CSR: Role of Banks

1. Dr. RAJEEV BABEL
ACS, MBA, PH.D, LLB, AIIB,
M.COM, DBM, DFS, D T&D
Mail: babelrajeev@gmail.com

2.  Good Corporate Governance and Corporate
Responsibility towards society are so inextricably
interlinked that we cannot separate one from the
other.
 If providing good governance to its stakeholders and
the society at large is what is expected of a
corporate, it is because it receives so much from the
society that it is only appropriate that the corporate
gives back to it at least something in return in the
form of good governance.
 It is thus understood that good corporate governance
itself is part and parcel of corporate responsibility to
society

3.  Corporate social responsibility (CSR, also called
Corporate Conscience, Corporate Citizenship or
Sustainable Responsible Business) is a form of
corporate self-regulation, integrated into a business
model .
 CSR policy functions as a self-regulatory mechanism
whereby a business monitors and ensures its active
compliance with the spirit of the law, ethical
standards and international norms . With some
models, a firm's implementation of CSR goes beyond
compliance and engages in "actions that appear to
further some social good, beyond the interests of the
firm and that which is required by law.
 CSR aims to embrace responsibility for corporate
actions and to encourage a positive impact on the
environment and stake holders including consumers,
employees, investors, communities, and others.

4.  The acronym CSR is made of three words i.e.
Corporate, Social and Responsibility.
• Corporate: Corporate citizenship doing
business for wealth creation.
• Social: Sustainable development i.e taking
care of the People, Planet and Profit.
• Responsibility: Accountability between the
two i.e. having a balance between the
wealth creation by exploiting the natural and
societal resources and providing
employments generation and welfare
activities for the society at larger.

5.  Gone are the days, when it was believed that ‘
The business of business is business’.
 Now the business (activity) of business (trading/
manufacturing/ service) is not only the business
(wealth creation) but it has to take care of the
sustainable development too.
 Thus, sustainable business success and
shareholder’s value cannot be achieved solely
through maximizing short-term profits, but
instead through market-oriented yet responsible
behaviour.
 Thus, CSR is operating a business in a manner
which meets or excels the ethical, legal,
commercial and public expectations that a
society has from the business.

6.  Under the old Companies Act, 1956, there
was no provision of CSR.
 However the CSR was introduced as
Voluntary Guidelines in 2009 by the Ministry
of Corporate Affairs (MCA).

7.  In its preamble it was mentioned that CSR is
not philanthropy and CSR activities are
purely voluntary- what companies will like to
do beyond any statutory requirement or
obligation.
 To provide companies with guidance in
dealing with the above mentioned
expectations, while working closely within
the framework of national aspirations and
policies, following Voluntary Guidelines for
Corporate Social Responsibility have been
developed.

8.  While the guidelines have been prepared in
the Indian Context, enterprises that have a
trans-national presence would benefit from
using these guidelines for their overseas
operations as well.
 Since the guidelines are voluntary and not
prepared in the nature of a perspective road-
map, they are not intended for regulatory or
contractual use.

9.  The Core elements of CSR Policy covered the
following points:
• Care for all stakeholders
• Ethical Functioning
• Respect for Workers Rights and Welfare
• Respect for Human Rights
• Respect for Environment
• Activities for Social and Inclusive
Development

10.  The companies should respect the interests
of, and be responsive towards all
stakeholders, including shareholders,
employees, customers, suppliers, project
affected people, society at large etc. and
create value for all of them. They should
develop mechanism to actively engage with
all stakeholders, inform them of inherent
risks and mitigate them where they occur.

11.  Their governance systems should be
underpinned by Ethics, Transparency and
Accountability. They should not engage in
business practices that are abusive, unfair,
corrupt or anti-competitive.

