Capstone Project Report

on
“Perception of Investor Towards Stock Market”
“The Impact of Npa on the Net Profit of SBI And Axis Bank”
“A Study on CSR activity done by Indian Commercial Banks”
Submitted to
Durgadevi Saraf Institute of Management Studies
In the partial fulfilment for the award of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
(2022 – 2024)

Submitted By
Miss. Sayali Mane
(20221046)

Under the guidance of

Prof. Sumana Chaudhuri
(Faculty Mentor)

RSET Campus, Swami Vivekananda Rd, Mandlik Nagar, Sunder Nagar, Malad West, Mumbai,
Maharashtra 400064
 Specialization Project
on
“Perception of Investor Towards Stock Market”

Submitted to
Durgadevi Saraf Institute of Management Studies
In the partial fulfilment for the award of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
(2022 – 2024)

Submitted By
Miss. Sayali Mane
(20221046)

Under the guidance of

Prof. Sumana Chaudhari
(Faculty Mentor)

RSET Campus, Swami Vivekananda Rd, Mandlik Nagar, Sunder Nagar, Malad West, Mumbai,
Maharashtra 400064
 CERTIFICATE

This is to certify that Miss. Sayali Mane has worked and duly completed his Project Work in
partial fulfilment of the Master's Degree in Management Studies recognized by the University of
Mumbai for the academic year 2022 -24 and his Project entitled.

“Perception of Investor Towards Stock Market”

Under my supervision.

I further certify that the entire work has been done by the Learner under my guidance and that no
part of it was submitted previously for any degree/diploma of any university.

It is his own work and facts reported by his personal finding and investigations.

Name of the Mentor: Prof. Sumana Chaudhari.

Date: (Signature of Mentor)
 DECLARATION

I the undersigned Miss. Sayali Mane hereby declare that the work embodied in this project work titled
“Perception of Investor Towards Stock Market” forms my contribution to the research work carried out
under the guidance of Mr. Sumana Chaudhari (Asst. Professor) is a result of my research work and had
not been previously submitted to any degree/diploma to this or any other Institute.

Wherever references have been made to precious works of others, it has been clearly indicated as such
and included in the bibliography.

I, hereby further declare that all information in this document has been obtained and presented in
accordance with academic rules and ethical conduct.

Miss. Sayali Mane

Certified by

Mrs. Sumana Chaudhari

(Asst. Professor)
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.

I take this opportunity to thank Durgadevi Saraf Institute of Management Studies for giving
me a chance to do this project.

I would like to thank my Director, Dr. C. Babu for providing the necessary facilities required
for the completion of this project.

I would also like to express my sincere gratitude towards my Faculty Mentor, Asst. Sumana
Chaudhari. Whose guidance and care made the project successful.

I would like to thank our College Library for providing various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
 EXECUTIVE SUMMARY of Specialization Project

Stock market has become an attractive investment avenue for most of the investors, and stock
market has enormously grown over the years. But lot of investors fear to invest in stock market due
to the volatility often seen in share market. The risk often undertaken by the investors in share market
huge and there exist fear among the investors of losing their hard-earned income. Even though the
return, the investors receive in stock market is high, the investors need to bear an equal amount of
risk as well as moreover the investors must sure of which investment avenue, they are selecting to
ensure high returns. The research is being conducted to know the whereabouts of investment
psychology of an individual also to understand the different personal factors affecting their
investment decision and the different factors influencing various categories of investment. The was
also conducted to know the source of investors awareness regarding stock market. Questionnaire and
personal interview of the investors was conducted to understand the view-point, behavio and
attitude of the investors as well as their level of awareness. It was that there are many factors
influencing the investor's decision such as risk, return, tax benefits, maturity period, capital
appreciation and safety of principal. But majority of the investors believed returns is the most
important factor influencing their decision. The highest number of investors preferred to invest in
stocks, when compared to mutual funds and derivatives. Some have different myths about stock
market whereas some are happy with traditional mode of investments. Also, some people have low
risk tolerance level. Thus, study attempted to learn the behaviour of the investors towards stock
market.
More awareness should be created to about different investments options either through campaigns
or through digital platforms like Youtube, Facebook, etc. this is the way to make them participate in
Capital Market, or else every field should have financial guidance programme to make them more
aware about the situation as inflation is on the rise people should invest in this market to grow their
money to eradicate poverty and increase standard of living of people for better development of the
country.
 INDEX

SR.NO CONTENT PAGE NO.

1 INTRODUCTION 1

2 OBJECTIVES 7

3 SCOPE 8

4 RESEARCH METHODOLOGY 9

5 OVERVIEW OF INDIAN CAPITAL MARKET 12

6 CHARACTERISTIC 16

7 INVESTMENT PROCESS 18

8 TYPES OF MUTUAL FUND 25

9 REVIEW OF LITERATURE 36

10 DATA ANALYSIS 40

11 FINDINGS 57

12 CONCLUSION 58

13 RECOMMENDATION 59

14 BIBLIOGRAPHY 60
 INDIAN STOCK MARKET

INTRODUCTION

Indian Stock Markets is one of the oldest in Asia. Its history dates back to nearly 200 years ago. The
earliest records of security dealings in India are meager and obscure. The East India Company was
the dominant institution in those days and business in its loan securities used to be transacted towards
the close of the eighteenth century.

By I 830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay.
Though the trading list was broader in 1 839, there were only half a dozen brokers recognized by
banks and merchants during 1840 and 1850. The I850's witnessed a rapid development of commercial
enterprise and brokerage business attracted many men into the field and by 1860 the number of
brokers increased into 60. ln 1 860-61 the American Civil War broke out and cotton supply from
United States to Europe was stopped; thus, the 'Share Mania' in India began. The number of brokers
increased to about 200 to 250.

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a
place in a street (now appropriately called as Dalal Street) where they would conveniently assemble
and transact business. In 1 887, they formally established in Bombay, the "Native Share and Stock
Brokers' Association'', which is alternatively known as "The Stock Exchange". In 1895, the Stock
Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock
Exchange at Bombay was consolidated.

The Indian stock market has been assigned an important place in financing the Indian
corporate sector. The principal functions of the stock markets are:
 Enabling mobilizing resources for investment directly from the investors.
 Providing liquidity for the investors and monitoring.
 Disciplining company management.

1
The two major stock exchanges in India are:
 National Stock Exchange (NSE)
 Bombay Stock Exchange (BSE).

National Stock Exchange

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market
trading system on par with the international standards.
The National Stock Exchange was incorporated in 1992 by Industrial Development
Bank of India, Industrial Credit and Investment Corporation of India, Industrial
Finance Corporation of India, all Insurance Corporations, selected commercial banks
and others.
The Nation al Stock Exchange (NSE) is India's leading stock exchange covering
various cities and towns across the country. NSE was set up by leading institutions to
provide a modern, fully automated screen-based trading system with national reach.
The Exchange has brought about unparalleled transparency, speed & efficiency, safety
and mark et integrity. It has set up facilities that se1ve as a model for the securities
industry in terms of systems, practices and procedures.

Trading at NSE can be classified under two broad categories:

 Wholesale debt market
 Capital market

Wholesale debt market: It’s similar to money market operations -Institutions and corporate
bodies enter into high value transactions in financial instruments such as government securities
treasury bills, public sector unit bonds, commercial paper, certificate of deposits, etc.

2
Capital market: A market where debt or equity securities are traded.

There are two kinds of players in NSE:

 Trading members
 Participants

Recognized members of NSE are called trading members who trade on behalf of themselves and
their clients. Participants include trading members and large players like banks who take direct
settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism
which adopts the principle of an order-driven market. Trading members can stay at
their offices and execute the trading, since they are linked through a communication
network.

The prices at which the buyer and seller are willing to transact will appear on the
screen. When the prices match the transaction will be completed and a confirmation slip
will be printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractice 's prevailing in the
traditional trading mechanism can be done away with greater operational efficiency and
informational transparency in the stock market operations, with the support of total
computerized network.

3
NSE NIFTY:

S&P CNX Nifty is a well-diversified 5O stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios,
index based derivatives and index funds.

NSE came to be owned and managed by India Index Services and Products Ltd. (USL),
which is a joint venture between NSE and CRISI L. IISL is India's first specialized
company focused upon the index as a core product. IISL have a consulting and
licensing agreement with Standard & Poor's (S&P), who are world leaders in index
services. CNX stands for CRISIL NSE Indices.

CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE
and CRISlL. Thus, 'C' Stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index.
The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.

4
Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established as "The
Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to
obtain permanent recognition in 1956 from the Government of India under the Securities Contracts
(Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role in the development of the
Indian capital market is widely recognized and its index, SESEX, is tracked worldwide.

5
SENSEX

The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently
became the barometer of the Indian stock market.

SENSEX is not only scientifically designed but also based on globally accepted construction and
review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks
representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-
79 and the base value is 100. The index is widely reported in both domestic and international markets
through print as well as electronic media.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the
Indian stock market. As the oldest index in the country, it provides the time series data over a fairly
long period of time. Small wonder, the SENSEX has over the years become one of the most
prominent brands in the country.

The SENSEX captured all these events in the most judicial manner. One can identify the booms and
busts of the Indian stock market through SENSEX.

The launch of the SENSEX in 1986 was later followed up in January 1989 by
introduction of BSE National index (base 1983-84). It comprised of 100 stock listed at
five major stock exchanges.

The values of all the BSE indices are updated ever 15 seconds during the market hours
and displayed through the BOLT system, BSE website and news wire agencies.

All BSE reviewed periodically by the “index” of the exchange.

6
 OBJECTIVES OF THE STUDY

1. To understand in depth about different investment avenues available in India.

2. To examine the regulation and procedures of stock market.

3. To know the awareness about the different avenues among the investors.

4. To understand the type of investment they would prefer.

5. To give recommendations to the investors that where they should invest.

6. To understand financial literacy in the country.

7. To know the satisfaction level of the investors regarding return of different investment
avenues

7
 SCOPE OF THE STUDY

Stock market has been more about speculation and inefficiencies, which are stranded on the
rationality of the investor. Traditional finance theory is based on the two assumptions. Firstly,
investors make rational decisions, and secondly investors are unbiased in their predictions about
future returns of the stock. However according to financial economist, the long-held assumptions of
traditional finance theory are wrong and that the investors can be irrational and make predictable
errors about the return on investment on their investments.

The analysis which can be drawn from this study is an attempt to know the profile of the
investor and know the characteristics of the investors to know their preference with
respect to their investments. The study also tries to unravel the influence of demographic
factors like age on risk tolerance level of the investor.

This analysis will throw light on various investment avenues available in India that will
help in many ways. The expectations of different types of investors regarding particular
service requirements can be identified.

The common problem areas faced by the investors can be understood.

This study will help in gaining a better understanding of what an investor looks for in an
investment option.

8
 RESEARCH METHODOLOGY

FORMATION OF THE PROBLEM

The analysis would be focusing on the information from the investors about their knowledge,
perception, and behaviour on different financial products.
 The total number of financial instruments are so large that it needs a lot of resources to
analyze them all. There are various companies providing these financial instruments to the
public. Handling and analyzing such a varied and diversified data needs a lot of time and
resources.

 Gap in other research conducted.

 The lack of knowledge of customers about the financial instruments can be major limitation.

SAMPLING TECHNIQUE

Initially, a rough draft will be prepared keeping in mind the objective of the research. The final
questionnaire will be arrived at only after certain important changes are incorporated. Convenience
sampling technique will be used for collecting the data from different investors. The investors are
selected by the convenience sampling method. The selection of units from the population based on
their easy availability and accessibility to the researcher is know n as convenience sampling.
Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating
ideas and hypothesis.

SAMPLING UNIT:

The respondents who will be asked to fill out the questionnaires are the sampling units. These
Comprise of employees of MNC's, government-employees, homemakers, self-employed,
professionals and other investors.

9
SAMPLING SIZE:

The sample size will be restricted to only 50, which comprised of mainly people from different
regions of Mumbai, Maharashtra due to time constraints.

SAMPLING AREA:

The area of the research is Mumbai, Maharashtra.

PRIMARY DATA:

Information is collected by conducting a survey by distributing a questionnaire to 50 (due to covid

scenario and time constraints) investors in Mumbai, Maharashtra. These 50 investors are of different
age group, different occupation, different income levels.

SECONDARY DATA:

This data is collected by using the following means.

 Articles in Financial Newspapers ('Economic times' and 'Business Standard').

 Investment Magazines, Business Magazines, Financial chronicles.
 Expert's opinion published in various print media.
 Books written by various Foreign and Indian authors on Investments.
 Data available on internet through various websites.

10
RESEARCH LIMITATIONS:

 Only 50 respondents have been considered for this study.

 Some respondents might have furnished the required information from their monetary
memory and also through contempt and hence the collected data might be subject to bias.

 Reluctance of the people to provide complete information about them can affect the
validity of the responses.

 As the analysis is based on primary as well as secondary data, possibility of

unauthorized information cannot be avoided.

 Due to covid restriction the data collected is not sufficient as there was no physical
human connection the data collected will lack accuracy.

11
OVERVIEW OF INDIAN CAPITAL MARKET

OVERVIEW OF THE REGULATORY FRAMEWORK OF THE CAPITAL

MARKET IN INDIA

India has a financial system that is regulated by independent regulators in the sectors of banking,
insurance, capital markets and various service sectors. The Indian Financial system is regulated by
two governing agencies under the Ministry of Finance. They are:

1. Reserve Bank of India

The RBI was set up in 1935 and is the central bank of India. It regulates the financial and banking
system. It formulates monetary policies and prescribes exchange control norms.

2. The Securities Exchange Board of India

The Government of India constitutes SEBI on April 12,1988, as a non-statutory body to promote
orderly and healthy development of the securities market and to provide investors protection.

Department Economic Affairs

The capital markets division of the Department of Economic Affairs regulates capital
markets and securities transactions.
The capital markets division has been entrusted with the responsibility of assisting the
government in framing suitable policies for the orderly growth and development of the
securities markets with the (SEBI).
The principal aspects that are dealt with the capital market division are:
-Policy matters relating to the securities market
-Policy matters relating to the regulation and development and investor protection of the
securities market and the debt market.
-Organizational and operational matters relating to SEBI

12
The Capital Market is governed by:

-Securities Contract (Regulation) Act, 1956

-Securities Contract (Regulation) Rules,1957
-SEBI Act, 1992
-Companies Act 1956
-SEBI (Stockbrokers and Sub Brokers) Rules, 1992
-Exchange Byelaws rules & Regulations

Self-regulating Role of the Exchange

The exchange functions as a Self-Regulatory Organization with the parameters laid down by the
SCRA, SEBI Act, SEBI Guidelines and Rules, Bye-laws and Regulations of the exchange. The
Governing Board discharges these functions. The Executive Director has all the powers of the
governing board except discharging a member indefinitely or declaring him a defaulter or expelling
him. The Executive Director takes decisions in the areas like surveillance, inspection, investigation,
etc.in an objective manner as per the parameters laid down by the governing board or the statutory
committees like the Disciplinary Action Committee.

3. Techniques and Instruments for Trading

The various techniques that are available in the hands of a client are:
1. Delivery
2. Intraday
3. Future
4. Forwards
5. Options
6. Swaps

13
Basic Requirement for doing Trading.

Trading requires Opening a Demat account. Demat refers to a Dematerialized account.

You need to open a Demat account if you want to buy or sell stocks. So, it is just like a bank
account where actual money is replaced by shares. We need to approach the Depository Participants
(DP, they are like bank branches), to open Demat account.
A depository is a place where the stocks of investors are held in electronic form. The depository has
agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details of all account held
is like a depository. And the DPs are the branches that cater to individuals.
There are only two depositories in India: -
 The National Securities Depository Ltd (NSDL) and the
 Central Depository Services Ltd (CDSL)

Capital Market Participants

-Banks
-Exchanges
-Clearing Corporations
-Brokers
-Custodians
-Depositories
-Investors
-Merchant Bankers
Types of Investors
-Institutional Investors – MFs/FI/FIIs/Banks
-Retail Investors
-Arbitragers/Speculators
-Hedgers
-Day traders/Jobbers

14
Combination of Futures and Option

Hedging means, minimizing the risk i.e., minimizing the losses. Under index futures and index
options investor can minimize his losses. Hedging does not remove losses but removes unwanted
exposure, i.e. unnecessary risk. One should not enter a hedging strategy hoping to make excess
profits: all it can do is reduce the risk.

PARAMETERS OF INVESTMENT

The nature of investment differs from individual to individua l and is unique to each one because it
depends on various parameters like future financial goals, the present & the future income model,
capacity to bear the risk, the present requirements and lot more. As an investor progresses on his/her
life stage and as his/her financial goals change, so does the unique investor profile.
Economic development of a country depends upon its investment. The emerging
economic environment of competitive markets signifying customer's sovereignty has profound
implications for their savings and investment. Investment means person's commitments towards his
future.

INVESTMENT

The word "investment" can be defined in many ways according to different theories and principles.
It is a term that can be used in a number of contexts. However, the different meanings of "investment"
are more alike than dissimilar.

Generally, investment is the application of money for earning more money. Investment also means
savings or savings made through delayed consumption.

According to economics, investment is the utilization of resources in order to increase income or

production output in the future.

15
 An amount deposited into a bank or macl1inery that is purchased in anticipation of earning income
in the long run are both examples of investments. Although there is a general broad definition to the
term investment, it carries slightly different meanings to different industrial sectors.

