Corporate Social Responsibility: A must for Banks and Financial Institutions

PARTHA PRATIM SEN Managing Director, Citizens’ Urban Co-operative Bank, Gangtok.

Introduction: It is said that the banks are not only for making profits by carrying on different types of banking & financial services related business. Banks are equally responsible to give back to the society a portion of what they earn from their business. In this perspective, the concept of Corporate Social Responsibility (CSR) has most pertinently evolved in the banking and financial sectors.  CSR in banking revolves around the commitment to both the financial and non-financial well-being of society. It is not just about profits, but creating a harmonious balance between economic, ethical, philanthropic and environmental objectives.

CSR includes four categories: 1) Environmental social responsibility, 2) Ethical responsibility, 3) Philanthropic Corporate responsibility and 4) Economic & Financial responsibility.

1) Environmental social responsibility means that organisations should behave in an environment friendly manner to the most extent possible by a) Reducing harmful practices like decreasing pollution, green house gas emissions, the single-time use of plastics, water consumption and general waste, b) Regulating energy consumption by increasing reliance on renewable, sustainable resources and by making use of recycled or partially recycled materials and

c) Offsetting negative environmental impact by planting trees, funding research and making donations to such related matters. 

2) Ethical responsibility means that an organisation operates in a fair and ethical manner towards all its stakeholders like management, customers, investors, employees, suppliers etc and every deal with each stakeholder is done in an ethical, transparent and in industry standard style and manner.

3) Philanthropic Corporate responsibility means making charity and giving donations to the disadvantaged people and others to make the society a better place to live with all. Some organisations establish or create their own charitable trusts to carry out philanthropic activities on an on-going basis to leave a lasting positive impact on the society.

4) Economic & Financial responsibility means that all such decisions and products framed should not only enhance profit but should positively impact the people and the society at large. As for Banks, they should not charge exorbitant rate of interest on their loan products and they should give  standard & reasonable rate of interest (inflation adjusted) on deposits as per market practice and standard and should not charge service charge from the customers at the exorbitant rates. Banks should provide reasonable amount of remuneration to the employees who toil hard to develop the banks, of course depending upon the profit of the organisations. Banks should also give reasonable amount of dividends to the shareholders every year because banks utilise capital amount provided by the shareholders in their business activities to earn profits.

Banks’ obligation for CSR activities: The Companies Act, 2013 brought the concept of Corporate Social Responsibility to the forefront by mandating companies to set aside 2% of their net profits solely for social activities. India’s CSR framework under section 135 of the Companies Act, 2013 mandate social responsibility a legal obligation for a company. Eligible companies must spend 2% of their average net profits from the past three years on CSR activities. But, banks are not governed by the Companies Act, 2013. Banks are governed by RBI regulations.  As per RBI regulations vide DBOD. No. Dir.BC.50/13.01.01/2005-06 dated 21.12.2005, “the profit making banks may make donations during a financial year aggregating up to one percent of the published profits of the banks for the previous year.”

It may be noted that the donations to Prime Minister’s National Rural Relief Fund (PMNRRF) and subscriptions/contributions to professional bodies/Institutions related to banking industry like Indian Banks’ Association, National Institute Of Bank Management, Indian Institute of Banking & Finance, Institute of Banking Personnel Selection and Foreign Exchange Dealers’ Association of India may be excluded from the limit of 1%.

A Bank may undertake CSR activities itself or a) through a company established under section 8 ( a non-profit company),  of the companies Act, 2013 or a registered public trust or a registered society, registered under section 12 A & 80 G of the Income tax Act, 1961 and having an established track record of at least three years in undertaking similar activities, b) through a company established under section 8 of the Companies Act, 2013 or a registered society established by the central or state government, c) any entity established under an act of parliament or a state legislature.

CSR donations through eligible recipient organisations: Discretion to be exercised judiciously to ensure that donations are given for worthy causes and to the institutions /NGOs having a long unblemished record of public service. It should be ensured that donations are invariably made directly to institutions/NGOs without any involvement of agents/middlemen/consultants. Request for donations from institutions having caste, religious, communal bias and or political overtones should not be considered. Donations to Government departments or organisations/institutions funded exclusively by the Government should not be considered. Donations or institutions which are having their own funds or who can raise funds,should be avoided for giving donations. In short, donations should be given for genuine needs and to the genuine institutions who are really having in need of funds. Preferably donations should be given in the form of kinds instead of cash.

CSR donations for eligible activities: CSR donations can be given for the following eligible activities as per SBI Corporate Social Responsibility Policy:

1)Healthcare and sanitation: Eradicating hunger, poverty and malnutrition and promoting healthcare including preventive healthcare and sanitation including contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water,

2)Education: Promoting education including special education and employment enhancing vocational skills especially among children, women, elderly and differently abled persons and working on  livelihood enhancement projects.