12.  Companies should provide a workplace
environment that is safe, hygienic and humane
and which upholds the dignity of employees.
 They should provide all employees with access to
training and development of necessary skills for
career advancement, on an equal and non-
discriminatory basis.
 They should uphold the freedom of association
and the effective recognition of the right to
collective bargaining of labour, have an effective
grievance redressal system, should not employ
child or forced labour and provide and maintain
equality of opportunities without any
discrimination on any grounds in recruitment and
during employment.

13.  Companies should respect human rights for
all and avoid complicity with human rights
abuses by them or by third party.

14.  Companies should take measures to check
and prevent pollution; recycle, manage and
reduce waste, should manage natural
resources in a sustainable manner and ensure
optimal use of resources like land and water,
should proactively respond to the challenges
of climate change by adopting cleaner
production methods, promoting efficient use
of energy and environment friendly
technologies

15.  Depending upon their core competency and
business interest, companies should
undertake activities for economic and social
development of communities and
geographical areas, particularly in the
vicinity of their operations. These could
include education, skill building for
livelihood of people, health, cultural and
social welfare etc., particularly targeting at
disadvantaged sections of society.

16.  Section 135 deals with the Corporate Social
Responsibility. Section 135 (1) provides that
every company having-
• Net worth of Rs. 500 crore or more, or
• Turnover of Rs. 1000 crore or more, or
• Net profit of Rs. 5 crore or more,
during any financial year shall constitute a
Corporate Social Responsibility Committee of
the Board consisting of three or more
directors, out of which at least one director
shall be an independent director

17.  The Corporate Social Responsibility
Committee shall formulate and recommend
to the Board, a Corporate Social
Responsibility Policy which shall indicate the
activities to be undertaken by the company
as specified in Schedule VII;
 Recommend the amount of expenditure to be
incurred on such the activities.
 Monitor the Corporate Social Responsibility
Policy of the company from time to time.

18.  Company should spend, in every financial
year, at least 2% of the average net profits of
the company made during the 3 immediately
preceding financial years, in pursuance of its
Corporate Social Responsibility Policy.
 Give preference to the local area and areas
around it, where it operates, for spending
the amount earmarked for Corporate Social
Responsibility activities.
 If the company fails to spend such amount,
the Board shall, in its report made specify
the reasons for not spending.

19.  eradicating extreme hunger and poverty;
 promotion of education;
 promoting gender equality and empowering
women;
 reducing child mortality and improving
maternal health;

20.  combating human immunodeficiency virus,
acquired immune deficiency syndrome,
malaria and other diseases;
 ensuring environmental sustainability;
 employment enhancing vocational skills
 social business projects;

21.  contribution to the Prime Minister's National
Relief Fund or any other fund set up by the
Central Government for socio-economic
development and relief and welfare of the
Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and
women; and
 Such other matters as may be prescribed.

22.  Explanation 2 to section 37(1) of the Income Tax
Act 1961 states that any expenditure incurred by
an assessee on the activities relating to
corporate social responsibility referred to in
section 135 of the Companies Act 2013 shall not
be deemed to have been incurred for the
purpose of business and hence shall not be
allowed as deduction under section 37.
However, the CSR expenditure which is of the
nature described in section 30 to 36 or section
80G shall be allowed deduction under those
sections subject to fulfilment of condition, if
any, specified therein.

23.  The commercial banking structure in India
consists of Scheduled Commercial Banks &
Unscheduled Banks. Since independence,
banking in India has evolved through four
distinct phases:
• Foundation phase (1950s till the
nationalization of banks in 1969),
• Expansion phase (mid-69s to 1984),
• Consolidation phase (1985 to 1991) and
• Reforms phase (since 1992).

24.  The CSR in Indian Banking Sector is aimed
towards addressing the financial inclusion,
providing financial services to the unbanked
or untapped areas of the country, the socio-
economic development of the country by
focusing on the activities like, poverty
eradication, health and medical care, rural
area development, self employment
training and financial literacy trainings,
infrastructure development, education,
and environmental Protection etc.