According to economists, investment refers to any physical or tangible asset, for example, a building
or machinery and equipment.
On the other hand, finance professionals define an investment as money utilized for buying financial
assets, for example stocks, bonds, bullion, real properties, and precious items.

According to finance, the practice of investment refers to the buying of a financial product or any
valued item with an anticipation that positive returns will be received in the future.

The most important feature of financial investments is that they carry high market liquidity. The
method used for evaluating the value of a financial investment is known as valuation. According to
business theories, investment is that activity in which a manufacturer buys a physical asset, for
example, stock or production equipment, in expectation that this will help the business to prosper in
the long run.

Characteristics of an investment decision:

It involves the commitment of funds available with you or that you would be getting in the future.
The investment leads to acquisition of a plot, house, or shares and debentures.
The physical or financial assets you have acquired are expected to give certain benefits in the future
periods. The benefits may be in the form of regular revenue over a period of time like interest or
dividend or sales or appreciation after some point of time as normally happens in the case of
investment in land or precious metals.

There is substantive empirical evidence to suggest that equities provide the maximum risk adjusted
returns over the long term. In an attempt to take full advantage of this phenomenon, investments would

16
be made with a long term perspective.

-Investments confer proportionate ownership

The approach to valuing a company is similar to making an investment in a business. Therefore, there
is a need to have a comprehensive understanding of how the business operates.

-Maintain a margin of safety

The benchmark for determining relative attractiveness of stocks would be the intrinsic value of the
business. The investment Manager would endeavor to purchase stocks that represent a discount to
this value, in an effort to preserve capital and generate superior growth.

-Maintain a balanced outlook on the market

The investment portfolio would be regularly monitored to understand the impact of changes in
business and economic trend as well as investor sentiment. While short term market volatility would
affect valuations of the portfolio, this is not expected to influence the decision to own fundamentally
strong companies.

-Disciplined approach to selling

The decision to sell a holding would be based on either the anticipated price appreciation being
achieved or being no longer possible due to a change in fundamental factors affecting the company
or the market in which it competes, or due to the availability of an alternative that, in the view of the
Investment Manager, offers superior returns.

In order to implement the investment approach effectively, it would be important to periodically meet
the management face to face. This would provide an understanding of their broad vision and
commitment to the long-term business objectives. These meetings would also be useful in assess in

17
INVESTMENT PROCESS

Framing of Investment Policy

Valuation

Portfolio Construction

A particular investor normally determines the investment types after having formulated the
investment decision, which is termed as capital budgeting in financial language.

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Investment Avenues

Various Short-term financial options available for investment.

Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with banks
may be considered as short-term financial investment options.

SAVINGS BANK ACCOUNT

It is often the first banking product people use, which offers low interest (4%-5% p.a.), making them
only marginally better than fixed deposits.
Now-a-days zero balance savings Account facility can be availed, it does not have a mandatory
minimum average balance. This is to encourage the habit of saving.
Various Long-term financial options available for investment.

POST OFFICE SAVINGS

Post Office Monthly Income Scheme is a low risk saving instrument, which can be availed through
any post office. It provides an interest rate of 8% per annum, which is paid monthly.
Minimum amount, which can be invested, is Rs. 1,000/- and additional investment in multiples of 1
,000/-. Maximum amount is Rs. 3, 00,000/- (if Single) or Rs. 6,00,000/- (if held jointly) during a
year. It has a maturity period of 6 years.
A bonus of 10% is paid at the time of maturity. Premature withdrawal is permitted if deposit is more
than one year old. A deduction of 5% is levied from the principal amount if withdrawn prematurely;
the 10% bonus is also denied.
There are various investment schemes available in post offices, like KVP (Kisan Vikas Patra), MIS
(Monthly Income Scheme) and various others. All these schemes are completely risk-free, and you
do not need to have large sum of money to start investing in these post office schemes. Some schemes
offer Tax-saving benefits and some gives tax-free returns. So you need to find out some schemes as
per your requirements.
instruments. It is your hard-earned money, so better play safe and invests some part in secure funds

19
PUBLIC PROVIDENT FUND

A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum
compounded annually. A PPF account can be opened through a nationalized bank at anytime during
the year and is open all through the year for depositing money. Tax benefits can be availed for the
amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the
seventh financial year of the date of opening of the account and the amount of withdrawal will be
limited to 50% of the balance at credit at the end of the 4th year immediately preceding the year in
which the amount is withdrawn or at the end of the preceding year whichever is lower the amount of
loan if any

GOVERNMENT SECURITIES

Government securities are supreme securities which are issued by the Reserve Bank of India on
behalf of Government of India in lieu of the Central Government’s market borrowing program.
The term Government Securities includes:
 Central Government Securities
 State Government Securities
 Treasury bills

The Central Government borrows funds to finance its ‘fiscal deficit’. The market borrowing
of the Central Government is increased through the issue of dated securities and 364 days
treasury bills either by auction or by flotation of loans. In addition to the above, treasury bills
of 91 days are issued for managing the temporary cash mismatches of the government. These
do no form part of the borrowing program of the Central Government.

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COMPANY FIXED DEPOSITS

These are short-term (six months) to medium-term (three to five years) borrowings by companies at
a fixed rate of interest which is payable monthly, quarterly, semiannually or annually.
They can also be cumulative fixed deposits where the entire principal along with the interest is paid
at the end of the loan period. The rate of interest varies between 6 -9% per annum for company FDs.
The interest received is after deduction of taxes.

21
NATIONAL SAVINGS CERTIFICATE (NSC)

National Savings Certificate (NSC) is a fixed interest, long term instrument for investment. NSCs
are issued by the Department of Post, Government of India. Since they are backed by the Government
of India, NSCs are a practically risk-free avenue of investment. They can be bought from authorized
post offices. NSCs have a maturity of 6 years. They offer a rate of return of 8% per annum. This
interest is calculated every six months and is merged with the principal. That is, the interest is re-
invested, and is paid along with the principal at the time of maturity. For every Rs. I00 invested, you
receive Rs. 160.10 at maturity.
NSCs qualify for investment under Section SOC of the Income Tax Act (IT Act). Even the interest
earned every year qualifies under Sec 80C. This means that investments in NSCs and the interest
earned on it every year, up to Rs. l Lakh, ai-e deductible from the income of the investor. There is no
tax deducted at source (TDS).

Features of NSC
 Minimum investment Rs. 5001- No maximum limit.
 Rate of interest 8% compounded half yearly.
 Rs. 1000/- grow to Rs. 1601/- in six years.
 Two adults, Individua ls, and minor through guardian can purchase.
 Companies, Trusts, Societies and any other Institutions not eligible to purchase.
 Non-resident Indian/HUF cannot purchase.
 No pre-mature encashment.

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BONDS

It is a fixed income (debt) instrument issued for a period of more than one year with the purpose of
raising capital.
The central or state government, corporations and similar institutions sell bonds. A bond is generally
a promise to repay the principal along with a fixed rate of interest on a specified date, called the
Maturity Date.

MUTUAL FUNDS

These arc funds operated by an investment company which raises money from the public and invests
in a group of assets (shares, debentures etc.), in accordance with a stated set of objectives. It is a
substitute for those who are unable to invest directly in equities or debt because of resource, time or
knowledge constraints. Benefits include professional money management, buying in small amounts
and diversification. Mutual fund units are issued and redeemed by the Fund Management Company
based on the fund's net asset value (NAV), which is determined at the end of each trading session.
NAV is calculated as the value of all the shares held by the fund, minus expenses, divided by the
number of units issued.

EQUITY INVESTMENTS

Equity investment refers to the trading of stocks and bonds in the share market. It is also referred to
as the acquisition of equity or ownership participation in the company. An equity investment is
typically an ownership investment, where the investor owns an asset of the company. ln this kind of
investment there is always a risk of the investor not earning a specific amount of money. Equity
investment can also be termed as payment to a firm in return for partial ownership of that firm. An
equity investor, in some cases, may assume some management control of the firm and may also share
in future profits.
ln order to understand equity investment properly, it is necessary to see the technical and fundamental
analysis. The technical analysis of equity investment is primarily the study of price history of the

23
available information that is relevant to the share market in order to predict the future trends of the
stock market. The annual reports, industry data and study of the economic and financial environment
are also included in the fundamental information of equity investment.

MUTUAL FUNDS AND SEGREGATED FUNDS

Mutual funds or other forms of pooled investment measures are equities held by private individuals
but managed and governed by prominent management firms. These types of financial holdings allow
individual investors to diversify their holdings and avoid potential loss.
Segregated funds, on the other hand, are used by large private investors who wish to hold their shares
directly rather than in a mutual fund.
The prime advantage in investing in a pooled fund is that it gives the individual access to professional
advice through the fund manager. The major disadvantages involved are that the investors must pay
a fee to the fund managers and that the diversification of the fund may not be appropriate for all
investors. In those cases, the investors may over-diversify by holding several funds, thus reducing
the risk.
Mutual funds are supposed to be the best mode of investment in the capital market since they are
very cost beneficial and simple, and do not require an investor to figure out which securities to invest
into. A mutual fund could simply be described as a financial medium used by a group of investors to
increase their money with a predetermined investment. The responsibility for investing the pooled
money into specific investment channels lies with the fund manager of said mutual fund.
Therefore, investment in a mutual fund means that the investor has bought the shares of the mutual
fund and has become a shareholder of that fund. Diversification of investment Investors are able to
purchase securities with much lower trading costs by pooling money together in a mutual fund rather
than try to do it on their own.
However, the biggest advantage that mutual funds offer is diversification which allows the investor
to spread out his money across a wide spectrum of investments. Therefore, when one investment is
not doing well, another may be doing taking off, thereby balancing the risk to profit ratio and
considerably covering the overall investment.

24
The best form of diversification is to invest in multiple securities rather than in just one security.
Mutual funds are set up with the precise objective of investing in multiple securities that can run into
hundreds. It could take weeks for an investor to investigate on this kind of scale, but with investment
in mutual funds all this could be done in a matter of hours.

Types of Mutual Funds (Mode of Investment)

 Mutual Fund Types

 American Mutual Funds
 BMO Mutual Funds
 Canadian Mutual Funds
 Fidelity Mutual Funds
 Investment Funds
 Top Mutual Funds
 Dynamic Mutual Fund
 Janus Mutual Funds
 Vanguard Mutual Funds

25
DEBENTURES

In financial context, Debentures are Debt Instruments issued for a long term by governments and big
institutions for rising funds. The Debenture has some resemblances to bonds but the securitization
terms and conditions are different for Debentures compared to a bond.
A Debenture is commonly considered as insecure because there is no pledge or lien on particular
assets. Nevertheless, a Debenture is secured by AU the assets which are otherwise not pledged.
If there is a bankruptcy, Debenture holders will be counted as general creditors.

TYPES OF DEBENTURES
 Convertible Debenture
 Non-Convertible Debenture
 Participative Debenture
 Non- Participative Debenture
 Redeemable Debenture
 Irredeemable Debenture

26
BOND MARKET

The bond market is a financial market that acts as a platform for the buying and selling of debt
securities. The bond market is a part of the capital market serving platform to collect fund for the
public sector companies, governments, and corporations. There are a number of bond indices that
reflect the performance of a bond market.
The bond market can also called the debt market, credit market, or fixed income market. The size of
the current international bond market is estimated to be $45 trillion. The major bond market
participants are: governments, institutional investors, traders, and individual investors. According to
the specifications given by the Bond Market Association, there are five types of bond markets.
They are:
 Corporate Bond Market
 Municipal Bond Market
 Government and Agency Bond Market

 Funding Bond Market

27
SHARE MARKET INVESTMENT
Shares arc purchased and sold on the primary and secondary share markets. To invest in the share
market, investors acquire a call option, which is the right to buy a share, or a put option, which is the
right to sell a share. In general, investors buy put options if they expect prices to rise, and call opt
ions if they expect prices to fall. The value of a derivative depends on the value of the underlying
asset. The various classifications of derivatives relevant to share market investment are:

SWAP
 Futures Contract
 Forward Contract
 Option Contract

A forward contract is an agreement between two parties to buy or sell a product in the future at a
price that has already been determined. This mutual agreement fulfils both the buyer's and seller's
profit motives, and it eliminates the uncertainties and hazards of future price variations. A future
contract differs from a forward contract in that the former requires the existence of a third party,
whilst the latter only requires a notional commitment to trade.
Before a share is chosen for investment, a technical analysis of the share is performed. The price and
volume of a share over a period of time arc tracked and then a business plan is constructed. A
fundamental analysis involves a close study of the company associated with constructed. A
fundamental analysis involves a close study of the company associated with the share, and its
performance over a period of time are tracked and then a business plan is constructed. The
fundamental analysis is important for the share market investor.

The price levels of a traded share are as follows:

Opening Price: This is the price at which the market opens. In other words, it is the
price of the first transaction.
Closing Price: This is the price at the time of closing of the market or the price of the
last trade.
Intra-Day High: This denotes the maximum price at which the share was traded in
the day.

28
DEBT INVESTMENTS

Debt securities (in the form of non-convertible debentures, bonds, secured premium notes, zero
interest bonds, deep discount bonds, floating rate bond I notes, securitised debt, pass through
certificates, asset backed securities, mortgage backed securities and any other domestic fixed income
securities including structured obligations etc.) include, but are not limited to:

 Debt obligations of the Government of lndia, State and local Governments,

Government Agencies and statutory bodies (which may or may not carry a
state I central government guarantee),

 Securities that have been guaranteed by Government of India and State

Governments,
 Securities issued by Corporate Entities (Public I Private sector undertakings),

 Securities issued by Public / Private sector banks and development financial

institutions.

Money Market Instruments Include

 Commercial Paper
 Commercial Bills
 Treasury Bills
 Government Securities having an unexpired period upto 1 year
 Call or notice money
 Certificate of Deposits

29
Demand for gold in the Indian Market:

India has the highest demand for gold in the world and more than 90% of this gold is acquired in the
form of jewellery. Following are the factors influencing the demand for gold. The movement of gold
prices is one of the important variables determining demand for gold. The increase in the irrigation,
technological change in agriculture (through mechanization and high yielding varieties), have
generated large marketable surplus and a highly skewed rural income distribution is another factors
contributing to additional demand for gold.
Supply of Gold: The main economic effects that arise from the changes in the supply of gold can be
seen against the quantum of gold that is already in existence in the economy. The supply of gold is
not up to the requirements as the production of gold is also coming down and demand for gold is
going up very sharply.

GOLD

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as
a hedge or harbor against economic, political, or social fiat currency crises (including investment
market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The
gold market is subject to speculation as are other markets, especially through the use of futures
contracts and derivatives. The history of the gold standard, the role of gold reserves in central
banking, gold’s low correlation with other commodity prices, and its pricing in relation to fiat
currencies during the 2007-2012 global financial crisis, suggest that gold behaves more like a
currency than a commodity. Gold has been used throughout history as money and has been a relative
standard for currency equivalents specific to economic regions or countries, until recent times. Many
European countries implemented gold standards in the latter part of the 19th century until these were
temporarily suspended in the financial crises involving World War I.

30
COMMODITY TRADING
The terms "commodities" a nd "futures" are often used to depict commodity trading or futures trading.
It is similar to the way "stocks" and "equities" are used when investors talk about the stock market.
Commodities are the actual physical goods like gold, crude oil, corn,soybeans, etc. Futures are
contracts of commodities that are traded at a commodity exchange like MCX. Apart from numerous
regional exchanges, India has three nation al commodity exchanges namely, Multi Commodity
Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX) and

National Multi Commodity Exchange (NMCE). Forward Markets Commission (FMC) is the
regulatory body of commodity market.
It is one of a few investment areas where an individual with limited capital can make extraordinary
profits in a relatively short period of time. Many people have become very rich by investing in
commodity markets. Commodity trading has a bad name as being too risky for the average individual.
The fact is that commodity trading is only as risky as you want to make it Those who treat trading as
a get-rich-quick.
The only risky as you want to make it Those who treat trading as a get-rich-quick scheme are likely
to lose because they have to take big risks. If you act carefully, treat your trading like a business and
are willing to settle for a reasonable return, the possibility of success is very high. The course of
trading commodities is also known as futures trading. Unlike other kinds of investments, such as
stocks and bonds, when you trade futures, you do not really buy anything or own anything. You are
speculating on the future direction of the price in the commodity you are trading. This is like a bet
on future price direction. The terms "buy " and "sell " merely indicate the direction you expect future
prices will move. If, for example, you were speculating in wheat, you would buy a futures contract
if you thought the price would be going up in the future. You would sell a futures contract if you
thought the price of wheat would go down. For every trade, there is always a buyer and a seller.
Neither person has to own any wheat to participate. Bu t he has to deposit sufficient capital with a
brokerage firm to ensure that he will be able to pay the losses if his trades lose money.

31
FOREX MARKET

Forex trading 1s the immediate trade of one currency and the selling of another. Currencies are trad
ed through an agent or dealer and are traded in pairs. For Example Euro (EUR), US dollar (USD),
British pound (GBP) or Japanese Yen (JPY).
Here you are not buying anything physical; this type of trading is confused. Think of buying a
currency as buying a share of a particular country. When you purchase say Japanese Yen, you are in
effect buying a share in the Japanese financial system, as the price of the currency is a direct reflection
of what the market thinks about the current and future health of the Japanese economy. In common,
the exchange rate of a currency versus other currencies is a reflection of the condition of that country's
financial system compared to the other countries financial system.

Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither
a physical location nor a central exchange. The Forex market is measured an Over- the Counter
(OTC)or Interbank market, due to the fact that the entire market is run electronically within a network
of banks continuously over a 24-hour period.
Until the late l990's only the big guys could play this game. The first requirement was that you could
trade only if you had about ten to fifty million bucks to start with Forex. Forex was initially intended
to be u sed by bankers and large institutions and not by small guys. However, because of the rise of
the Internet, online Forex trading firms are now able to offer trading accounts to 'retail' traders. All
you need to get started is a computer, a high-speed Internet connection, and the information.
The foreign exchange market is exclusive because of the following reasons;

32
  Its trading volumes.
 The tremendous liquidity of the market.
 Its geographical dispersion.
 Its long trading hours.
 The variety of factors that affect exchange rates.
 The low limits of profit compared with other markets of fixed income, but profits
can be high due to very great trading volumes.
 The use of leverage.

Benefits of Forex Trading

 Forex is the largest market.

 No Bulls or Bears
 Forex trading online offers great leverage
 Forex prices are predictable.
 Forex trading online is commission free
 Forex trading online is instant.

33
EMERGING INVESTMENT AVENUES

According to a study undertaken jointly by Merrill Lynch, Cap Gemini, and Ernst & Young, High
Net worth Individuals [HNis] or wealthy investors are proactive in portfolio management, risk
management, consolidation financial assets and use of diversification strategies as actively as large
institutions. HNis are proactive 1n identifying new investment options and take inputs from
professional advisors in volatile market conditions.
HNIs are dynamic in modifying their asset allocation and were among the first investors to
move from equities to fixed income during 2001-2002 period of downturn in equity markets.
They shifted back to equities when they identified favorable market trends.

Investment products and avenues

 Managed products: Managed product service is the most popular investment
 strategy adopted by wealthy investors globally
 Real Estate: Wealthy investors have found this asset class very attractive and have
invested directly in real estate and indirectly through real estate investment trusts.
 Art and passion: Wealthy investors also have their investment in art,
wine, antiques, and collectibles
 Precious Metals: Gold and other precious metals are attractive investment opt ions
to balance the asset allocation

34
HEDGE FUNDS

Over the last 15 years, hedge funds have become increasingly popular with high net worth
individuals, as well as institutional investors. The number of hedge funds has risen by about 20% per
year and the rate of growth in hedge fund assets has been even more rapid. A hedge fund is a private
investment fund, charging a performance fee and is open to only a limited number of investors. These
funds are like mutual funds, which collect money from investors and use the proceeds to buy stocks
and bonds. They can invest on almost any type of opportunity; in any market where in good returns
are expected with low risk levels.

35
 REVIEW OF LITERATURE

Various studies on Investment pattern & Investment behavior of investors had been conducted in
foreign countries. However, in Indian context, the number is quite few. Depending on the various
issues of investment, the review has been discussed in brief as follows:

Charles (1999) has analysed that the astonishing growth in Americans' stock portfolios i n the 1990s
has been a major force behind the growth of consumer spending. This article reviews the relationship
between stock market movements and consumption. Using various econometric techniques and
specifications, the authors find that the propensity to consume out of aggregate household wealth has
exhibited instability over the postwar period. They also show that the dynamic response of
consumption growth to an unexpected change in wealth is extremely sho1t lived, implying that
forecasts of consumption growth one or more quarters ahead are not typically improved by
accounting for changes in existing wealth.

Bhardwaj (2003) has stated the literature on globalization, He found the pervasiveness of the west's
perception of the world affect on Indian investors that affects the trends in investors's choice. They
are hugely affected by the west's views and so changes in Indian trends occur.

Ranganathan (2003), has stated the investor behaviour from the marketing world and financial
economics has brought together to the surface an exciting area for study and research: behavioral
finance. The realization that this is a serious subject is, however, barely dawning. Analysts seem to
treat financial markets as an aggregate of statistical observations, technical and fundamental analysis.
A rich view of research waits this sophisticated understanding of how financial markets are also
affected by the 'financial behavior' of investors. With the reforms of industrial policy, public sector,
financial sector and the many developments in the Indian money market and capital market, mutual
funds that has become an important portal for the small investors, is also influenced by their financial
behavior. Hence, this study has made an attempt to examine the related aspects of the fund selection
behavior of individual investors towards Mutual funds, in the city of Mumbai. From the researchers
and academicians point of view, such a study will help in developing and expanding knowledge in
the field.

36
Rakesh H.M (2014), A Study On Individual Investors Behavior In Stock Markets Of India, IJMSS
(Vol.02, Issue-02), ISSN:2321-1784: The paper proposes to study the behavior of individual
investors in the stock markets and the factors that influence their investment decisions, which include
awareness level, investment duration etc. The research was based on the primary data collected from
the city of Mysore of 150 respondents, being stock market investors. The research paper observes
that only 10 % of the respondents intended to stay invested into the stock market for a period of more
than 5 years. In other words, the research paper observed that people do not want to stay committed
for longer period of time into the stock market despite it giving better returns. The paper analyses
that annual income and annual savings are given importance by investors, but the level of savings are
decided by their level of income. He states that “investors are fully aware about the stock market and
they feel that market movements also affect the investment pattern of investors in the stock market.”
The paper however remains silent on its observation about the uneducated investors who are not
aware of the market conditions, with market trends and the stock price movements. It focuses on the
factors influencing savings and sources of information for decision making. The income level of an
individual, also decide the investment pattern of the investor. The investor’s income level does
determine the type of investment avenues the investor prefers.

Reena Rai (2014), Factors Affecting Investors’ Decision Making Behavior In The Stock Market: An
Analytical Review, Indian Journal of Applied Research (Vol.4, Issue-9), ISSN - 2249-555X: The
paper under study aims to study the factors influencing an investors decision making behavior on
basis of related studies. It states that the various factors that influence include various demographic
factors such as gender, age, education. It is known that men are more overconfident than women.
Age plays a role on the mindset of the individual and the propensity to take risk. It also explains
sometimes, the precautious attitude and conservatism. On the firm level the decision of the investors
depend on capital structure average pricing, political and media exposure, trend analysis, past
performance of company’s stocks, expected dividend and EPS etc. Finally, it concludes that out of
the various factors affecting behavior of investors some factors have a slight role while some majorly
impact investor behavior. The general factors being gender, age, confidence levels, cognitive bias,
risk factors, company’s performance.

37
Bing Zhu (2012), The Effects Of Macroeconomic Factors On Stock Return Of Energy Sector In
Shanghai Stock Market, International Journal of Scientific and Research Publications (Vol. 2, Issue-
11), ISSN 2250-3153: The study aims at understanding the performance of arbitrage pricing theory
(APT) in the Shanghai Stock Exchange. In finance, arbitrage pricing theory (APT) is a general theory
of asset pricing that holds that the expected return of a financial asset. The research points out the
fact that factors such as foreign reserve, exports, exchange rates, and unemployment rate have an
impact on the returns of energy sector. As the foreign reserve increases by 1 point, the stock return
of energy sector increases by 2.142004. This shows that foreign reserves have a positive direct impact
on the returns of energy sector.

Domenico Celenza and Fabrizio Rossi (2012), The Relationship Between Intellectual Capital And
Stock Market Performance: Emprical Evidence From Italy, Journal of Modern Accounting and
Auditing (Vol. 8, Issue-11), ISSN 1548-6583: This study aims at providing a relation between the
intellectual capital (IC) and returns of a company. It also aims at evaluating the value of IC. The
accounting records are still incomplete inspite of the regulatory accounting standard. It is limited in
transmitting information that is slowly reflected in the prices of securities of listed companies to the
stock market. As the information arrives into the market, it becomes old. Compared to the degree of
circulation of information in the market, the financial indicators appear to be static. The beta factor
does not explain the market value of firms and changes in stock prices. The conclusions stand true
as, the financial statements, made at the end of the year; fail to inform the value of the firm. The
speculation in the market also affects the investor’s sentiment. The beta index indicates the systematic
risks associated with the stocks and fails to elaborate the reason for changes in stock prices and market
value of firms.

Kaushal A. Bhatt (2013), Investment and Trading Pattern of Individuals Dealing in Stock Market,
The SIJ Transactions on Industrial, Financial & Business Management (IFBM) (Vol.1, Issue-02),
ISSN: 2321 – 242X: The paper aims at studying the literacy and awarenss of capital markets among
investors regarding various investment avenues. To find and identify segments preferred more by the
people and the influencing force behind the decision making, while investing in currently available
options including stock markets. It concludes that investors are moving to new investment avenues
such as equity market, mutual funds, bonds, and others like gold, land etc. This is due to the

38
companies. The investors are also risk sensitive. They want more safety and security. The stock
markets have become very popular due to high rate of return but due to uncertainty and risk many
people do not invest in equity markets. This stands true due to the lack of stability in the current
market scenarios. The risk related to investment also defines the amount invested by people in the
particular stock. The factors like age, occupation and income level are key factors in investment
decision making of people. The other major factors being considered were market scenario, risk
involved and other investment opportunities.

39
 DATA ANALYSIS
The data is collected from 50 respondents from Mumbai region.

PARAMETER No. of investors Percentage

Age
Below 20 0
20-30 25 50%
30-40 11 22%
40-50 9 18%
Above 50 5 9%
Gender
Male 27 54
Female 23 45
Other
Occupation
Student 16 31%
Home Maker 2 4%
Selfemployed (Business/Profession) 11 23%
Employee (Government/Private) 20 41%
Retired 1 1%
Annual Incomes
0-50,000 14 27%
50,000-1,00,000 11 23%
1,00,000-5,00,000 18 36%
5,00,000-10,00,000 7 14%

40
Analysis & Interpretation:

It was found that most of the investors are of the age of 20-30 and the remaining 50% investors
belongs to age group of above 30.

41
Analysis & Interpretation:

Most of the investors are Female and the other half is Male.

42
Analysis & Interpretation:

Investors are mostly employees working in Government/Private sector.

30% are students, 22.7% are self employed who own their Businessmen or Professionals and the
remaining are Home Maker.

43
Analysis & Interpretation:

Most of them fall in the bracket of 1,00,000-5,00,000 whereas 50,000-1,00,000 and

0-50,000 are the next income brackets of the investors. Least number of individuals are from
5,00,000-10,00,000.

44
Analysis & Interpretation:

Most of them are aware about different investment avenues.

Very few individuals are not aware about avenues as more number of people are getting aware
about investments.

45
Analysis & Interpretation:

Almost 50% of the individuals do not invest in stock market due to lack of knowledge.

46
Analysis & Interpretation:

Investors mostly invest in Shares, Bonds and Debentures and do not invest in other avenues.

47
Analysis & Interpretation:

Investors who invest in stock market invest nearly 50% and above monthly and yearly, weekly
investors are short term investors.

48
Analysis & Interpretation:

Nearly 70% investors invests upto only 10% of their income in stock market as it is highly volatile.

49
Analysis & Interpretation:

The risk appetite of the investors fall in Low and Medium. Investors are highly risk averse and do
not take High risk.

50
Analysis & Interpretation:

Risk and return on investment are highly preferred by the investors, also capital appreciation and
safety of the principal are the factors highly considered.

51
Analysis & Interpretation:

After the hit of Covid-19 most of the things altered also investment psychology of the people
changed and people started investing in more safer assets to avoid uncertainty.

52
Analysis & Interpretation:

Traditional investors mostly prefer fixed deposits and post office schemes as their investment
option to avoid risk and Females prefer investing in commodity market like gold as their safer
investment option.

53
Analysis & Interpretation:

Nearly 53% of the investors want their investment to grow at steady rate, and the other 30% at fast
rate, 16% at an average rate. In stock market investors want their capital to grow at proportion to
their investment.

54
Analysis & Interpretation:

The investors who invest in stock market are neutral as high risk is involved and greater volatility.
Some are more satisfied as due to their knowledge about financial instruments.

55
Analysis & Interpretation:

Youth generally prefer modern mode of investment and traditional mode is preferred by middle
aged group for greater safety.

56
 FINDINGS

 Maximum investors are aware of all the investment options.

 The study reveals that male investors dominate the investment market in India.
 Percentage of income that they invest depend on their annual income, more the income more
percentage of income they invest.
 The investors decisions are based on their own initiative.
 The investment habit was noted in most of the people who participated in the study.
 Most of the investors are financial illiterates.
 Increase in age decrease the risk tolerance level.
 Women are attracted towards investing gold than any other investment avenue.
 Investors do not invest in a single avenue. They prefer different avenues and maximum
investors prefer to invest in shares, mutual funds & debentures.
 Maximum investors want their investment grow at fast rate.
 Different factors considered by investors while investing are return, risk, tax benefits, capital
appreciation and the most prominent factor is the return on any investment avenue.
 Majority of investors invest 10% of their annual income.
 Maximum investors have other investment policies.
 The investors investing in different avenues are highly satisfied with the return generated by
their investment option.
 High number of investors are low or medium risk taker.
 Elderly people highly invest in traditional mode.
 Covid-19 have compelled the investors to invest in safe and secure assets for future
uncertainties.

57
 CONCLUSIONS

The study concludes that investment done in various investment avenues with the expectation of
capital appreciation and short- and long-term earnings. The basic idea behind investment of all
government, private, self-employed and retired person in this study is to utilize the surplus money in
favourable plans so that the money will be rolled back as well as it will give high returns also. When
a common man thinks about investment he will never go for any risky plan.

In the present scenario the share and gold market is highly uncertain and unpredictable, so the
investor should analyze the market cautiously and then make investment decision.

In order to understand irrational behaviours of investors in the investment decisions, a risk perception
mediated model has been developed to test the impact of different behavioral variables on the
investment decisions. On the basis of previous studies it can be concluded that the asymmetry of
information, risk taking behavior and decision context affect the perceptions of risk associated in a
particular investment situations.

Maximum investors are aware of all the investment options. Investors do not invest in a single
avenue. They prefer different avenues and maximum investors prefer to invest in shares, mutual
funds& debentures. Majority of investors invest 15-20% of their annual income. The most important
factor is return which influence the decision making of an investment.

Considering risk propensity as an influential factor, it is valid to believe that a risk-averse individual
is more likely to avoid risky decisions than a risk-seeking individual, who is more likely to make
risky decisions. Psychological studies have shown that risk perception can be greatly influenced by
the framework in which investors are when they make investment decisions. Thus, it can be said that
stock market and investment influence the perceived risk of the investor.

The individual investor still prefers to invest in financial products which give risk free returns. This
confirms that Indian investors even if they are of high income, well educated, salaries, independent
are conservative investors prefer to play safe.

58
 RECOMMENDATIONS

 The various investment tools which were mostly preferred by the investors were shares,
mutual funds etc. So there should be various other means to create awareness regarding the
potential of other instruments and the tools which can be more beneficial to the investors.
 Government should stress the financial institutions to conduct investor guidance workshops
about available avenues for investment.
 Financial sector i.e banking, financial services and life insurance industries will have to work
with government.
 There is a need for financial literacy and instilling confidence among investors.
 Industry associations and NGOs to educate the investor on the need for savings and savings
wisely.
 They should also educate the Indian population both on ways of meeting their financial
objectives through financial protection and wealth creation.
 To overcome the problem faced by the investors, adequate policy reforms in financial sector
is the need of the hour.
 The investors who want to avoid risk should invest in treasury notes or high rated municipal
bonds and debentures, etc.
 Some business people know the awareness about investment avenues but most of the
respondents they don’t have sufficient knowledge. Financial institutions should create
awareness about available avenues for investment and have to tell the people what is the
meaning of risk and how it could be mitigated.
 While investing on shares, the investors must consider a variety of factors comprise of
appropriate portfolio constructions to maximize the return and minimise the risk. Thus, the
investors should always invest their money in different companies by subscribing its shares
rather than investing in a particular company.

59
 BIBLIOGRAPHY

https://www.slideshare.net/SubhashishMondal/a-study-on-indian-investors-investments-
%20analysis-of-their-behaviour-on-various-investment-avenues-in-india

https://www.slideshare.net/BabasabPatil/investors-perception-indian-stockmarket

https://en.wikipedia.org/wiki/National_Stock_Exchange_of_India

https://en.wikipedia.org/wiki/Bombay_Stock_Exchange

https://www.cheggindia.com/earn-online/different-investment-avenues-in-india-and-its-
importance/

Books

The Intelligent Investor.

 General Management Project
on
“The Impact of Npa on the Net Profit of SBI And Axis Bank”
Submitted to
Durgadevi Saraf Institute of Management Studies
In the partial fulfilment for the award of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
(2022 – 2024)

Submitted By
Miss. Sayali Mane
(20221046)

Under the guidance of

Prof. Sumana Chaudhari
(Faculty Mentor)

RSET Campus, Swami Vivekananda Rd, Mandlik Nagar, Sunder Nagar, Malad West, Mumbai,
Maharashtra 400064
 CERTIFICATE

This is to certify that Miss. Sayali Mane has worked and duly completed his Project Work in
partial fulfilment of the Master's Degree in Management Studies recognized by the University of
Mumbai for the academic year 2022 -24 and his Project entitled.

“The Impact of Npa on the Net Profit of SBI And Axis Bank”

Under my supervision.

I further certify that the entire work has been done by the Learner under my guidance and that no
part of it was submitted previously for any degree/diploma of any university.

It is his own work and facts reported by his personal finding and investigations.

Name of the Mentor: Prof. Sumana Chaudhari.

