the Third Phase (2005 onwards), the financial inclusion was explicitly made as a policy objective and thrust was on providing safe facility of savings deposits through no frills accounts

7 Table 1: Financial Inclusion - Statistics Source: RBI As per the source from Cellular Operators Association of India number of mobile phone users as on April 30, 2009 is 403 million out of which 46% do not have a bank account. This statistics clearly speak about the necessity to bring in more people into the banking fold. Through this may not sound an appropriate comparison but the people using mobile phones can be brought into the banking fold. MeasuresNumbers No-Frill Accounts 4.15 Cr (as on June 2009) Rural Bank Branches 31,727 constituting 39.7% of total bank branches (June 2009) ATMs 47953 ( July 2009) POS 5,22,148 (July 2009) Cards 173 million (July 2009) Kisan Credit Cards 76 million GCC issued by PSBs 152824 ( March, 2009) Mobile phones 403 million (April 2009) out of which 187 million(46%) don t have a bank account

8 Table 2: Progress of No frills Accounts in the Banking Sector in India Category March 31, 2006 March 31, 2007 March 31, 2008* March 31, 2009* Row Total Public Sector Banks 3328785865419139099352985917849967410 Private Sector Banks 156388860997184586931241015987355 Foreign Banks 2315,91933,11541,48280747 Column Total 4894976732335157889193302476156035512 Source : 1. Report on Trend and Progress of Banking India – 2007-08 2. Data for 2008-09 are received from banks. *: Provisional.

9 RBIS INITIATIVES FOR FINANCIAL INCLUSION IN INDIA: No Frill Accounts Simple KYC Norms Other Rural Intermediaries Usage of Regional Language Easier Credit Facilities The number of no frills accounts increased from 489497 at end-March 2006 to 4.15 Cr on June 2009. Notably, the public sector banks account for the majority of these no frills accounts as at end-March 2009. Similarly, the number of credit as well as savings accounts per 100 adults has also shown increasing trend over the period 2002 to 2007.

10 NO FRILL ACCOUNT: The annual policy statement of April 2005, while recognizing the concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, urged banks to review their existing practices to align them with the objective of financial inclusion. With a view to achieving greater financial inclusion, all banks were asked to make available a basic banking no frill account either with nil or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transaction in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks were urged to give a wide publicity to the facility of such no frill account so as to ensure great financial inclusion. In order to reach the benefit of no frill accounts to low income groups both in urban and rural areas, the KYC procedure for opening of accounts has been simplified for those who intend to keep balances not exceeding Rs.50000/- in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed R. 100000/- in a year.

11 Chart 1: Total No Frill account by Indian Banking Sector from 2006-09. Source: Report on Trend and Progress of Banking India –2007-08

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13 Conclusion Public Sector Banks have significant contribution of 89% in opening no frill accounts. Public Sector Banks have significant contribution of 89% in opening no frill accounts. Followed by Private sector banks up to almost 11% total contribution till 2009. Followed by Private sector banks up to almost 11% total contribution till 2009. Foreign banks is negligible almost nearing 0% contribution towards no frill accounts. Foreign banks is negligible almost nearing 0% contribution towards no frill accounts. The analysis of data suggest that the Public Sector Banks have significant contribution of 89% in opening no frill accounts, followed by Private sector banks up to almost 11% total contribution till 2009 and foreign banks is negligible almost nearing 0% contribution towards no frill accounts. RBI has more control over Public Sector Banks as compared with Foreign Banks and which is getting reflected by the contribution towards financial inclusion disparities within Indian Banking Sector too. The analysis of data suggest that the Public Sector Banks have significant contribution of 89% in opening no frill accounts, followed by Private sector banks up to almost 11% total contribution till 2009 and foreign banks is negligible almost nearing 0% contribution towards no frill accounts. RBI has more control over Public Sector Banks as compared with Foreign Banks and which is getting reflected by the contribution towards financial inclusion disparities within Indian Banking Sector too. However, there is lot to achieve in terms of contribution towards financial inclusion by foreign and private banks as compared to public sector banks contribution. Indian Banking as a whole as a part of corporate social responsibility should take up issue of opening No Frill Accounts seriously and makes deliberate efforts to achieve financial inclusion. It not only will help Indian society to achieve social inclusion but also helps monetization of Indian Economy and taking bank to unbank. Also RBI has taken various measures to implement financial inclusion more effectively and has recommended it seriously by the private and foreign banks in India. However, there is lot to achieve in terms of contribution towards financial inclusion by foreign and private banks as compared to public sector banks contribution. Indian Banking as a whole as a part of corporate social responsibility should take up issue of opening No Frill Accounts seriously and makes deliberate efforts to achieve financial inclusion. It not only will help Indian society to achieve social inclusion but also helps monetization of Indian Economy and taking bank to unbank. Also RBI has taken various measures to implement financial inclusion more effectively and has recommended it seriously by the private and foreign banks in India.