25.  The CSR phases and its development can be
divided in to four phases are as follows:
• Phase I ( Till 1914): CSR motivated by charity
and philanthropy.
• The oldest form of CSR was motivated by
charity and philanthropy with direct
influence from culture, religion, family
trading and industrialization process.

26. • Phase II ( 1914 – 1960): CSR for India’s social
development.
• Dominated by the country’s struggle for
independence and influenced fundamentally
by Gandhi’s theory of trusteeship for
consolidation and amplification of social
development. Gandhi’s reform programs
which included activities that sought in
particular abolition of untouchability,
women’s empowerment and rural
development

27. • Phase III ( 1960 – 1980): CSR under the
paradigm of the mixed economy
• The paradigm of mixed economy with the
emergence of legislation on labor and
Environmental standards, affected the third
phase of Indian CSR This phase Is also
characterized by a shift from corporate self
regulation to strict legal and public
regulation of business activities

28. • Phase IV ( 1980 & onwards): CSR at the
Interface between philanthropic and business
approaches
• Indian companies and stakeholders began
abandoning traditional philanthropic
engagement and, to some extent, integrated
CSR into a coherent and sustainable business
strategy, partly adopting the multi
stakeholder approach

30.  RBI also insisted upon taking measures for
sustainable development of economy through
realizing the dire necessity of CSR and issued
a circular bearing No. RBI/2007-08/216
DBOD. No.Dir. BC. 58/13.27.00/2007- 08
dated 20.12.2007 on Corporate Social
Responsibility, Sustainable Development
(SD)and Non-Financial Reporting (NFR) – Role
of Banks.

31.  CSR entails the integration of social and
environmental concerns by companies in
their business operations as also in
interactions with their stakeholders.
 Sustainable Development (SD) essentially
refers to the process of maintenance of the
quality of environmental and social systems
in the pursuit of economic development.

32.  Non-Financial Reporting (NFR) is basically a system of
reporting by organizations on their activities in this
context, especially as regards the triple bottom line,
that is, the environmental, social and economic
accounting (Planet, People and Profit).
 The contribution of financial institutions including
banks to sustainable development is paramount,
considering the crucial role they play in financing the
economic and developmental activities of the world.
 In this context, the urgency for banks to act as
responsible corporate citizens in the society,
especially in a developing country like ours, need be
hardly overemphasized. Their activities should reflect
their concern for human rights and environment.

33.  In this context, the need for sustainable
developmental efforts by financial institutions in
India assumes urgency and banks, in particular,
can help contribute to this effort by playing a
meaningful role.
 In the circumstances, banks are advised to take
note of the issues raised and consider using the
same to put in place a suitable and appropriate
plan of action towards helping the cause of
sustainable development, with the approval of
their Boards.
 The progress made there under could be placed
in the public domain along with the annual
accounts of banks.

35.  Schedule VII of Companies Act, 2013 sets out the
activities which may be included in CSR and the
banks in India are already working on it.
 These activities include poverty eradication,
education, empowering women, environmental
sustainability, ecological balance, protection of
flora and fauna, animal welfare, agroforestry,
conservation of natural resources and
maintaining quality of soil, air and water socio-
economic development and relief and welfare of
the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women.

36.  After the nationalization of banks in 1969 (14
banks) and in 1980 (6 banks) the banks in
India, whether it be in public or private
sector domain, apart from catering the needs
of big industrial houses, are also actively
participating in the Priority Sector Lending (
target of which is 40% of the overall credit
or credit equivalent of Off-balance sheet
exposure, which ever is higher.

37.  Priority sector include:
• Agriculture
• Small Enterprises
• Retail Trade
• Micro Credit
• Education loans
• Housing loans
• Finance to weaker section

38.  Financial Inclusion: Financial inclusion
means the delivery of banking services at an
affordable cost to the vast sections of
disadvantaged and low income groups. It may
be defined as the process of ensuring access
to financial services and timely and adequate
credit where needed by vulnerable groups
such as weaker sections and low income
groups at an affordable cost.