Date: (Signature of Mentor)
 DECLARATION

I the undersigned Miss. Sayali Mane hereby declare that the work embodied in this project work titled
“The Impact of Npa on the Net Profit of SBI And Axis Bank” forms my contribution to the research work
carried out under the guidance of Mr. Sumana Chaudhari (Asst. Professor) is a result of my research work
and had not been previously submitted to any degree/diploma to this or any other Institute.

Wherever references have been made to precious works of others, it has been clearly indicated as such
and included in the bibliography.

I, hereby further declare that all information in this document has been obtained and presented in
accordance with academic rules and ethical conduct.

Miss. Sayali Mane

Certified by

Mrs. Sumana Chaudhari

(Asst. Professor)
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank Durgadevi Saraf Institute of Management Studies for giving
me a chance to do this project.

I would like to thank my Director, Dr. C. Babu for providing the necessary facilities required for
the completion of this project.

I would also like to express my sincere gratitude towards my Faculty Mentor, Asst. Sumana
Chaudhari. Whose guidance and care made the project successful.

I would like to thank our College Library for providing various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
 Index

Chapter No. Description Page No.

Executive Summary
INTRODUCTION
 General Introduction to the study
 Objective of the study
I  Nature & scope of study 1
II REVIEW OF LITERATURE 4
III RESEARCH METHODOLOGY 5
NON-PERFORMING ASSETS
 Types of NPAs
 Effects of NPAs
 Impact of NPAs
 Recovering losses
 NPA in Banking System
 NPA Parameters
IV  NPA Ratio 6
CLASSIFICATION of BANK
 Public sector bank
V  Private sector bank 20
ABOUT BANKS
 SBI
VI  AXIS 31
VII DATA ANALYSIS 40
VIII UNDERLYING REASON 42
IX BREIF ACCOUNT OF PROFITABILITY 44
X PROBLEMS of NPA 45
XI SUGGESTION & RECOMMENDATION 46
XII CONCLUSION 47
XIII BIBLIOGRAPHY 48
 EXECUTIVE SUMMARY

In this report NPA means an asset or an account of borrower, which has been classified by bank or
financial institution as substandard, doubtful or loss asset in accordance to the direction or guidelines
on asset classification issued by the RBI. So NPAs can considered as a hindrance to the profitability
and liquidity of banks.

This study endeavors to determine the impact of NPA on Profitability Performance of the SBI and
Axis Bank in India. The objectives of the study are to measure the relationship between NPA and
profitability of the bank and to determine the impact of NPA on Net Profit of the bank. The study
applied Correlation analysis to measure the relationship and the impact of NPA on profitability. The
study found that there is a significant impact of NPA on SBI & Axis Bank during the study period.

In this report discusses the problems of NPAs in the Indian banks in five years & classification of
NPAs in SBI and Axis bank and there is no fixed formula on this basis of which a recovery strategy
for a NPA is undertaking. Then here RBI guidelines can be taken.

In the report resolution strategy for an NPA recommendations are discussed. NPAs reflects the
performance of bank. A high level of NPAs suggest high probability of a large number of credit
defaults that the profitability and net –worth of bank and also erodes the value of the asset. The NPAs
growth involves the necessity of provisions, which reduces the overall profits and shareholders
‘value.

This report deals with understanding the concept of NPAs, its magnitude and major causes for an
account becoming non -performing, projection with special reference to SBI and Axis bank in India
INTRODUCTION TO THE IMPACT OF NPA ON THE NET
PROFIT OF SBI & AXIS Bank:
The recession which happened in the year 2008 showed its adverse effect on financial stability across
the globe. It suggests that as NPA increases the NET profit decreases. It shows that NPA do affect
the NET profits of SBI & Associates. Increasing NPA results in decreasing profits for banks in this
sector. This suggests that asset quality management of the banks are not up to the mark. This crisis
showed how the performance of the banks affect the economy of the country. Realizing this issue the
central bank had given more importance for the financial stability of the country. In countries like
India where the banks dominate the financial system, the financial stability heavily relies on the
performance of the banks. The Indian banks were strong enough to tackle the economic crisis during
the recession in 2008. However, in the recent past the concern about the stability of the banking
sector has been increased. The report which was released by the RBI in 2012 on financial stability
on banking sector showed the increasing risk of stability in the post-recession period and the report
clearly showed how banks are underperforming in the aspects of return on equity, return on assets
and net profits.
The non-performing assets (NPAs) is one of the major issues which is affecting the financial
stability of banks. NPAs are nothing but the assets (loans or advances) for which the principle along
with interest has remained due over a period. According to the guidelines of RBI if the interest and
principal amount for the loan is not paid for more than 90 days then the asset is declared as non-
performing assets. NPAs in the Indian banks has been steadily increasing in the recent times and this
growth affects profitability as well as the efficiency of the banks. This increase will result in scares
of credit that become more costly which affects the growth of the economy. NPAs are caused due to
factors such as business environment, borrowers and banks. When it comes to business environment
there are various element like Recession and weak legal system in recovery of loan which are the
reasons for increasing NPA, whereas under borrowers’ vision there are various reasons like improper
selections of projects, lack of resource, poor management, willful default and labor issues which are
the reasons for accumulations of NPAs. When it comes to the banks, there are various issues for
increasing NPAs like poor credit appraisal, insufficient credit monitoring and lack of effective NPA
management. Proper steps need to be implemented to reduce NPA or else it will be a big threat to the
economic stability. In this paper the NPA growth along with its trend and its effect on the profitability
of Public and Private sector banks will be analyzed.

1
 OBJECTIVE OF THE STUDY

The different aspects of literature related to Non-Performing Assets have used for this study, but there
is a less time gap existing for the Comprehensive research on quality aspects of Non-Performing
Assets. Most of the research and studies are being done on causes, impact and management aspects
of NPAs.

1. To measure the relationship NPA of the SBI & Axis bank.

2. To determine the impact of NPA on Net Profit of the SBI & Axis bank.

3. The study may help the government in creating & implementing new strategies to control
NPA’s.

4. The study will help to select appropriate techniques suited to manage the NPAs.

5. To study the status of Non-Performing Assets of Public and Private sector bank.

6. To know the recovery of NPAs through various channels.

2
 NATURE & SCOPE OF STUDY

This Project report shows the role of profitability position and the NPA of leading SBI
& Axis bank in India. This is the process of comparing NPAs in SBI & Axis bank
determining how much NPA increase or decrease during a specific period of time. The
study covers a period of 5 years from 2014 to 2018 is taken for the study.

This study indicate the Indian Banking Sector is mainly dominated by the Bank.
Globalization has encouraged multinationals and foreign bank to set up their business
unit in India.

This study will help to analyze the recent norms of NPA. This study helps to analyze
how NPA Causing Problems to Banking Sector and what might be the solution to
overcome from this problem and its impact on Profitability of New Profit Banks.

3
 REVIEW OF LITERATURE

NPA is a burning topic for the banking sector and many authors tried to study the reasons of NPA,
the problems created by NPA and the impact of NPA on the banking sector, and moreover came to a
solution or remedies of the growing problem of NPA. A few papers have been written and gone
through, and this part of this paper is attempting to present a review of all those are available in the
same area of non-performing assets of the SBI bank, Axis bank and other banks. This survey has
conducted a study on the existing papers, articles, journals, and reports provided by different authors,
groups and committees from time to time.

 An article on ‘’ Nonperforming assets in India’’ is writer by Anupam Jain, Vinita and Swati
Jain. This paper deals with the concept of nonperforming asset and nonperforming assets in
Indian commercials Banks. In this paper detail of Nonperforming assets of total banking
sector, distribution of commercial bank credit to priority sector and small-scale industries has
been listed in the table format. Eight years data of total banking sector are considered. This is
done foe the total advances and for advances to the SSI Sector. Check for the significance of
NPA as a determinant of efficiency.
 The study made by Prof. E. Gordon and Dr. K. Natarajan who publish a book on, “Banking
Theory, Law and Practice” in Himalaya Publishing House. In this book they studied
Magnitude of NPA, factors contributing to NPAs like internal factors, external factors and
other factors. Early Warning Signals like financial, operational, banking, managerial and
external signals were discussed. Management of NPAs by adopting some techniques are
discussed in this book.
 Biswanath Sukul (2018), in his study entitled “Non-Performing Assets (NPAs): A
Comparative Analysis of selected Private Sector Banks” examined and found that NPA is
increasing by leaps and bounds in ICICI bank, and he also said that proper evaluation of
projects and adherence of proper credit appraisal techniques will lead to reduction in NPA.
 Pradip Kumar Samanta, Payel Roy (2018), in their study entitled “Analysis of Nonperforming
Assets in Public Sector Banks of India”, examined and found that there is a 10 high correlation
between Gross NPA and Net Profit and to retain the investors trust transparency in disclosure
norms should adhere.

4
 RESEARCH METHODOLOGY

Sources of Data: The study has used data from secondary sources which are collected mainly
from the Annual reports of the SBI and Axis Banks in India and from various journals and Web sites
like money control, investing.com and also from latest news related NPAs in economies times. Aim
of the present research paper is to analyze the trends in NPAs. Several research studies on NPA in
Indian banking sector are available, the studies on a closer look validated NPA problem using
secondary data. The primary emphasis of this research is focused on analyzing nonperforming assets
of SBI and Axis banks in India during the period 2014 to 2018.The present study is a descriptive
study which tries to establish the relationship between the non-performing assets and net profits. This
is selective study. The data for the study has been sourced from Reserve Bank of India (RBI)
bulletins, comparison of NPAs in both SBI & Axis banks in India, report on existing and progress of
banking in India, issued by the RBI.

5
 INTRODUCTION OF NPA

Meaning of NPA: A Non-performing asset (NPA) is defined as a credit facility in respect of

which the interest and/or installment of Bond finance principal has remained ‘past due’ for a specified
period of time. NPA is used by financial institutions that refer to loans that are in jeopardy of default
the so called NPL. Once the borrower has failed to make interest or principal payments for 90 days
the loan is considered to be a non-performing asset. Non-performing assets are problematic for
financial institutions since they depend on interest payments for income. Troublesome pressure from
the economy can lead to a sharp increase in NPLs and often results in massive write-downs.

With a view to moving towards international best practices and to ensure greater transparency, it
has been decided to adopt the ‘90 days’ overdue’ norm for identification of NPA, from the year
ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset
(NPA) is a loan or an advance where.

 Interest and/or installment of principal remain overdue for a period of more than 91 days in
respect of a term loan,

 The account remains ‘out of order’ for a period of more than 90 days, in respect of an
Overdraft/Cash Credit (OD/CC),

 The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,

 Interest and/or installment of principal remains overdue for two harvest seasons but for a
period not exceeding two half years in the case of an advance granted for agricultural
purposes, and

6
  Any amount to be received remains overdue for a period of more than 90 days in respect of
other accounts.

 Non-submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit

Facility.

 No active transactions in the account (Cash Credit/Over- Draft/EPC/PCFC) for more than
91days.

Further classify non-performing assets further into the following three categories based on the
period for which the asset has remained non-performing and the reliability of the dues:

1. Sub-standard assets: a substandard asset is one which has been classified as NPA for a period
not exceeding 12 months.
2. Doubtful Assets: An asset would be classified as doubtful if it has remained in the substandard
category for a period of 12 months.
3. Loss assets: where loss has been identified by the bank, internal or external auditor or
central bank inspectors. But the amount has not been written off, wholly or partly.

Sub-standard asset is the asset in which bank must maintain 15% of its reserves. All those assets
which are considered as non-performing for period of more than 12 months are called as Doubtful
Assets. All those assets which cannot be recovered are called as Loss Assets. Some advanced tools
like Experian India's "Hunter Fraud Score" have also been launched that work on data mining and
calculate some authentic score that can help banks detect fraud and lower their losses.

7
TYPES OF NON-PERFORMING ASSETS

Although the most common nonperforming assets are term loans, there are six other ways loans and
advances are NPAs:

1. Gross NPA

Gross NPA is an advance which is considered written off, for bank has made provisions, and which
is still held in banks' books of account. Gross NPA (non-performing asset) refers to overall
quantity of loans that have gone bad debts. It consists of all the nonstandard assets like as substandard,
doubtful, and loss asset. “Gross NPAs Ratio = Gross NPAs / Gross Advances”

2. Net NPA

Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs.
“Net NPAs = Gross NPAs – Provisions / Gross Advances – Provisions”
 Overdraft and cash credit (OD/CC) accounts left out-of-order for more than 90 days.
 Agricultural advances whose interest or principal installment payments remain overdue for
two crop/harvest seasons for short duration crops or overdue one crop season for long duration
crops.
 Bill overdue for more than 90 days for bills purchased and discounted.
 Expected payment is overdue for more than 90 days in respect of other accounts.
 Non-submission of stock statements for 3 consecutive quarters in case of cash-credit facility.
 No activity in the cash credit, overdraft, EPC, or PCFC account for more than 91 days. 

Banks are required to classify nonperforming assets in one of three categories according to how
long the asset has been non-performing: sub-standard assets, doubtful assets, and loss assets. A
sub-standard asset is an asset classified as an NPA for less than 12 months. A doubtful asset is an
asset that has been non-performing for more than 12 months. Loss assets are assets with losses

8
identified by the bank, auditor, or inspector and have not been fully written off.

THE EFFECTS OF NPAs

Carrying nonperforming assets, also referred to as nonperforming loans, on the balance sheet
places three distinct burdens on lenders. The nonpayment of interest or principal reduces cash flow
for the lender, which can disrupt budgets and decrease earnings. Loan loss provisions, which are set
aside to cover potential losses, reduce the capital available to provide subsequent loans. Once the
actual losses from defaulted loans are determined, they are written off against earnings.

CAUSES OF NPA
1. Lending Practices of Bank: In 2008 the financial crisis has been happened because of bad
lending practices of banks. The banks should strictly follow rules and regulations while
lending loans. They should properly follow the credit policy of banks.

2. Business Risk: The organization may sometimes face problems with its own operational
environment which may result in losses for the company.

3. Environmental Risk: Sometimes there may be environmental problems like cyclones,

drought which does not give the required output to the farmers and Agri based businesses.

IMPACT OF NPA
1. Liquidity
The Banks are facing the problem of NPAs. They are not recovering which lending money
to borrower. Those times money will be blocked. Banks don’t have enough cash in hand for
short period of time.

2. Credit Loss
Banks lose their goodwill and brand equity in market when there is problem with their NPA

9
 that further affect the value of the banks in terms of market credit.

3. Profitability
NPA not only effect on current profits but also profit of entire financial year.

ASSETS CLASSIFICATION
1. Standard Assets
Standard Asset means which assets are not facing the problem and not more risk towards
customer. Such assets are assumed to be performing asset. A general provision of 0.25%
must be provided on global loan portfolio basis.
2. Sub-standard Assets
An asset would be classified as sub-standard if it remained NPA for a period less than or
equal to 12 months. Accordingly, a general provision of 10% on outstanding has to be
provided on substandard assets.

REASONS FOR OCCURRENCE OF NPA

NPAs result from what are termed “Bad Loans” or NPL. Default, in the financial parlance, is the
failure to meet financial obligations, say non-payment of a loan installment. These loans can occur
due to the following reasons:
 Usual banking operations /Bad lending practices
 A banking crisis (as happened in USA, South Asia and Japan)
 Overhang component (due to environmental reasons, natural calamities, business cycle,
Disease Occurrence, etc...)
 Incremental component (due to internal bank management, like credit policy, terms of credit,
etc...)

PROBLEMS CAUSED BY NPA

NPAs do not just reflect badly in a bank’s account books, they adversely impact the national
economy. Following are some of the repercussions of NPAs:

10
  Depositors do not get rightful returns and many times may lose uninsured deposits. Banks
may begin charging higher interest rates on some products to compensate NPL losses.
 Bank shareholders are adversely affected.
 Bad loans imply redirecting of funds from good projects to bad ones. Hence, the economy
suffers due to loss of good projects and failure of bad investments.
 When bank do not get loan repayment or interest payments, liquidity problems may ensue.

RECOVERING LOSSES

Lenders generally have four options to recoup some or all losses resulting from nonperforming assets.
When companies struggle to service debt, lenders take proactive steps to restructure loans to maintain
cash flow and avoid classifying loans as nonperforming. When defaulted loans are collateralized by
borrowers' assets, lenders can take possession of the collateral and sell it to cover losses.

Lenders can also convert bad loans into equity, which may appreciate to the point of full recovery
of principal lost in the defaulted loan. When bonds are converted to new equity shares, the value
of the original shares is usually eliminated. As a last resort, banks can sell bad debts at steep
discounts to companies that specialize in loan collections. Lenders typically sell defaulted loans
that are unsecured or when methods of recovery are not cost-effective.

NPA woes may continue for banks in 2018-19 due to current economic situation: RBI 17 Reserve
Bank of India said today that banks will witness further deterioration in their non-performing assets
(NPAs) or bad loans due to the "economic situation prevailing" in the current fiscal.

11
 HIGHLIGHTS
 The Gross NPA ratio of scheduled commercial banks may increase further in 2018-19.
 In order to curb NPAs, RBI also put in place revised and harmonized guidelines.
 NPAs in public sector banks increased by about Rs 6.2 lakh crore between March 2015-2018.