3)Empowerment of women andSenior Citizens: Promoting gender equality, empowering women, setting up Homes & Hostels for women & orphans, setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups, 4)Environment: Ensuring environmental sustainability, ecological balance, protection of flora & fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air & water including contribution to the clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga, 5)Protection of National Heritage: Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art, setting up of public libraries, promotion and development of traditional art and handicrafts, 6) war veterans: Measures for the benefit of armed forces of veterans, war widows and their dependants, 7) Sports: Training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports, 8) Contribution to various funds: Contribution to any fund set up by the Central Government for socio-economic development and relief and welfare of the schedule castes, tribes, other backward classes, minorities and women, contribution to Prime Minister’s Citizen Assistance and Relief in Emergency Situation Fund (PMCARES),

9) Other Miscellaneous Areas: Contribution to incubators funded by Central Government or State Government or any agency or public sector undertaking of Central Government or State Government. Contribution to Public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous bodies engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs), 10) Rural Development: Assisting in Rural Development Projects,

11) Slum Area Development: Slum area development (Slum area shall mean any area declared by the Central or State Government or any other competent authority under any law in force), 12) Disaster management including relief, rehabilitation and reconstruction activities: Covid-19 related relief activities were considered eligible CSR expenditures. State Bank and other banks  publish CSR activities and expenditures in the Annual Reports and websites.

Corporate Social Responsibility (CSR) activities of Future Generali: Future Generali India Insurance Company Limited is a joint venture between India’s leading retailer ‘Future Group’ and Italy based Insurance major ‘Generali’ for providing general insurance services in India. The company believes in the welfare of the people and feels a powerful sense of responsibility towards the interests of the community. The company aims to fulfill its responsibility towards the community and planet by investing in projects encompassing Healthcare, Education, Insurance Awareness and Sustainability. The companyis committed to undertaking its business in a socially and economically responsible manner thereby contributing to the socio-economic development of the country. The company understands the role it plays in society and is committed to leave behind its ethical footprints. The company embarks on its sustainability efforts and takes pride in being part of a socially responsible corporate.

Recent CSR activity of Citizens’ Urban Co-operative Bank, Gangtok in collaboration with Future Generali India Insurance Company Limited:

Citizens’ Urban Co-operative Bank Ltd, Gangtok in association with insurance giant Future Generali India Insurance organised a free medical camp at Rangpo Bazar area of Sikkim on 7^th of March, 2025. The medical camp was inaugurated by Rangpo Nagar Panchyat president Mr. Sanjeev Khati and Vice-president Smti Radha Pradhan in the presence of Citizens’ Urban Bank Co-operative Bank (CUCB)Vice-Chairman Sri Suresh Kumar Lama, Managing Director Partha Pratim Sen, General Manager Sri Rajiv Pradhan and Rangpo Branch Manager Sri Nischal Roka, Anjuman Islamia Chairman Tanvir Ahmed and members of the Lotus Self-Help Group and others.

The camp provided free medical check-up to around 150 patients including downtrodden people from the region with doctors from Central Referral Hospital, Sikkim Manipal University, Sikkim offering consultations and diagnostic services including ECG, Eye check-up, diabetes test, general health check-up etc. Speaking on the occasion, Vice Chairman of Citizens’ Bank Shri Suresh Kumar Lama said that the Bank is always in the forefront to help people in the society through various CSR activities and expressed his gratitude to the team of doctors, representatives from Future Generali India Insurance, Citizens’ Bank’s employees and volunteers for their dedicated social service. 

It may be noted that this initiative aligns with the International Year of Co-operatives (IYC), 2025 and golden jubilee year of Sikkim’s statehood, reinforcing the commitment of Citizens’ Urban Co-operative Bank Ltd towards community welfare and health care accessibility, Mr. Lama said.

Future Generali India Insurance (FGIL) Regional In charge (Marketing) Mr. Ramkrishna Chanak, who came from Kolkata with his team, said that most of the people residing in rural areas do not have access to primary and preventive healthcare services and demand urgent attention. At FGIL, we are focusing on providing healthcare services to the under privileged and contributing effectively towards improving the health conditions of an individual and society at large. He also said that more such programs will be held in the next financial year in Sikkim.

Conclusion: CSR is no longer a nice-to-have concept now; it is actually a need-to-have concept at present. Besides, CSR gives lots of benefits to the organizations.  1)CSR increases employee engagement. Giving back to the community is a virtuous circle in which engaged employees are enriched by volunteering opportunities that further engage and encourage them. 2) CSR increases revenue. According to a research firm, Companies investing in social purpose have 6% higher market value and generate 20% more revenue than companies that do not invest in social purpose. 3) CSR increases brand value of the organization in the market which in turn gives more revenue and helps employee retention in an organization.  So, CSR is not to be seen as only a statutory obligation, but it is to be considered as a significant tool to enhance business sustainability on a long term basis.