39.  The Reserve Bank had adopted financial inclusion as
one of its major projects in January 2010.
 Banks have been advised to devise financial inclusion
plans (FIPs) congruent with their business strategies
and comparative advantages to make them an
integral part of their corporate business plans.
 The initiative included targets required to be set by
banks for opening banking outlets, Business
Correspondent (BC) outlets opened in urban
locations, opening of basic savings bank deposit
accounts (BSBDAs), overdraft (OD) facility availed in
BSBDAs and farm and nonfarm credit such as Kisan
Credit Cards/ General Credit Cards (KCCs/GCCs)
transactions in (Business Correspondent – Information
and Communication Technology) (BC-ICT) accounts.

40.  The objectives of PMJDY launched by the Government of
India are mostly in sync with the financial inclusion
objectives being advocated by the Reserve Bank. The
implementation plan for PMJDY leverages on the policies
laid down by the Reserve Bank under financial inclusion.
 The timeline for providing banking services in villages with
populations below 2,000 under the roadmap may be
advanced from March 2015 to August 2015. With revised
targets for opening of basic bank accounts in place, banks
will have to ensure opening of at least one bank account in
each household by January 26, 2015.
 In addition, banks are advised to undertake financial
awareness campaigns in association with IBA so as to
educate customers with regard to the facilities offered
under the accounts opened under PMJDY, extending PMJDY
to insurance and pension.

41.  The scheme of linkage of SHGs with banks was
launched in 1992 under aegis of NABARD with a
view to combat growing problem of poverty.
 The credit is not the primary objectives of an
SHG. It comes into play only when the group
graduates to a highly functional entity, gains
ability to undertake productive and income
generating activities and becomes capable of
undertaking exposure to risk. SHGs are
registered or unregistered small economically
homogeneous and affinity groups of rural poor,
voluntarily coming together for mutual benefits.
 It involves 3 stages namely (a) group formation &
stabilization, (b) micro credit stage and (c)
micro enterprise development stage.

42.  The Government of India has designed and
implemented a large number of schemes for
creation of employment, eradication of
poverty and for ensuring overall development
in rural areas. Commercial Banks are the
main players in the implementation of these
schemes.

43.  Integrated Rural Development Programme
(IRDP)
 Service Area Approach (SAA)
 Lead Bank Scheme (LBS)
 Differential Interest Rate (DIR)
 Small Farmers Development Agency (SFDA)
 Marginal Farmers and Agricultural Labourers
Development Agencies (MFAL )
 Farmers Service Societies (FSS)
 Swarnajayanthi Gram Swarozgar Yojana (SGSY)
 Indira Awas Yojana (IAY)
 Prime Minister’s Rozgar Yojana (PMRY)

44.  Pradhan Manthri’s Gram Sadak Yojana
(PMGSY)
 Central Rural Sanitation Programme (CRSP)
 Sampoorna Grameen Rozgar Yojana (SGRY)
 Swajal Dhara Scheme (SDS)
 Watershed Development Programme
 Hariyali Programme
 People’s Planning Programme (PPP)
 Self Help Groups (SHGs)
 Vikas Volunteer Vahini Clubs (VVVs)
 Kisan Credit Card (KCC)

45.  We have picked up samples from Public
Sectors Banks ( SBI, BOB and PNB) and two
from the Private Sectors ( ICICI Bank and Axis
Bank) which are leading banks in Public and
Private sector. The abstract on the CSR
activity of the concerned banks have been
taken from the respective Annual Reports.

46.  State Bank of India is committed to:
• Enhancing stakeholder’s value though value-
driven engagement.
• Economic and social well-being of the
society, particularly the less fortunate and
under-privileged members of the society.
• Minimize the direct and indirect impact of its
operations on the environment.