According to the Reserve Bank of India (RBI), banks will continue to face deterioration in their
non-performing assets (NPAs) or bad loans due to the current economic conditions in the current
fiscal year. The gross non-performing assets (GNPAs) plus restructured standard advances in the
banking system remained elevated at 12.1 per cent of gross advances at end-March 2018, RBI's
annual report for 2017-18 stated.
"Going forward, the stress tests carried out by the Reserve Bank suggest that under the baseline
assumption of the current economic situation prevailing, the GNPA ratio of scheduled commercial
banks (SCBs) may increase further in 2018-19," it said.
The aggregate gross NPAs of SCBs increased primarily because of this transparent recognition
of stressed assets as NPAs, from Rs 3,23,464 crore, as on March 31, 2015, to Rs 10,35,528 crore,
as on March 31, 2018.
To curb NPAs, RBI also put in place revised and harmonized guidelines for resolution of
stressed assets during the year, replacing earlier schemes.
According to sources familiar with the report of the Standing Committee on Finance, RBI needs
to find out as to why the early signals of stressed accounts were not captured before the AQR.
The report was adopted by the Committee headed by senior Congress leader M Veerappa Moily
today and is likely to be placed in the Parliament in the Winter Session.
NPAs in public sector banks (PSBs) increased by about Rs 6.2 lakh crore between March 2015
and March 2018.
This led to substantial provisioning of Rs 5.1 lakh crore, sources said quoting the report.

12
NPA IN Indian Banking System
NPA surfaced suddenly in the Indian banking scenario, around the Eighties, during turbulent
structural changes overtaking the international banking institutions, and when the global financial
markets were undergoing sweeping changes. In fact, after it had emerged the problem of NPA kept
hidden and gradually swelling unnoticed and unperceived, in the maze of defective accounting
standards that still continued with Indian Banks up to the Nineties and opaque Balance sheets. In a
dynamic world, it is true that new ideas and new concepts that emerge through such changes caused
by social evolution bring beneficial effects, but only after levying a heavy initial toll. The process of
quickly integrating new innovations in the existing set-up leads to an immediate disorder and
unsettled conditions. People are not accustomed to the new models. These new formations take time
to configure and work smoothly. The old is cast away and the new is found difficult to adjust.

Marginal and sub-marginal operators are swept away by these convulsions. Banks being sensitive
institutions entrenched deeply in traditional beliefs and conventions were unable to adjust themselves
to the changes. They suffered easy victims to this upheaval in the initial phase. Consequently, banks
underwent this transition-syndrome and languished under distress and banking crises surfaced in
quick succession one following the other in many countries. But when the banking industry in the
global sphere came out of this metamorphosis to re-adjust to the new order, they emerged revitalized
and as more vibrant and robust units. Deregulation in developed capitalist countries particularly in
Europe, witnessed a remarkable innovative growth in the banking industry, whether measured in
terms of deposit growth, credit growth, growth intermediation instruments as well as in network.
During all these years the Indian Banking, whose environment was insulated from the global context
and was denominated by State controls of directed credit delivery, regulated interest rates, and
investment structure did not participate in this vibrant banking revolution. Suffering the dearth of
innovative spirit and choking under undue regimentation, Indian banking was lacking objective and
prudential systems of business leading from early stagnation to eventual degeneration and reduced
or negative profitability. Continued political interference, the absence of competition and total lack
of scientific decision-making, led to consequences just the opposite of what was happening in the
western countries. Imperfect accounting standards and opaque balance sheets served as tools for
hiding the shortcomings and failing to reveal the progressive deterioration and structural weakness
of the country's banking institutions to public view. This enabled the nationalized banks to continue

13
to flourishing a deceptive manifestation and false glitter, though stray symptoms of the brewing
ailment were discernable here and there. The government hastily introduced the first phase of reforms
in the financial and banking sectors after the economic crisis of 1991. This was an effort to quickly
resurrect the health of the banking system and bridge the gap between Indian and global banking
development. Indian Banking, in particular PSB‟s suddenly woke up to the realities of the situation
and to face the burden of the surfeit of their woes. Simultaneously major revolutionary transitions
were taking place in other sectors the economy on account the ongoing economic reforms intended
towards freeing the Indian economy from government controls and linking it to market driven forces
for quick integration with the global economy. Import restrictions were gradually freed. Tariffs were
brought down, and quantitative controls were removed. The Indian market was opened for free
competition to the global players. The new economic policy in turn revolutionaries the environment
of the Indian industry and business and put them to similar problems of new mixture of opportunities
and challenges. As a result, we witness today a scenario of banking, trade and industry in India, all
undergoing the convulsions of total reformation battling to kick off the decadence of the past and to
gain a new strength and vigor for effective links with the global economy. Many are still languishing
unable to get released from the old set-up, while few progressive corporates are making a niche for
themselves in the global context. During this decade the reforms have covered almost every segment
of the financial sector. In particular, it is the banking sector, which experienced major reforms. There
forms have taken the Indian banking sector far away from the days of nationalization. Increase in the
number of banks due to the entry of new private and foreign banks; increase in the transparency of
the banks' balance sheets through the introduction of prudential norms and norms of disclosure;
increase in the role of the market forces due to the deregulated interest rates, together with rapid
computerization and application of the benefits of information technology to banking operations have
all significantly affected the operational environment of the Indian banking sector. In the background
of these complex changes when the problem of NPA was belatedly recognized for the first time at its
peak velocity during 1992-93, there was resultant chaos and confusion. As the problem in large
magnitude erupted suddenly banks were unable to analyze and make a realistic or complete
assessment of the surmounting situation. It was not realized that the root of the problem of NPA was
centered elsewhere in multiple layers, as much outside the banking system, more particularly in the
transient economy of the country, as within. Banking is not compartmentalized and isolated sector
delinked from the rest of the economy. As has happened elsewhere in the world, a distressed national
economy shifts a part of its negative results to the banking industry.

14
NPAs DEFINITION BY RESERVE BANK OF INDIA (RBI)
An asset, including a leased asset, becomes non-performing when it ceases to generate income
for the bank.

 Technical definition by RBI on NPA on different cases NPA is a loan or an advance where.
 Interest and/ or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan.
 The account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC).
 The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted.
 The installment of principal or interest thereon remains overdue for two crop seasons for short
duration crops.
 The installment of principal or interest thereon remains overdue for one crop season for long
duration crops.
 The amount of liquidity facility remains outstanding for more than 90 days, in respect of a
securitization transaction undertaken in terms of guidelines on securitization dated February
1, 2006.
 In respect of derivative transactions, the overdue receivables representing positive mark to
market value of a derivative contract, if these remain unpaid for a period of 90 days from the
specified due date for payment.

15
 CATEGORIES OF NON-PERFORMING ASSETS (NPAs)

Based upon the period to which a loan has remained as NPA, it is classified into 3 types:
How serious is India’s NPA issue?

 More than Rs. 7 lakh crore worth loans are classified as Non-Performing Loans in India. This
is a huge amount.
 The figure roughly translates to near 10% of all loans given.
 This means that about 10% of loans are never paid back, resulting in substantial loss of money
to the banks.
 When restructured and unrecognized assets are added the total stress would be 15-20% of
total loans.
 NPA crisis in India is set to worsen.
 Restructuring norms are being misused.
 This bad performance is not a good sign and can result in crashing of banks as happened in
the sub-prime crisis of 2008 in the United States of America.

REASONS FOR THE RISE IN NPA IN RECENT YEARS

 GDP slowdown -Between early 2000's and 2008 Indian economy were in the boom phase.
During this period Banks especially public sector banks lent extensively to corporate.
However, the profits of most of the corporate dwindled due to slowdown in the global
economy, the ban in mining projects, and delay in environmental related permits affecting
power, iron and steel sector, volatility in prices of raw material and the shortage in availability
of. This has affected their ability to pay back loans and is the most important reason behind
increase in NPA of public sector banks.

16
 One of the main reasons of rising NPA is the relaxed lending norms especially for corporate
honchos when their financial status and credit rating is not analyzed properly. Also, to face
competition banks are hugely selling unsecured loans which attributes to the level of NPAs.
 5 sectors Textile, aviation, mining, Infrastructure contributes to most of the NPA, since most
of the loan given in these sectors are by PSB, They account for most of the NPA.
 Public Sector banks provide around 80% of the credit to industries and it is this part of the
credit distribution that forms a great chunk of NPA. Last year, when kingfisher was marred
in financial crisis, SBI provided it huge amount of loan which it is not able to recover from
it.
 There is a myth that main reason for rise in NPA in Public sector banks was Priority sector
lending, however according to the findings of Standing Committee on Finance NPAs in the
corporate sector are far higher than those in the priority or agriculture sector. However, even
the PSL sector has contributed substantially to the NPAs. As per the latest estimates by the
SBI, education loans constitute 20% of its NPAs.
 The Lack of Bankruptcy code in India and sluggish legal system make it difficult for banks
to recover these loans from both corporate and non-corporate.
 Diversification of funds to unrelated business/fraud.
 Lapses due to diligence.
 Business losses due to changes in business/regulatory environment.
 Lack of morale, particularly after government schemes which had written off loans.
 Global, regional or national financial crisis which results in erosion of margins and profits of
companies, therefore, stressing their balance sheet which finally results into non-servicing of
interest and loan payments. (For example, the 2008 global financial crisis).
 The slowdown in a specific industrial segment, therefore, companies in that area bear the heat
and some may become NPAs.
 Unplanned expansion of corporate houses during boom period and loan taken at low rates
later being serviced at high rates, therefore, resulting into NPAs.
 Due to mal administration by the corporates, for example, willful defaulters.
 Due to miss governance and policy paralysis which hampers the timeline and speed of
projects, therefore, loans become NPAs. For example, Infrastructure Sector.
 Delay in land acquisition due to social, political, cultural and environmental reasons.

17
 A bad lending practice which is a non-transparent way of giving loans.
 Due to natural reasons such as floods, droughts, disease outbreak, earthquakes, tsunami etc

STEPS TAKEN BY RBI AND GOVERNMENT IN LAST FEW

YEARS TO CURB NPA

 Government has launched ‘Mission Indradhanush’ to make the working of public sector bank
more transparent and professional in order to curb the menace of NPA in future.
 Government has also proposed to introduce Bankruptcy code.
 RBI introduced number of measures in last few years which include tightening the Corporate
Debt Restructuring (CDR) mechanism, setting up a Joint Lenders' Forum, prodding banks to
disclose the real picture of bad loans, asking them to increase provisioning for stressed assets,
introducing a 5:25 scheme where loans are to be amortized over 25 years with refinancing
option after every 5 years, and empowering them to take majority control in defaulting
companies under the Strategic Debt Restructuring (SDR) scheme.
 NPAs story is not new in India and there have been severalsteps taken by the GOI on legal,
financial, policy level reforms. In the year 1991, Narasimham committee recommended many
reforms to tackle NPAs. Some of them were implemented.

18
 NPA PARAMETERS

NATURE OF FACILITY PARAMETERS

Term Loan Interest and/or instalment of principal

remain overdue beyond 90 days

Overdraft/Cash Credit Remains “out of order” as indicated above

Bill Purchased/discounted Remains overdue beyond 90 days

Crop Loans (short duration crops) Instalment of principal or interest there on

remains overdue for 2 crop seasons

Crop Loans (long duration crops) Instalment of principal or interest there on

remains overdue for 1 crop season

Securitization transactions Amount of liquidity facility remains

outstanding beyond 90 days

Derivative transactions Overdue receivables representing positive

mark-to-market value of derivatives contract
which remains unpaid beyond 90 days from
specified due date for payment

Securitization transactions Liquidity facility remains outstanding for

more than 90 days

19
WORST OF THE NPA CRISIS IS OVER, IN RBI REPORT
NPA RATIO MAY FALL FROM 10.8% IN SEPTEMBER 2018 TO 10.3% IN
MARCH 2019

Mumbai: Indicating that the banking sector is on course to a recovery, the Reserve Bank
of India (RBI) on Monday said stress tests suggest further improvement in banks’ asset quality
would be made in the New Year.

In the baseline scenario, the (NPA) ratio may decline from 10.8% in September 2018 to 10.3%
in March 2019 and 10.2% in September 2019, RBI said in its biannual Financial Stability
Report (FSR). In his foreword to the report, new RBI governor Shaktikanta Das wrote that
after a prolonged period of stress, the load of impaired assets was receding, with banks
reporting their first half-yearly decline in the gross NPA ratio since September 2015.
The asset quality of banks showed an improvement, with the gross non-performing assets
(GNPA) ratio of scheduled commercial banks (SCBs) declining from 11.5% in March 2018
to 10.8% in September 2018. But an industry analysis by RBI shows that stress is rising in
the mining, food processing and construction sectors.

Despite projections of a recovery, 18 SCBs, including all public sector banks under the
prompt corrective action (PCA) framework, may fail to maintain the required capital
adequacy ratio under a two SD (standard deviation) shock to the GNPA ratio, unless capital
infusion takes place and banks improve their performance, according to RBI’s analysis. One
SD shock equals approximately a two-percentage point increase in the GNPA ratio.

20
The PCA banks are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank,
UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of
Commerce, Dena Bank and Bank of Maharashtra.

“Notwithstanding the significant costs wrought by the enhanced recognition of asset

impairment in Public Sector Banks (PSBs), it appears to have led to a greater discipline in
credit assessment, higher sensitivity to market risk and better appreciation of operational
risks,” Das wrote.

The report pointed out that credit growth of banks improved in September 2018, driven
largely by private sector banks. However, the performance of public sector banks witnessed
an overall improvement, with credit growth increasing from 5.9% in March 2019 to 9.1% in
September 2019 and deposit growth increasing from 3.2% to 5% during the same period.
RBI said there had been a further widening between PCA and non-PCA PSBs: while non-
PCA PSBs’ credit growth improved from 9.1% in March 2019 to 13.6% in September 2019
and deposit growth rose from 6.1% to 7.9% during the same period, the PSBs under PCA
registered a decline in both credit and deposits.

Interestingly, the central bank also looked at fresh loans turning bad in the same fiscal to
assess stress in their incremental loan portfolios. For instance, 11 public sector banks under
PCA saw 4.07% of their fresh exposure between April and September 2016 turning bad by
the end of September 2016. The numbers have shown a declining trend for PCA banks
between 2016-17 and 2017-18 and stood at 2% of the freshly sanctioned portfolio.

“[This is] too high, especially given their constrained capital position and across-the-board
superior performance among private financial intermediaries,” the report said.
RBI has also conducted a contagion analysis to assess whether the PCA framework has helped
in reducing the systemic footprint of PCA banks. For this, the central bank has argued, one
needs to do away with the implicit sovereign guarantees enjoyed by PCA banks.

21
NPA WOES MAY CONTINUE FOR BANKS IN 2018-19 DUE
TO CURRENT ECONOMIC SITUATION:

RBI SAID TODAY THAT BANKS WILL WITNESS FURTHER DETERIORATION IN

THEIR NON-PERFORMING ASSETS (NPAS) OR BAD LOANS DUE TO THE
"ECONOMIC SITUATION PREVAILING" IN THE CURRENT FISCAL.

NET NPAS FOR 36 BANKS HAVE REDUCED BY RS 18,921 CRORE IN

THE THREE MONTHS FROM JULY TO SEPTEMBER. DURING THE
SAME PERIOD, GROSS NPAS HAVE REDUCED BY A MERE RS 5870
CRORE
The push for bad loan resolution has seen little success so far. However, it does hold promise
to improve the asset quality for the banking sector by the end of March 2019.Net non-
performing assets (NPAs) for 36 banks reduced by Rs 18,921 crore in the three months from
July to September. During the same period, gross NPAs reduced by a mere Rs 5,870 crore.

However, over the last one-year, net NPAs have risen by Rs 13,453 crore while gross NPAs
have risen by Rs 1.41 lakh crore to Rs 8.72 lakh crore as at September 2018 end, as per data
collated by Money control. The numbers are based on the second quarter financial results of
36 banks including public and private sector lenders.

“The emerging trends in the movement of NPAs when viewed along with the provisions made
by banks do indicate that the NPA cycle may have peaked, and that the recognition issue has
by and large been addressed. This is evidenced from the declining NPA ratios for most
banks,” said a report by Care ratings.

Posting a profit after a consecutive loss in the last three quarters, State Bank of India (SBI),

22
country’s largest lender, reduced its gross NPAs by nearly Rs 7,000 crore while it’s net NPAs
declined by Rs 4,400 crore. Its gross NPAs stood at Rs 2.06 lakh crore (9.95 percent of total
loans) as on September end from Rs 2.13 crore as on June end (10.69 percent).

“NPA resolutions have started to happen since the recognition of bad loans and Insolvency
and Bankruptcy Code (IBC) law implementation has picked up. So hopefully, going forward,
the asset quality should start looking better from here on. Banks are also growing their balance
sheet which would also show improvement in the percentage ratios for the NPAs," said
Karthik Srinivasan, Senior Vice President of ICRA Ratings.

We believe FY20 will be “the year of happiness”, SBI Chairman Rajnish Kumar said
after the FY18 financial results. In the current market situation, Kumar considers SBI
in the best position to seize the opportunity.

