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

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. 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".

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. 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)

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.

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". 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.

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

Table 1: Financial Inclusion - Statistics

Measures
No-Frill Accounts Rural Bank Branches ATMs POS Cards Kisan Credit Cards GCC issued by PSBs Mobile phones

Numbers
4.15 Cr (as on June 2009) 31,727 constituting 39.7% of total bank branches (June 2009) 47953 ( July 2009) 5,22,148 (July 2009) 173 million (July 2009) 76 million 152824 ( March, 2009) 403 million (April 2009) out of which 187 million(46%) dont have a bank account

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.

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

332878

5865419

13909935

29859178

49967410

Private Sector Banks

156388

860997

1845869

3124101

5987355

Foreign Banks Column Total

231 489497

5,919 6732335

33,115 15788919

41,482 33024761

80747 56035512

Source: 1. Report on Trend and Progress of Banking India 2007-08 2. Data for 2008-09 are received from banks. *: Provisional.

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.

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.

Total 'No Frill' A/c by Indian Banking Sector from 2006-09

Chart 1: Total No Frill account by Indian Banking Sector from 2006-09.

Private Sector Banks 10.9% Foreign Banks 0.1%

Public Sector Banks 89%

Table 5: Progress of No frills Accounts in the Banking Sector in India Category March 31, 2006 Sector 332878 March 31, March 31, March 31, Row 2007 2008* 2009* Total 5865419 13909935 29859178 49967410 860997 5,919 6732335 1845869 33,115 15788919 3124101 41,482 33024761 5987355 80747 56035512

Public Banks Private Sector 156388 Banks 231 Foreign Banks 489497 Column Total *: Provisional.

Source: Report on Trend and Progress of Banking India 2007-08

Conclusion

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. 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. 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.

References

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Thank You.., One and All