47.  In order to further guide the Sustainability
Development journey, the individual
elements of the policy are grouped into
three key pillars:
1. Social Responsibility,
2. Environmental Responsibility and
3. Economic Responsibility.

48.  CSR was introduced in the SBI as early as 1973, under
the name Innovative Banking, covering both banking as
well as non-banking activities.
 The initial emphasis was on assisting groups belonging to
the weaker and downtrodden sections of society by
providing avenues for improvement of their economic
condition.
 Non-banking activities involved participation in
community activities which contributed to the
communal good, e.g. blood donation camps, health
camps, participation in local festivals, adult literacy,
tree planting etc.
 As the scope of activities increased, the Bank classified
these activities as Community Service Banking, through
which the Bank plays the role of a responsible and
responsive corporate citizen and discharges its
corporate social responsibility to the community.

49.  BANK’S DONATIONS: In terms of Reserve
Bank of India instructions, the Bank can
sanction donations up to 1% of the previous
year’s profits. Bank’s donations are classified
under 2 broad categories:
1. National Donations [0.25% of profit]
Prime Minister’s National Relief Fund,
National Defence Fund, Chief Minister’s
Relief Fund etc. for relief / rehabilitation
during natural calamities.

50.  2. Normal Donations [0.75% of profit]
Voluntary organizations / NGOs/ charitable
institutions registered as Societies or Public
Charitable Trusts. It covers Health, Education, Sports
and Games, Adoption of the Girl Child, Women’s
empowerment, Child development, Welfare and
rehabilitation of poor and handicapped Assistance to
poor and under privileged, Entrepreneur
development programmes , Vocational guidance,
Thrust for assistance to IT education in Rural /Tribal
/unreached areas, Environment protection,
Adoption, maintenance , restoration of historic /
heritage monuments / buildings, Assistance during
natural calamities like floods/droughts etc.

51.  ADOPTION OF THE GIRL CHILD
Society’s preference for the boy child has
resulted in a large number of instances when
the girl child is deprived of basic facilities. In
order to supplement the efforts of the Govt.,
to change this concept, Branches may adopt
Girl Children in the age group of 6 to 14
years, who are orphans / destitute /
physically handicapped / belong to poor
families. A lump sum amount of Rs.3000/ to
Rs.5000/- per annum is given for the child’s
education.

52.  The Bank received the ‘Global Excellence &
Leadership Award’ in the category of ‘50
most talented CSR Professionals of India’ by
World CSR Congress in Mumbai on
18/02/2014.

53. The Bank has established Baroda Swarozgar
Vikas Sansthan (Baroda R-SETI) for imparting
free training to unemployed youth to develop
their ntrepreneurial skills to become self
employed.
All the Lead Districts of the Bank have an R-
SETI each. About 47 such Sansthans have
been established by the Bank in which more
than 1,92,247 youth have been trained and
around 1,20,979 have been gainfully self
employed.

54.  To speed up the process of financial
inclusion, the Bank has also established 46
Financial Literacy Centres (FLC) across India.
These centres will impart financial literacy in
the form of simple messages like Why Save,
Why borrow from banks, Why borrow as far
as possible for income generating activities,
Why repay in time, Why insure yourself, Why
Save for your retirement, etc.

55.  Appreciation Certificate for CSR Activities by
ASSOCHAM.
 Global CSR Excellence and Leadership Awards
for “Organisations with Best CSR Practices"
by ABP News.
 3rd Asia’s Best CSR Practices Awards- Best
CSR Practices Overall by World CSR Day.

56.  Punjab National Bank has been proactively
catering to the needs and aspirations of the
society and small & micro entrepreneurs and
youth in particular. Towards improving the
livelihood of farmers, the Bank has a well
defi ned set up in terms of Farmers' Training
Centres (FTCs), Rural Self Employment
Training Institutes (RSETIs) and Financial
Literacy and Credit Counselling Centres
(FLCCs).