23
NPA NORMS

NPA norms Though the issue of NPA was given more importance after the Narasimham
Committee Report (1991) and highlighted its impact on the financial health of the commercial
banks and, subsequently, various asset classification norms were introduced, the concept of
classifying bank assets based on its quality began during 1985-86. A critical analysis to
monitor credit comprehensively and uniformly was introduced in 1985-86 by the RBI by way
of the Health Code System in banks. The RBI advised all commercial banks (excluding
foreign banks, most of which had similar coding system) on November 7, 1985, to introduce
the Health Code System indicating the quality (or health) of individual advances under the
following eight categories, with a health code assigned to each borrowal account (source:
RBI): 1. Satisfactory - conduct is satisfactory; all terms and conditions are complied with; all
accounts are in order and safety of the advance is not in doubt. 2. Irregular- the safety of the
advance is not suspected, though there may be occasional irregularities, which may be
considered as a short-term phenomenon. 3. Sick, viable - advances to units that are sick but
viable - under nursing and units for which nursing/revival programme are taken up. 4. Sick:
nonviable/sticky - the irregularities continue to persist and there are no immediate prospects
of regularization, and the accounts could throw up some of the usual signs of incipient sickness
5. Advances recalled - accounts where the repayment is highly doubtful, and nursing is not
considered worthwhile and where decision has been taken to recall the advance. 6. Suit filed
accounts - accounts where legal action or recovery proceedings have been initiated. 7.
Decreed debts - where decrees (verdict) have been obtained. 8. Bad and Doubtful debts –
where the recover ability of the bank's dues has become doubtful on account of short-fall in
value of security, difficulty in enforcing and realizing the securities or inability/unwillingness
of the borrowers to repay the bank's dues partly or wholly Under the above Health Code
System, the RBI classified problem loans of each bank into three categories: i) advances
classified as bad and doubtful by the bank (Health Code No.8) (ii) advances where suits were
filed/decrees obtained (Health Codes No.6 and 7) and (iii) those advances with major
undesirable features (Health Codes No.4 and 5). The Narasimham Committee (1991) felt that
the classification of assets according to the health codes was not in accordance with
international standards. It believed that a policy of income recognition should be objective

24
and based on the record of recovery rather than on subjective considerations. In addition,
before the Indian banks complied with the capital adequacy norms, their assets had to be
revalued on a more realistic basis of their realizable value. Thus, the Narasimham Committee
(1991) believed a system of income recognition and provisioning is fundamental to preserve
the strength and stability of the banking system. The international practice is that an asset is
treated as non-performing when interest is due for at least two quarters. In respect of such
nonperforming assets, interest is not recognized on accrual basis but is booked as income only
when it is received. The NPA would be defined as advance, as on the balance sheet date in
the following circumstances: 1. In respect of overdraft and cash credits, accounts remain out
of order for a period of more than 180 days, 2. In respect of bills purchased and discounted,
the bill remains overdue4 and unpaid for a period of more than 180 days, 3. In respect of
other accounts, any account to be received remains past due for a period of more than 180
days. As mentioned earlier, the grace period was reduced and from March 1995 onwards
assets for which interest has unpaid for 90 days were considered as NPAs. Provisions need to
be made for the NPAs and total NPA (gross) minus the provisions is defined as net NPA.
Besides providing a detailed definition of NPA, the Narasimham Committee (1991) also
suggested that for the purpose of provisioning, banks and financial institutions should
classify their assets by compressing the health codes into four broad groups; (i) Standard (ii)
Sub-standard, (iii) Doubtful and (iv) Loss. Broadly, substandard assets would exhibit
problems and include assets classified as non-performing for a period not exceeding two
years. Doubtful assets are those that remain as such for more than two years and include loans
that are overdue for more than two years. Loss assets are accounts where loss has been
identified but amounts have not been written off. According to international norms,
commercial banks need to keep aside a portion of their income as a provision against bad
loans. The amount of the provision depends on the type of NPAs and the time duration. Now
Indian banks need to make provisions for all bad loans.

25
NPA RATIOS

As per the Care report, “The NPA ratio peaked in Q4-FY19 at 10.16 percent which was when
the highest quantum of NPAs was recognized. There has tended to be some moderation
subsequently and in Q2 was down to 9.41 percent,” Care report said.
In the case of eight banks, the ratio for Q2 was lower than that of Q1. In a different set of
eight banks, the ratio still appears to be in an upward direction. “Here the next two quarters
will again be important to gauge whether or not whether the NPA ratio has peaked,” the report
said.
It highlighted that HDFC Bank, Indusind Bank, Kodak and Ratnakar Bank have the lowest
NPA ratios which have been under control and could decline over the quarters.
Only two public sector banks (PSB) have gross NPA ratio of less than 10 percent; Vijaya
Bank with 5.86 percent and SBI which is on the border at 9.95 percent.
Half or six of 12 banks have witnessed lower ratios in the last two quarters. These include
SBI, Andhra Bank, Canara Bank, Indian Overseas Bank (IOB), Punjab National Bank and
Vijaya Bank. This is a positive for the PSB group, Care report said.
The improvement in banks, especially public sector ones, is largely attributed to the sudden
upsurge in the NPAs in the last 2-3 years to the recognition aspect after the asset quality
review (AQR) of banks undertaken under the leadership of former Reserve Bank of India
(RBI) Governor Raghu ram Rajan in December 2016.
“It was widely believed that the NPA level had peaked in March 2019. Subsequently, there
was a tendency for the ratios to show some moderation. This was also observed for provisions
(where it may be assumed that upwards of 80 percent are on account of NPA) that were made
in the last two quarters,” the report said.
However, two banks have ratios of above 20 percent in Q2-FY19 - IOB with 24.73 percent
and Dena Bank with 23.64 percent, while five banks have ratios in the band of 15-20 percent.
Hence, as per the Care report, there would still be some banks whose NPA ratios would have
to be monitored closely for another two quarters.

26
RBI NOTE SHOWS WORST OF NPA AND CREDIT
GROWTH PROBLEM MAY BE OVER

THE SHARE OF GROSS NPAS IN TOTAL ADVANCES OF BANKS, BOTH IN THE

PUBLIC AND PRIVATE SECTOR, PEAKED IN MARCH 2018, AND HAS SINCE
DECLINED — IN BOTH THE JUNE AND SEPTEMBER QUARTER OF THE CURRENT
FISCAL YEAR. THE NPA CRISIS IS MORE WIDESPREAD IN THE PUBLIC SECTOR
BANKS.

A Reserve Bank of India (RBI) note based on unaudited financial statements of Scheduled
Commercial Banks (SCBs) up to September 30, 2018, suggests that the worst of the non-
performing assets (NPA) crisis facing India’s banks might be over and that credit growth may
also be back. (REUTERS)

The share of gross NPAs in total advances of banks, both in the public and private sector,
peaked in March 2018, and has since declined — in both the June and September quarter of
the current fiscal year. The NPA crisis is more widespread in the public sector banks. The
report also says that annualized slippage ratio — percentage of fresh NPAs as percentage of
standard NPAs — has also shown a decline in the last two quarters. To be sure, the share of
NPAs in total advances is still much higher than what it was before the RBI forced banks to
implement Asset Quality Review (AQR) in December 2015. The AQR is believed to have
put an end to the practice of making additional provisions to what were already stressed loans.

The Indian economy has been suffering from a vicious cycle of low demand and supply for
capital due to the NPA crisis. Banks were unable to lend because their capital was caught in
bad loans. And firms were unwilling to borrow because of an already existing loan burden.
The Economic Survey had termed this as the “twin balance sheet” problem a couple of years
ago. The latest numbers on decline in share of NPAs, when read together with capital
formation and credit growth statistics, which are already available in the public realm, also
point towards a cyclical revival of the investment cycle in the Indian economy. Both these
indicators show a revival in the recent period, which suggests that there is a revival in

27
investment demand in the economy.

While these developments are good news on the macro front from a growth perspective,
they could also mean a tightening of the inflation scenario. Given the fact that non-food
inflation in the economy has been consistently high, it could build the case for a hike in
lending rates by RBI in the near future.

28
 GROSS NPAS JUMP TO 11.2 % IN FY19: IN RBI REPORTS IN 2019

PRIVATE SECTOR PEERS BANKS’ NPA RATIO STOOD AT A MUCH LOWER LEVEL OF
4.7 PERCENT AS AGAINST 4.1 PERCENT IN FY17

System-wide gross non-performing assets of banks rose to 11.2 percent or at Rs 10.39 trillion in
FY19 from 9.3 percent a year ago, and the share of public sector banks stood at Rs 8.95 trillion, or
at 14.6 percent, according to the Reserve Bank data released Friday.
In FY18, system wide gross NPAs stood at 9.3 percent and that of state-run lenders stood at 11.7
per cent.
“During FY17, the GNPA ratio reached 14.6 percent for state-run banks due to restructured
advances slipping into NPAs and better NPA recognition,” RBI said in its report on ’Trends &
Progress of Banking in 2016-17.’
In terms of the net NPA ratio, state-run banks saw significant deterioration at 8 percent in FY17
from 6.9 percent year-ago. Private sector peers’ banks’ GNPA ratio stood at a much lower level of
4.7 percent as against 4.1 percent in FY16.
“Resolute efforts on the part of private sector banks to clean up their balance sheets through higher
write-offs and better recoveries also contributed to their lower GNPA ratios,” the report said. Asset
quality of foreign banks improved marginally to 3.8 percent in FY18 from 4 percent in FY18.
In FY19, the share of doubtful advances in total gross NPAs increased sizeable to Rs 5.11 trillion
or 6.7 per cent of the system, driven up by state-run banks whose ratio stood at 9 percent.
In fiscal 2019, share of sub-standard and loss assets in GNPAs of private banks declined to 1.1
percent and 0.2 percent, respectively due to aggressive write-offs.
During the year under review, the fresh slippages rose for state-run lenders on account of
restructured advances slipping into NPAs and a decline in standard advances.
In the previous fiscal, the GNPA ratio of public sector banks arising from larger borrower accounts
(exposure of Rs 5 crore and above) increased to 23.1 per cent from 18.1 per cent in the FY18.But
this saw an improvement in FY19. “During the first half of FY19, NPAs in large borrower accounts
of state-run banks and private sector banks declined to 21.6 percent and 7 percent, respectively,”
the report said.
The gems & jewelry sector saw a significant increase in GNPAs during FY19 with unearthing of

29
frauds at PNB, which bore the brunt of the Rs 14,000 crore scam by Nirva Modi and his uncle
Mehul Choksi.

“Frauds have emerged as the most serious concern in the management of operational risks, with
90 percent of them located in the credit portfolio of banks,” the report said. A large value fraud
involving Rs 50 crore and above constituted about 80 percent of all the frauds during 2017-18.
Nearly 93 percent of the frauds worth Rs 10 lakh or more occurred in state-run lenders while
private banks accounted for just 6 percent.
“We will continue to monitor asset quality as well as resolution of stressed assets with a focus on
implementation of the new resolution framework,” the RBI said in the report. The monetary
authority also said it will investigate implementation of Ind.-As, corporate governance in banks
and a revised framework for securitization. The central bank also intends to issue revised
prudential regulations including guidelines on exposure/investment norms, risk management
framework and select elements of Basel III capital framework, it said.

30
TOTAL NPA in BANKING SECTOR TILL 2019

Indian banks' gross non-performing assets (NPAs), or bad loans, stood at Rs 10.25 lakh crore as
on 31 March 2019. On quarter, the pile has grown by Rs 1.39 lakh crore or 16 percent from Rs
8.86 lakh crore as on 31 December 2018. This chunk now accounts for 11.8 percent of the total
loans given by the banking industry. For financial year 2019, the total bad loans of these banks
rose by a whopping Rs 3.13 lakh crore.

Taking note of the alarming bad loans situation, the Narendra Modi-led government, last year,
announced an Rs 2.11 lakh crore bank recapitalization plan to pull out state-run banks from the
mess. As much as 90 percent of the above-mentioned sticky assets are on the books of government
owned banks.

A break-up of the NPAs shows that 21 public sector banks (PSBs) saw their bad loans pile grow
by Rs 1.19 lakh crore (or 15.4 percent) to Rs 8.97 lakh crore in the March 2019 quarter, compared
to December 2018's figures, while that of 18 private banks surged by Rs 19,446 crore or 17.9
percent to Rs 1.28 lakh crore in the March 2018 quarter from Rs 1.09 lakh crore in the December
2017 quarter.

After making provisions, the net bad loans of these banks stood at Rs 5.18 lakh crore in the March
2019 quarter as against Rs 4.69 lakh crore in the December 2018 quarter. Industry leader, the State
Bank of India (SBI), which tops the NPA chart, has logged an increase of Rs 24,286 crore in bad
loans in the March quarter to Rs 2.23 lakh crore. The Nirav Modi scam-hit Punjab National Bank
(PNB) has reported the maximum rise of Rs 29,100 crores in gross NPAs to Rs 86,620 crore in
the March quarter. Barring the Bank of India (BoI) and Oriental Bank of Commerce (OBC), most
other PSBs' also recorded a rise in bad loans during the quarter. While Bank of India's gross bad
loans declined by Rs 1,920 crore in the March quarter, that of OBC was down by Rs 1,417 crore.

Among private banks, the gross NPAs of ICICI Bank and Axis Bank have risen significantly.
ICICI Bank's bad loans pile grew by Rs 8,024 crore or 17.4 percent in the March 2018 quarter to

31
Rs 54,063 crore; Axis Bank's widened by Rs 9,248 crore or 37 percent to Rs 34,249 crore in the
March 2018 quarter from Rs 25,001 crore during the December 2017 quarter.

These seven charts throw more light on the bad loans crisis that has engulfed the
nation's banking sector:

32
33
34
The Modi government has time and again blamed the previous UPA-regime for the bad loan mess,
saying NPAs are a legacy issue. It isn't clear whether the government has grasped the gravity of the
situation. Indeed, the government has taken steps to address the bad loans mess like the NPA
ordinance, giving the central bank more power to direct banks to act against loan defaulters, and the
passage of the Insolvency and Bankruptcy Code (IBC).
MEANING OF PUBLIC SECTOR BANK

35
A Public bank is a bank, a financial institution, in which a state, municipality, or public actors are the
owners. It is an enterprise under government control. Prominent among current public banking
models are the Bank of North Dakota, the German public bank system, and many nations’ postal
bank systems.
Public or 'state-owned' banks proliferated globally in the late 19th and early 20th centuries as vital
agents of industrialization in capitalist and socialist countries alike; as late as 2012, state banks still
owned and controlled up to 25 per cent of total global banking assets.
Proponents of public banking argue that policymakers can create public-sector banks to reduce the
costs of government services and infrastructure; protect and aid local banks; offer banking services
to people and entities underserved by private-sector banking; and promote kinds of economic
development reflecting polities’ shared notions of social good. The 2015 Addis Ababa Financing
for Development Action Agenda noted that public banks should have an important role in
achieving the new Sustainable Development Goals. Increasingly, major international financial
institutions are recognizing the positive and catalytic role public banks can serve in the coming
low carbon climate resilient transition. Further, international NGOs and critical scholars argue that
public banks can play a significant role in financing a just and equitable energy transition.

PUBLIC SECTOR BANK

THE STATE BANK OF INDIA (SBI)

The SBI is an Indian multinational, public sector banking and financial services company. It is
a government-owned corporation headquartered in Mumbai, Maharashtra. The company is ranked
216th on the Fortune Global 500 list of the world's biggest corporations as of 2017. It is the largest
bank in India with a 23% market share in assets, besides a share of one-fourth of the total loan and
deposits market.
The bank descends from the Bank of Calcutta, founded in 1806, via the Imperial Bank of India,
making it the oldest commercial bank in the Indian subcontinent. The Bank of Madras merged into
the other two "presidency banks" in British India, the Bank of Calcutta and the Bank of Bombay, to
form the Imperial Bank of India, which in turn became the State Bank of India in 1955. The
Government of India took control of the Imperial Bank of India in 1955, with Reserve Bank of India

36
(India's central bank) taking a 60% stake, renaming it the State Bank of India. In 2008, the
government took over the stake held by the Reserve Bank of India

SBI FIVE YEARS NPAs

YEAR NET NPA in CRORE

2015 31096.07

2016 27590.58

2017 55807.02

2018 58277.38

2019 110854.70

INTERPRETATION: In this table shows that Net NPA of public sector banks E.g. SBI banks
has increase year by year like in 2015 there is 31096.07 crores and in year 2019 Net NPA will increase
110854.70 it also effects on Net profit of banks & its performance.

37
MEANING OF PRIVATE SECTOR BANKS

Private banking includes personalized financial and banking services generally offered to
wealthy high net worth individual (HNWI) clients. For wealth management purposes, HNWIs
have typically accrued more wealth than the average person, so they have the means to access a
larger variety of conventional and alternative investments. Private Banks aim to match such
individuals with the most appropriate options.

In addition to providing exclusive investment-related advice, private banking goes beyond

managing investments to address a client's entire financial situation. Services include protecting
and growing assets in the present, providing specialized financing solutions, planning
retirement and passing wealth on to future generations.

While an individual may be able to conduct some private banking with $50,000 or less in
investable assets, some exclusive private banks only accept clients with at least $500,000 worth of
investable assets. Such high levels of wealth allow these individuals to participate in alternative
investments, such as hedge funds and real estate. Furthermore, this level of wealth often prevents
liquidity problems. UBS, Merrill Lynch, Morgan Stanley and Credit Suisse are examples of private
banks.

PRIVATE SECTOR BANKS

AXIS BANK

Axis bank is the third largest of the private-sector banks in India offering a comprehensive suite
of financial products. The bank has its head office in Mumbai, Maharashtra. It has 3,703 branches,
13,814 ATM s, and nine international offices. The bank employs over 55,000 people and had a
market capitalization of 1.31 trillion (US$18 billion) (as on March 31, 2018). It sells financial
services to large and mid-size corporate s, SME, and retail businesses.