14 References Friedman Milton, (September 13, 1970 )The Social Responsibility of Business is to Increase its Profits The New York Times Magazine, Copyright @ 1970 by The New York Times Company Friedman Milton, (September 13, 1970 )The Social Responsibility of Business is to Increase its Profits The New York Times Magazine, Copyright @ 1970 by The New York Times Company Leeladhar, V. (Dec, 2, 2005) Taking Banking Services to the common Man-Financial Inclusion- Commemorative Lecture at the Fedbank Hormis Memorial Foundation at Ernakulam, India. Leeladhar, V. (Dec, 2, 2005) Taking Banking Services to the common Man-Financial Inclusion- Commemorative Lecture at the Fedbank Hormis Memorial Foundation at Ernakulam, India. Rangarajan C, (2008) Report of the Committee on Financial Inclusion, Ministry of Finance, GOI. Rangarajan C, (2008) Report of the Committee on Financial Inclusion, Ministry of Finance, GOI. Shanmugasundaram S. (2008), Customer Relationship Management: Modern Trends and perspectives, PHI Shanmugasundaram S. (2008), Customer Relationship Management: Modern Trends and perspectives, PHI Sharma Anamika, (May 2009), Challenges: For Building Financial Inclusive India, ICFAI Reader, pp 14-20 Sharma Anamika, (May 2009), Challenges: For Building Financial Inclusive India, ICFAI Reader, pp 14-20 Sudha V, Kalidas K, Sampath Kumar R, (2009) edited, Financial Inclusion- Aspects, Issues and the Way Forward, Himalaya Publishing House Thorat Usha, Financial Inclusion- The Indian Experience, RBI Bulletin, pp 1165-1172 Sudha V, Kalidas K, Sampath Kumar R, (2009) edited, Financial Inclusion- Aspects, Issues and the Way Forward, Himalaya Publishing House Thorat Usha, Financial Inclusion- The Indian Experience, RBI Bulletin, pp 1165-1172 Reports: Reports: RBI, Report on Trend and Progress of Banking in India (1998-2007) RBI, Report on Trend and Progress of Banking in India (1998-2007) RBI, (2005-2006) Circulars of RBI/2005-06/288 DBOD. No. BL. 58/22. 01.001/2005-2006, RBI/2005-06/233 RPCD. R.F. BC. 54/07.38.01/2005-06 RBI, (2005-2006) Circulars of RBI/2005-06/288 DBOD. No. BL. 58/22. 01.001/2005-2006, RBI/2005-06/233 RPCD. R.F. BC. 54/07.38.01/2005-06 RBI, (2008-2009) Circulars of RBI, RBI/2008-2009/455 DBOD. No. BL.BC.129/22.01.09/2008-2009 RBI, (2008-2009) Circulars of RBI, RBI/2008-2009/455 DBOD. No. BL.BC.129/22.01.09/2008-2009 Electronic Source: Electronic Source: Annan Kofi, (Dec 29, 2003), retrieved from http://en.wikipedia.org/wiki/Fiancial_inclusion Annan Kofi, (Dec 29, 2003), retrieved from http://en.wikipedia.org/wiki/Fiancial_inclusionhttp://en.wikipedia.org/wiki/Fiancial_inclusion Corporate Social Responsibility, retrieved from http://www.google.co.in/search?q=corporate+social+responsibility+in+india&hl=en&source=univ&tbs=nw s:1&tbo=u&ei=4NZHTMaWCc- 6caTI1aAM&sa=X&oi=news_group&ct=title&resnum=11&ved=0CDQQsQQwCg (accessed on 17th Nov 2010) Corporate Social Responsibility, retrieved from http://www.google.co.in/search?q=corporate+social+responsibility+in+india&hl=en&source=univ&tbs=nw s:1&tbo=u&ei=4NZHTMaWCc- 6caTI1aAM&sa=X&oi=news_group&ct=title&resnum=11&ved=0CDQQsQQwCg (accessed on 17th Nov 2010) http://www.google.co.in/search?q=corporate+social+responsibility+in+india&hl=en&source=univ&tbs=nw s:1&tbo=u&ei=4NZHTMaWCc- 6caTI1aAM&sa=X&oi=news_group&ct=title&resnum=11&ved=0CDQQsQQwCg http://www.google.co.in/search?q=corporate+social+responsibility+in+india&hl=en&source=univ&tbs=nw s:1&tbo=u&ei=4NZHTMaWCc- 6caTI1aAM&sa=X&oi=news_group&ct=title&resnum=11&ved=0CDQQsQQwCg Corporate Social Responsibility, retrieved from http://en.wikipedia.org/wiki/Corporate_social_responsibility (accessed on 17th Nov 2010) Corporate Social Responsibility, retrieved from http://en.wikipedia.org/wiki/Corporate_social_responsibility (accessed on 17th Nov 2010) http://en.wikipedia.org/wiki/Corporate_social_responsibility CSR –Milton Friedman was right (1970), Simon Cooper, Associate, Bath Consultancy Group, retrieved from http://www.bathconsultancygroup.com/documents/CSR%20- %20Milton%20Friedman%20was%20right.pdf. (accessed on 17th Nov 2010) CSR –Milton Friedman was right (1970), Simon Cooper, Associate, Bath Consultancy Group, retrieved from http://www.bathconsultancygroup.com/documents/CSR%20- %20Milton%20Friedman%20was%20right.pdf. (accessed on 17th Nov 2010)http://www.bathconsultancygroup.com/documents/CSR%20- %20Milton%20Friedman%20was%20right.pdfhttp://www.bathconsultancygroup.com/documents/CSR%20- %20Milton%20Friedman%20was%20right.pdf

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