57. The Bank in the area of CSR, a separate wing
i.e. PNB Prerna has been set up wherein the
wives of the senior officers and female
employees identify the needy organisations &
beneficiaries who deserve to be supported
for bringing about a change in the lives of
differently-abled people and also people
from the lower strata of the society. The CSR
activities have been decentralized to circle
levels. To encourage innovative ideas, a
scheme to recognise best CSR initiatives of
the circles is also put in place.

58.  Apart from this, the Bank has been
performing its role by taking green
initiatives. Tree plantation Drives, Energy
Conservation measures and making use of
Solar energy have been some programmes
undertaken by the Bank in this direction.

59.  ICICI Group set ICICI Foundation for Inclusive
Growth in early 2008 to build up the Group’s
legacy of promoting inclusive growth
 Areas of Focus:
1. Skill Development & Sustainable
Livelihoods
1.1. ICICI Foundation has launched the
ICICI Academy for Skill to impart vocational
training to the youth to train about 5000
youth in its first year of operation.

60.  1.2. Rural Self-Employment Training
Institutes at Udaipur and Jodhpur. It offers
short term residential training and on-
location training courses in various trades.
ICICI Foundation has set up satellite centers
at block-levels in districts which offer
vocational training in remote locations.

61.  2. Elementary Education:
2.1. School and Teacher Education Reform
Programme, Rajasthan. It has 4 key components
viz: (i) Revision and renewal of curricula and
syllabus for classes I to VII have been revised and
new text books have been developed (ii) Teacher
education and training for in-service and pre-
service teachers
2.2. School and Teacher Education Reform
Programme, Chattisgarh: to enable qualitative
improvement in teaching-learning processes with
State Council Educational Research and Training.

62.  3. Primary Healthcare: (i) Out patient
Health Programm, Odisha and Gujarat (ii)
Strengthening Convergent Action for
Reducing Child Under nutrition, Rajasthan
 4. Financial Inclusion: Financial Literacy
Programme
 5.Other Programmes: ICICI Fellows – To
create a cadre of socially responsible leaders
with a passion for development work in rural
India. Blood Donation, Inclusive India Series.

63.  Financial Inclusion-During Fiscal year 2014
the Bank opened 317 branches in rural
unbanked villages, taking the total count of
branch in unbanked villages to 448. With
this, the Bank has a total anetwork of 822
branches in rural areas.
 The Bank has 1.8. million basic savings bank
deposit account as at 31.3.2014.

64.  Axis Bank Foundation (ABF) was setup as a Public
Trust in 2006 to carry out the Corporate Social
Responsibility initiatives of Axis Bank. ABF has
partnered with several NGOs to provide
equitable education to various underprivileged
individuals across 13 states of India. These
programs aim at alleviating poverty and
providing livelihood options for economically
weak households.
 ABF is also actively involved in making steps
towards reversing the effects of our ecological
footprint, by implementing several Sustainability
Initiatives.

65.  Today the banking services are more effective in
comparison with the past and the bank have also started
working towards social banking that is Corporate Social
Responsibility.
 After the involvement of RBI the CSR becomes the
important part of Banking Sector but still more regulations
and new policies are required to implement the concept of
CSR in Indian Banking Sector.
 RBI should made some criteria to distinguish between the
banks conducting CSR practices and those not conducting,
on the basis of their involvement in social banking and
some percentage must be set for spending on CSR
activities by all the established Banks and a proper
monitoring is required by a committee on the working of
Banks so that the Banks work for their profit along with
contributing towards the society because

66. Corporate Social Responsibility is
just not the charity but a practical
implementation of ethical ideas
towards the society.

67. It is not the end
It is the beginning of
CSR -Dr. RAJEEV BABEL
ACS, MBA, PH.D, LLB, AIIB,
M.COM, DBM, DFS, D T&D
Mail: babelrajeev@gmail.com