As of 30 Jun. 2017, 30.81% shares are owned by promoters and promoter group (United India
Insurance Company Limited, Oriental Insurance Company Limited, National Insurance Company

38
Limited, New India Assurance Company Ltd, GIC, LIC and UTI). The remaining 69.19% shares are
owned by mutual funds, FIIs, banks, insurance companies, corporate bodies, and individual
investors among other,
AXIS FIVE YERAS OF NPAs

YEAR NET NPA in CRORE

2015 1024.62

2016 1316.71

2017 2522.14

2018 8626.60

2019 16592.00

INTERPRETATION: In this table shows that Net NPA of Private sector banks E.g.
Axis banks has increase year by year like in 2015 there is 1024.62 crores and in year
2019 Net NPA will increase 16592.00 it also effects on Net profit of banks & its
performance.

39
 DATA ANALYSIS AND INTERPRETATION

To analyze the performance of SBI & Axis banks on Non-performing asset for last five years
In public sector (SBI bank) and private sector (axis bank) for this study were selected based on
purposive sampling method, for this top 1 public and 1 private sector banks in India were taken
for the study on the basis of market capitalization. The study period is from 2013-14 to 2017-18.

Statistical tools used: Statistical tools used Mean has been calculated to know the average
performance and to know the stability in the performance of the banks to find the relationship
between NPA and Net profit.

Gross NPA to Gross advance ratio of SBI & AXIS Banks in India from2012-13 to 2017 -18 (Ratio
in Percentage)
YEAR SBI BANK AXIS BANK
2014-15 4.93 1.34
2015-16 4.20 1.43
2016-17 6.3 1.75
2017-18 6.8 5.42
2018-19 6.9 6.77
MEAN 5.826 3.342

INTERPRETATION:

As above table shows that reveals the Gross NPA to Gross advance ratio of SBI & Axis Banks.
SBI has the highest mean ratio of 5.826, followed by Axis bank has the lowest mean ratio of 3.342.
This shows that there a consistency in Gross NPA to gross advance ratio.

40
RELATIONSHIP BETWEEN NET NPA AND NET PROFITS OF SBI AND
AXIS BANKS

NET PROFIT AND NET NPA OF SELECT PUBLIC SECTOR BANKS FROM 2013-134TO
2017-18 (RS IN CRORES)
YEARS SBI NET SBI NET NPA AXIS NET AXIS NET NPA
PROFIT PROFIT

2014-15 10891 31096 6216 1027

2015-16 13102 27590 7345 1318
2016-17 9951 55807 8224 2520
2017-18 10484 58277 3682 8627
2018-19 2815 110854 2757 16592
MEAN 9449 56725 5645 6017
Interpretation: AS above table shows that when NPA is at an increasing level, there will be a
downfall in the Net Profit of the banks. It is clear from the above table that the NPA of SBI increases
56725 crores in 2018-19. The NPA of Axis bank has the lowest 6017 in 2018-19. This shows that
the concentration of NPA with some largest Public Sector Bank increases at a high rate. Table
shows that when NPA is at an increasing level, there will be a downfall in the Net Profit of the
banks. It is clear from the above table that the NPA of SBI increases 56725 crores in2018-19, and
the NPA of Axis banks has 6017.This shows that the concentration of NPA with largest SBI Bank
increases at a high rate. To analyze the performance of SBI & Axis banks on Nonperforming asset
for last five years “NPA resolutions have started to happen since the recognition of bad loans and
Insolvency and Bankruptcy Code (IBC) law implementation has picked up. So hopefully, going
forward, the asset quality should start looking better from here on. Banks are also growing their
balance sheet which would also show improvement in the percentage ratios for the NPAs," said
Karthik Srinivasan, Senior Vice President of ICRA Ratings.
In FY20 will be “the year of happiness”, SBI Chairman Rajnish Kumar said after the FY19 financial
results. In the current market situation, Kumar considers SBI in the best position to seize the
opportunity.

41
Underlying reason for NPA in India

An internal study conducted by RBI shows that in the order of prominence, the following factor
contribute to NPAs. Internal Factor Diversion of funds for - Expansion/diversification
/Modernization - Taking up new project - Helping /promoting associate concerns time/cost overrun
during the project implementation stage Business Failure Inefficiency in management Slackness in
credit management and monitoring Inappropriate Technology/technical problem Lack of
coordination among lenders External Factor Recession Input/power storage Price escalation
Exchange rate fluctuation Accidents and natural calamities, etc. Changes in government policies in
excise/ import duties, pollution control orders, etc.

NPA - Impact The problem of NPAs in the Indian banking system is one of the foremost and the
most formidable problems that had impact the entire banking system. Higher NPA ratio trembles
the confidence of investors, depositors, lenders etc. It also causes poor recycling of funds, which
in turn will have deleterious effect on the deployment of credit. The non-recovery of loans effects
not only further availability of credit but also financial soundness of the banks.

1. Profitability: NPAs put detrimental impact on the profitability as banks stop to earn income on
one hand and attract higher provisioning compared to standard assets on the other hand. On an
average, banks are providing around 25% to 30% additional provision on incremental NPAs which
has direct bearing on the profitability of the banks.

2. Asset (Credit) contraction: The increased NPAs put pressure on recycling of funds and reduces
the ability of banks for lending more and thus results in lesser interest income. It contracts the
money stock which may lead to economic slowdown.

3. Liability Management: In the light of high NPAs, Banks tend to lower the interest rates on
deposits on one hand and likely to levy higher interest rates on advances to sustain NIM. This may
become hurdle in smooth financial inter mediation process and hampers banks’ business as well
as economic growth.

42
4. Capital Adequacy: As per Basel norms, banks are required to maintain adequate capital on risk
weighted assets on an ongoing basis. Every increase in NPA level adds to risk weighted assets
which warrant the banks to shore up their capital base further. Capital has a price tag ranging from
12% to 18% since it is a scarce resource.

5. Shareholders’ confidence: Normally, shareholders are interested to enhance value of their

investments through higher dividends and market capitalization which is possible only when the
bank posts significant profits through improved business. The increased NPA level is likely to
have adverse impact on the bank business as well as profitability thereby the shareholders do not
receive a market return on their capital and sometimes it may erode their value of investments. As
per extant guidelines, banks who’s Net NPA level is 5% & above are required to take prior
permission from RBI to declare dividend and also stipulate cap on dividend payout.

6. Public confidence: Credibility of banking system is also affected greatly due to higher level
NPAs because it shakes the confidence of public in the soundness of the banking system. The
increased NPAs may pose liquidity issues which is likely to lead run on bank by depositors. Thus,
the increased incidence of NPAs not only affectsthe performance of the banks but also affect the
economy as a whole. In a nutshell, the high incidence of NPA has cascading impact on all
important financial ratios of the banks viz., Net Interest Margin, Return on Assets, Profitability,
Dividend Payout, Provision coverage ratio, Credit contraction etc., which may likely to erode the
value of all stakeholders including Shareholders, Depositors, Borrowers, Employees and public at
large.

43
 A BRIEF ACCOUNT OF PROFITABILITY

The primary objective of each business enterprise is to earn profit. In facts profit earning is
considered essential not only for the survival of business but is also required for its expansion and
diversification. One of the most frequently used tools of financial ratio analysis is profitability
ratios which are used to determine the company’s bottom line and its return to its inventors.
Profitability ratios are typically based on net earnings, but variations will occasionally use cash
flow or operating earnings. Profitability is a measure of efficiency and control. Profitability is the
main base for liquidity as well as solvency. As per RBIs master circular dated 01 -07-2005 An
asset, including a leased asset, becomes non-performing when it ceases to generate income for the
bank. It is also known as non- productive assets (NPA’s), non-performing loans and constitutes
integral part of Bank’s operations. It means NPA an asset or account of borrower, which has been
classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance
with the directions or guidelines relating to asset classification issued by RBI. A critical look
through the existing statistics on the movement of NPAs of the leading Commercial Banks will help
to determent the extent to which they are standing regarding NPAs

44
 PROBLEMS OF NPA

The banking sector regardless of laying prominence is not making sufficient return on investment
or the return on equity that shareholders necessitate. These days it’s all about the customer and
many banks are feeling stress because they are not delivering the level of service that consumers
are demanding, especially regarding technology. In banking system day to day NPAs are
increasing so bank does not have sufficient capital adequacy ratio for managing the risk. The major
risk to India’s banks is the risk in bad loans. The hold back in the economy in the last few years
led to a risk in bad loans or non-performing assets. This money cannot be used for any other
purpose including lending as a result; banks have lower capital available to use for its various
operation.
In the past few years, many banks have tried to interruption setting aside money as provisions (for
future bad loans). Technically, NPA are loan account of borrower, which have been classified by
a bank into three categories via, standard asset, substandard asset and loss asset in agreement with
the guidelines relating to assets classification issued by RBI. The increase of NPAs is an important
factor in banking sector influential its financial stability and growth as high NPAs have a
weakening impact on capital, liquidity and profitability of the banking institutions. In addition, a
high level of NPAs hampers the bank ability to recycle funds and puts a strain on the net worth of
banks. Since the onset of the global financial crisis, the Indian banking system has become a source
of concern due to rising NPAs.
Non-Performing assets have emerged as a serious threat to the banking industry in India as it
affects the performance, financial soundness, and profitability of the banks. Further, NPA is one
of the indicators to assess the soundness of banking sector. They, unfortunately, impact the banks
by reducing their profits in the form of provisions and it also reduces their lending capacity. The
banks’ inability to recover the loans results in written offs which leads to a downfall in their
profitability performance. Non-repayment of loans by the willful defaulters prevents the banks
from lending to new borrowers, which slows down the credit cycling and diminishes the estimate
of credit multiplier. Increase in Non-Performing Assets has an adverse impact on the profitability
of the banks. So, it becomes the biggest hurdle in the way of social-economic development of
India. Hence, the present study focused on the impact of NPA on Profitability of the select Public
and Private Sector banks in India.

45
SUGGESTION AND RECOMMENDATION

 Advances provided by banks need to be done re-sanctioning evaluation and post

disbursement control so that NPA can decrease.
 Good management needed on the side of public sector bank e.g. SBI to decrease the level of
NPA. Proper selection of borrowers & follow ups required to get timely payment. Non-
performing assets are a drain to the bank.
 The banks in India are adopting various strategies to reduce the non-performing assets in their
banks and they are also adopting various methodologies by which further addition to NPA
portfolio is minimized in the real sense, in case there is a recovery in principle andinstallments
due in respect of the loans granted to the banks are received 100%, the questionof non-
performing assets do not arise.
 However, there is no such ideal bank where the NPA is nil. Except banks which were
originated recently, all banks are prone to have some portion of their loans and advances as
non-performing advances the following are some strategies by which banks are trying to
curtail non-performing assets to a great extent.
 As the HDFC bank is using the new technology known as ‘Artificial Intelligence’ very
effectively by which the NPA of HDFC bank is very less around 0.2%. So, it is suggested
that SBI and Axis bank should also use this technology in a very effective and efficient way
so that the NPA of these banks get reduced over the period.

46
 CONCLUSION

This project report suggests NPAs affect the financial performance of Indian banks as well
financial growth of economy. Indian banking system is facing the NPAs problem. Every country’s
economic growth depends upon their financial system. The financial system mainly comprises
banking sector. Especially public sector banks E.g. SBI bank should focus on their NPA
Management to grow their profitability. The financial institutions should develop new strategies
planning to improve the recovery of loan. Non-performing assets (NPAs) is affecting the
performance of financial institutions both financially and psychologically. The non-performing
assets have
become a major cause of concern. Absorbing the credit management skills has become more
important for improving the bottom-line of the banking sector. The current NPAs status continues
to disturb Indian banking Sector. The Indian banking sector faced a serious problem of NPAs. A
high level of NPAs suggests high probability of many credit defaults that affect the profitability
and liquidity of banks. Most of the problem related to NPA is faced by public sector banks. To
improve the efficiency and profitability, the NPAs must be scheduled. Strict measures are needed
to be taken up to combat these NPAs crises. It is highly impossible to have zero percentage.

47
 BIBLIOGRAPHY

A. Websites: -

1. WWW. MONEYCONTROL .COM

2. WWW. ECONOMIC TIMES.COM

3. WWW.INVESTING.COM

4. WWW.AXISBANK.COM

5. WWW.SBI.CO.IN

6. www.rbi.org.in

7. WWW.business today.in

8. WWW.WIKIPEDIA.COM

48
 Social Relevance Project
on
“A Study on CSR activity done by Indian Commercial Banks”
Submitted to
Durgadevi Saraf Institute of Management Studies
In the partial fulfilment for the award of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
(2022 – 2024)

Submitted By
Miss. Sayali Mane
(20221046)

Under the guidance of

Prof. Sumana Chaudhari
(Faculty Mentor)

RSET Campus, Swami Vivekananda Rd, Mandlik Nagar, Sunder Nagar, Malad West, Mumbai,
Maharashtra 400064
 CERTIFICATE

This is to certify that Miss. Sayali Mane has worked and duly completed his Project Work in
partial fulfilment of the Master's Degree in Management Studies recognized by the University
of Mumbai for the academic year 2022 -24 and his Project entitled.

“A Study on CSR activity done by Indian Commercial Banks”

Under my supervision.

I further certify that the entire work has been done by the Learner under my guidance and that
no part of it was submitted previously for any degree/diploma of any university.

It is his own work and facts reported by his personal finding and investigations.

Name of the Mentor: Prof. Sumana Chaudhari.

Date: (Signature of Mentor)
 DECLARATION

I the undersigned Miss. Sayali Mane hereby declare that the work embodied in this project work titled
“A Study on CSR activity done by Indian Commercial Banks” forms my contribution to the research
work carried out under the guidance of Mr. Sumana Chaudhari (Asst. Professor) is a result of my
research work and had not been previously submitted to any degree/diploma to this or any other
Institute.

Wherever references have been made to precious works of others, it has been clearly indicated as such
and included in the bibliography.

I, hereby further declare that all information in this document has been obtained and presented in
accordance with academic rules and ethical conduct.

Miss. Sayali Mane

Certified by

Mrs. Sumana Chaudhari

(Asst. Professor)
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.

I take this opportunity to thank Durgadevi Saraf Institute of Management Studies for giving
me a chance to do this project.

I would like to thank my Director, Dr. C. Babu for providing the necessary facilities required
for the completion of this project.

I would also like to express my sincere gratitude towards my Faculty Mentor, Asst. Sumana
Chaudhari. Whose guidance and care made the project successful.

I would like to thank our College Library for providing various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
 INDEX

SR.NO TITLE PAGE NO.

EXECUTIVE SUMMARY 1
1 INTRODUCTION 2
2 OBJECTIVES OF THE STUDY 5
3 RESEARCH METHODOLOGY 5
4 SIGNIFICANCE OF STUDY 5
CORPORATE SOCIAL RESPONSIBILITY BY
INDIAN COMMERCIAL BANKS:
LITERATURE REVIEW
5 6
6 DATA INTERPRETATION AND ANALYSIS 10
ORIGIN AND DEVELOPMENT OF CSR IN
7 INDIA 21
8 CSR IN INDIA 24
REVIEW OF CSR PRACTICES OF
9 COMMERCIAL BANKS IN INDIA 27
CSR PRACTICES BY INDIAN BANKS -A
10 COMPARATIVE STUDY 28
11 CONCLUSION 51
12 SUGGESTIONS 54
13 BIBLIOGRAPHY 55
 EXECUTIVE SUMMARY

The main purpose of the study is to analyze the corporate social responsibility (CSR)
activities carried out by Indian commercial banks. The study is based on the
secondary data taken from the annual reports of the banks for the year 2009-10 to
2011-12. Variables used in the study are rural branch expansion, priority sector
lending, environment protection, community welfare, women welfare, new initiative
related to CSR, financial literacy, education and farmers’ welfare. The analysis
shows that though the Indian banks are making efforts in the CSR areas but still there
is a requirement of more emphasis on CSR. There are some banks which are not even
meeting the regulatory requirements. The public sector banks have overall highest
contribution in CSR activities. Private sector banks and foreign banks are still lagging
in this area. The study has a scope of further research where the CSR performance of
banks can be related to financial performance of the banks

1
 Introduction

Business is a socio-economic entity. Society cannot do without business and vice versa. Businesses
cannot detach itself from the social spectrum within which it functions. The relationship between
business and society has become increasingly significant in recent years as businesses must respond
to rapid global change and serious societal concerns, many of which cannot be adequately attended
to by government alone.
In this evolving times society, governments and businesses are more closely connected than ever.
In this age of globalization, corporations and business enterprises are no longer confined to the
traditional boundaries of the nation. In the last 20 years, Multi-National Corporations (MNCs) have
played an influential role in defining markets and consumer behaviour.
The rules of corporate governance have also changed. Reactions to this change have been varied.
Labourers, marginalized consumers, environmental and social activists protested against the
unprecedented predominance of multinational corporations. Corporate Social Responsibility (CSR)
is, essentially a new business strategy to reduce investment risks and maximize profits by taking all
the key stakeholders into confidence.
The new generation of corporations and entrepreneurs recognize the fact that social and
environmental stability are two important prerequisites for the long-term sustainability of their
markets. Corporate social responsibility is both a value and a strategy to ensure the sustainability of
business. For the new generation of corporate leaders, optimization of profit is the key and is more
important than its maximization.
Hence there is a noticeable shift from accountability to shareholders to accountability to all
stakeholders for the long-term success and sustainability of the business. Stakeholders include
consumers, employees, affected communities and shareholders, all of whom have the right to know
about the corporations and their business. This raises the important issue of transparency in the
organization.

2
As corporates are profit making organizations basic assumption is that they should be sensitive to
the needs of communities or society at large in which they operate, similarly, their products and
services should be such that it should be free of any negative impact on people and the planet. The
concept of Corporate Social Responsibility (CSR) has a wider scope. The banks are one of the
major stakeholders in the financial sector. Through its huge network of branches and profit the
banking industry is considered as one of the major corporates in India. The banks can have a wider
socio-economic impact in the society through their financial products and services. Considering
this, the Reserve Bank of India has issued guidelines to banks regarding CSR, sustainable
development and non-financial reporting and advised that the banks should frame their policies on
CSR. Further, RBI considers implementation of CSR as crucial.

CSR is not all about expending money and resources without proper planning and implementation.
A company treading on the CSR path must pass several stages of planning. The company can begin
the actual implementation of the project only after it has got the entire program details in place.
The Government has introduced the new Companies Act, 20131 which mandates a certain
percentage of expenditure on CSR initiatives. The Companies Act, 2013 has introduced the idea of
CSR to the forefront and through its disclose-or- explain mandate is promoting greater transparency
and disclosure. Schedule VII of the Act, which broadly lists out the CSR activities on which the
amount may be spent.

3
There are several concerns with the introduction of mandatory CSR. One of the biggest concerns is
the anticipated rise in ‘Green washing’. Green washing is the practice of making an unsubstantiated
or misleading claim about the environmental benefits of a product, service, and technology or
company practice. Green washing can make a company appear to be more environmentally friendly
than it really is. The second concern is the creation of a monitoring body to oversee the
implementation of mandatory CSR. The third issue is that the bill covers a very small section of the
private sector.

One feature of the Companies Act, 2013 while mandating CSR is that the government had decided
it will not police and monitor the implementation. Instead, it will leave it to the companies to
implement what is mandated by the law. In case a company fails to meet the prescribed spend, it
will have to report and explain the reasons to its shareholders. The CSR spending in the new
Companies Act would be in addition to what is being prescribed for companies in the mining or the
coal sector.

4
 Objectives of the Study:
 To Study the CSR activities undertaken by Indian Commercial Banks.
 To understand the Impact of CSR on Economy and Company Growth.

Research Methodology:
 Data collected is Secondary in Nature.
 Nature of the study is Descriptive.

Significance of Study:

The business of the 21st century will have no choice but to implement CSR. The corporates and the
government should try to build up a relationship between the business and the society. The study
will help in identifying whether requisite awareness is created among various stakeholders of the
entity and also regarding the impact which CSR is having on organizational performance.
This will help in bringing the importance of good corporate governance in banks so as to
implement CSR in proper time and situations to achieve the projected growth. It further tries to
assess the importance of training and motivating the employees to take part in community based
programs.
The study also aims to understand whether implementation of strong CSR mechanism has any
effect on public perception and how it affects the overall performance of the banking company. In
this context, the researcher feels that it is necessary to make an in-depth study on CSR and
corresponding performance of the banking industry.

5
Corporate Social Responsibility by Indian Commercial Banks:
Literature Review

Within the world of business, the main “responsibility” for corporations has historically been to
make money and increase shareholder value. In other words, corporate financial responsibility has
been the sole bottom line driving force. However, in the last decade, a movement defining broader
corporate responsibilities– for the environment, for local communities, for working conditions, and
for ethical practices has gathered momentum and taken hold. This new driving force is known as
corporate social responsibility (CSR). CSR is oftentimes also described as the corporate “triple
bottom line”–the totality of the corporation’s financial, social, and environmental performance in
conducting its business. In the recent years Corporate Social Responsibility (CSR) has witnessed
tremendous increase in awareness and control in the global arena.
In the financial sector several international initiatives like "United Nations Environment Program
Finance Initiative", "Global Reporting Initiative", "Equator Principles and Collavecchio
Declaration on Financial Institutions" are underway to ensure the adoption of CSR practices in
normal business operations. These initiatives have favourably tuned up developed countries to
behave in a socially responsible way
Reserve Bank of India stated that CSR entails the integration of social and environmental concerns
by companies in their business operations and also in interactions with their stakeholders. The
major thrust areas for CSR practice in Indian banks are common in public sector and private sector
banks. These areas include child welfare, community welfare, education, environment, healthcare,
poverty eradication, rural development, vocational training, women's empowerment, protection to
girl child and employment.
Very limited research work has been done to investigate the CSR practices in developing and
emerging nations. In fact the academic publication on this fiery issue is primarily western centric. It
is to be noted that most of the CSR studies conducted so far were in the context of Western Europe,
USA and Australia and we still know too little about practices in smaller and emerging countries.
In recent years an attempt has been initiated to ensure socially responsible behaviour of banking
sector in a more organized manner.
The following section provides a brief review of the theoretical literature on CSR practices by
Indian commercial banks:

6
 The Reserve Bank of India (2007) issued a guideline on CSR titled “Corporate Social
Responsibility, Sustainable Development and Non-Financial Reporting – Role of Banks”. In
their circular, RBI highlighted the role of banks in corporate social responsibility. RBI
circulated the notice with guidelines on CSR for all the scheduled commercial banks.
 Sharma (2011), in his study entitled “CSR Practices and CSR Reporting in Indian Banking
Sector” attempted to examine CSR practices and CSR reporting in India with special
reference to banking sector. The study revealed that CSR identifies the organization’s
commitment to function in a socially accountable manner. The study found that CSR
activities of developing nations are not promising. The study further revealed that in
financial sector there is an absence of stringent provisions regarding compliances and
reporting of CSR. The study concluded that the banking sector in India is showing interest
in incorporating sustainability into their business models, but the area of concern is its CSR
reporting practices which are far away from satisfaction.
 Patil, J.D & Aurangabadker, N.P (2011), in their study “CSR Practices and Ratings in Indian
Banking Sector” have discussed about the CSR practices in Indian banking industry. The
study was aimed by the researchers to understand the CSR practices carried out by the
selected commercial banks and their ratings in the Indian banking sector. CSR was a
concept whereby financial institutions not only consider their productivity and growth, but
also the well-being of society and the environment by taking responsibility for the impact
of their activities on various stakeholders including the civil society represented by NGOs.
 Chaudhury, S.K, Das, S.K & Sahoo, P.K (2013), in their research work entitled “Practices of
Corporate Social Responsibility in Banking Sector in India: An Assessment” observed that
most of the financial and banking institutions in India are directly involved in social
banking. The study is conducted mainly to know the status of CSR and strategies adopted
for CSR by banking institutions. The study further states that the only option left with the
businesses and industries of 21st century is nothing but to implement corporate social
responsibility. The concept of CSR has so far been futile in Indian scenario because of lack
of co-ordination between the corporate efforts, government and non-governmental
efforts. The study suggests that CSR activities should be made mandatory by asking

7
 corporate to earmark a certain percentage of their profit for CSR activities and to publish
CSR report in a format laid down by the regulator.
 Moharana, S (2013), in her study on “Corporate Social Responsibility: A Study of Selected
Public Sector Banks in India” analyzed the CSR activities carried out by selected
nationalized banks in India. The study was carried out taking five nationalized banks as
sample for the study, the selected banks includes Allahabad Bank, Andhra Bank, Bank of
Baroda, State Bank of India and UCO Bank. It was revealed by the study that the
nationalized banks are directly engaged in CSR activities mostly for the development of
rural areas, towards education, welfare of community, women and children. The study
disclosed that, efforts are being made by the selected banks for the implementation of
CSR, but are restricted to certain areas and activities.
 Singh, N, Srivatsava. R & Rastogi, R. (2013), in their work entitled “CSR Practices & CSR
Reporting in Indian Banking Sector” enlisted various initiatives taken by the banking sector
in the current era with respective to CSR and its reporting along with its scope for
improvement. This study aims at evaluating various dimensions of CSR by studying the
concept, major areas of CSR in Indian banking sector, reporting practices and present
status of CSR in banking. The study revealed that maximum number of banks whether
related to private sector or public sector has highly performing CSR activities as per their
priority. But in case of CSR reporting the study shows that most of the banks are still not
disclosing their amount for such initiatives in their websites. The involvement of RBI made
CSR an important part of banking sector but still new policies are required to implement
the concept of CSR in Indian banking industry.
 Sharma, E & Mukta, M. (2013), in their research article on “Corporate Social
Responsibility: An Analysis of Indian Commercial Banks” analyzed the corporate social
responsibility (CSR) activities carried out by Indian commercial banks. The study is based
on the secondary data taken from the annual reports of the banks for the year 2009-10 to
2011-12. The analysis revealed that even though the Indian banks are making efforts in the
CSR areas there lays the need for more emphasis on social responsiveness on the part of
banks. The study further disclosed that certain banks are not even meeting the regulatory

8
 contribution in CSR activities and private sector banks and foreign banks are still lagging in
this area.
 Dhingra, D & Mittal, R. (2014), in their study entitled “CSR Practices in Indian Banking
Sector” attempted to examine the measures initiated by Indian commercial banks to
implement the CSR activities. The study found out that among the reporting banks some
banks are sending false signals to the society with respect to their efforts for socio-
environmental concerns. Most of the banks use CSR practices as a marketing tool and
many are only making nominal efforts towards CSR in loose ways such as donations to
charitable trusts, NGOs, sponsorship of events, etc. Very few banks have a clearly defined
CSR philosophy. Mostly banks implement CSR in an adhoc manner, unconnected with their
business process and do not state how much they spend on CSR activities. The study
concluded that banking sector in India is showing interest in incorporating sustainability
into their business models but the reporting of CSR practices are not satisfactory.
 Gupta, R. & Agrawal, G. (2015) in their study “Corporate Social Responsibility: A Check
on Indian Banks for Responsible Investment” considered the significance of CSR in Indian
banking industry and how it is different in comparison to other industries. The study
revealed that banking industry are far behind other industries as none of the banks issue
separate CSR report or sustainability report even few of them does not publish business
responsibility report also. The study further concluded that the total income and size of
banks are very important factor in CSR contribution. Banks with high income contributes
more towards such activities.
 Patel, A. (2016), in the research article entitled "Corporate Social Responsibility: A
Comparative Study of SBI and ICICI in India" attempted to study the CSR initiatives of
leading commercial banks in India and compare CSR spending from the year 2009-10 to
2015-16. The study found that the percentage of profit after tax spent for CSR by State
Bank of India is more compared to ICICI, but both the banks contribution was high in the
financial year 2015-16. The estimated spending for CSR for 2016-17 is also more in SBI as
compared to ICICI. A great deal of effort is required towards CSR practices and banks must
accept their responsibilities in more legitimate ways.

9
 Data Interpretation and Analysis

Evolution and Framework of Corporate Social Responsibility:

Corporate Social Responsibility (CSR) is an important and one of the most debated issues in
contemporary business, management and politics. There is a lack of consensus regarding the
meaning of CSR in the literature available on corporate social responsibility. Academicians,
practitioners and research scholars have thus been open to define and interpret CSR as it best fits
their purpose, resulting in definitions and interpretations that are often biased by underlying value
judgements and ideologies. The concept of CSR has increasingly gained interest among corporates
and governments and other stakeholders of business and has triggered discussions and debates on
its meaning among a number of scholars.
The roots of the concept of CSR as it is known today have a long history which indicates that
business people have paid increasing attention to the concerns of society1. The concepts of modern
CSR evolved only recently. In both the east and west, it was called social philanthropy.
Traditionally, corporate philanthropy aimed at the welfare of the inner circle of members within the
enterprise like staff and employees and their families. This was usually in the form of contributions
by visionary business leaders to the establishment and trusts that promoted education, women’s
welfare, medical care and so on.
CSR is qualitatively different from the concept of the traditional concepts of corporate
philanthropy. It acknowledges the debt that the corporation owes to the community within which it
operates. It regards the community as an equal stakeholder. It also defines the business
organization’s partnership with social action groups in providing financial and other resources to
support development plans, especially among disadvantaged communities.
In the emerging perspective CSR directs the corporations to analyze its profits in conjunction with
social prosperity and ethics. Thus ethical business is more a fundamental need emerging on the
international scenario. In an ethical business, the main thrust is on social values and business is
conducted in consonance with broader social values and the stakeholders’ long-term interest.
A better understanding of the transformation of the concept not only contributes to a better
understanding of the meaning of CSR and the relationship between businesses and their key

10
stakeholders but also to a better idea of what should be the role of business in development and
their contributions to society in the late nineteenth century.
Businesses raised concerns on the welfare of their employees and their impact on society in
general. With the emergence of the labour movement and establishment of slums as a result of the
industrial revolution, businesses started to provide social welfare on a restricted scale, including the
construction of hospitals and provision of food coupons. Business philanthropy in this period is
highlighted as spearheading the development of the CSR concept2. The Great Depression in 1929
further strengthened this trend with the introduction of public trusteeship management in addition
to traditional profit-maximizing management3. The concept of CSR is supposed to be emerged and
thrived in the 1950s.
The last decade has seen exponential growth in the field of CSR. CSR has grabbed the attention of
numerous parties which includes business world, investors, consumers, and the media. In the late
nineties more than half of the Fortune 1000 companies started publishing reports.
Of late larger number of companies has started engaging in a serious effort to define and integrate
CSR into all aspects of their businesses. An increasing number of shareholders, analysts, regulators,
activists, labour unions, employees, community organization and news media are asking companies
to be accountable for an ever- changing set of CSR issues. There is increasing demand for
transparency and growing expectations that corporations measure, report, and continuously
improve their social, environmental, and economic performance.
Each company differs in how it implements CSR. The differences depend on various factors such
as the size of the company, management, profitability, the type of products and services rendered,
the business culture of the firm, stakeholder demands and social commitments. Some companies
focus on a single area, which is regarded as most important for them or where they have the highest
impact or vulnerability; human rights, for example, or the environment, while others aim to
integrate CSR in all aspects of their operations.
In India, CSR has evolved to incorporate employees, customers, stakeholders and sustainable
development. CSR taken up by various genres of companies primarily focuses on poverty
alleviation, environmental protection and sustained development. Companies are also taking
initiatives for developing infrastructure in rural areas. Government, social activists and the media
hold companies answerable for the outcome of their social activities. Various organizations grade
companies on the performance of their corporate social responsibility. As a result CSR has emerged

11
CSR Definitions:

CSR is intended to assure the organizations and entities regarding the impact which their business
has upon the society which includes their own stakeholders and the community or environment in
which it operates. CSR is a concept with many definitions and practices. The way it is
comprehended and the way in which it is applied differ greatly for each country and company.
Moreover, CSR is a very broad concept that addresses many and various topics such as human
rights, corporate governance, health and safety, environmental effects, working conditions and
contribution to economic development. Whatever be the definition of CSR, the purpose of it is to
navigate change towards sustainability. There are as many definitions of CSR as there are
disagreements over the appropriate role of the corporation in society. Here is an overview of some
of the popular definitions of CSR that have been proposed over the years.
Bowen defines the social responsibility of businesses “as the obligations of businessmen to pursue
those policies, to make those decisions, or to follow those lines of action which are desirable in
terms of the objectives and values of our society”. According to this definition every aspect of
corporate activity should be integrated in such a manner so as to remain socially approved action.
Thus this definition lays stress on normative behaviour and covers ethical behaviour of corporate
and can be termed as broad view of CSR and covers all stakeholders. He argued that businessmen
are responsible for the consequences of their actions in a sphere somewhat wider than corporate
financial performance, indicating the existence and importance of corporate social performance.
According to Frederick5 “CSR as a private contribution to society’s economic and human
resources and a willingness on the part of business to see that those resources were utilized for
broad social ends”. Frederick summarised the development of CSR in the 1950s into three core
ideas:
(1) Corporate managers as public trustees through the shareholding system;
(2) Stakeholders’ balanced claims to corporate resources;
(3) The acceptance of business philanthropy.
In the opinion of Davis “CSR refers to the firm’s consideration of, and response to, issues beyond
the narrow economic, technical, and legal requirements of the firm”. This definition is very wide
and does specifically stipulate the areas and actions which relate to comprehensive CSR. This
definition also covers the entire stakeholders. The definition of CSR that he set forth refers to

12
economic or technical interest. By arguing that CSR was a blunt idea and the same had to be
discussed in a managerial context, he further advocated that economic gains of the entities in the
long-run shall only be used to justify the socially responsible business decisions, thus paying back
for its socially responsible behaviour.
According to Friedman; “the social responsibility of the firm is to increase its profits”. This
definition lays stress only on economic responsibility of corporate and can be termed as narrow
view of CSR. This definition covers only one stakeholder i.e. shareholder.
As per Carroll; “the social responsibility of business encompasses the economic, legal, ethical, and
discretionary expectations that society has of organizations at a given point in time”. This definition
is very comprehensive and covers all aspects which relate to all responsibilities of business. The
scope of this definition is very wide.
According to Thomas M. Jones; “Corporate social responsibility is the notion that corporations
have an obligation to constituent groups in society other than stockholders and beyond that
prescribed by law and union contract”. Two facets of this definition are critical. First, the obligation
must be voluntarily adopted; behaviour influenced by the coercive forces of law or union contract
is not voluntary. Secondly the obligation is a broad, extending beyond the traditional duty to
shareholders, to other societal groups such as customers, employees, suppliers and neighbouring
communities. The scope of this definition is also wide and relates to stakeholder approach.
Epstein defined CSR as “something that relates primarily to achieving outcomes from
organizational decisions concerning specific issues or problems which (by some normative
standard) have beneficial rather than adverse effects on pertinent corporate stakeholders. The
normative correctness of the products of corporate action has been the main focus of corporate
social responsibility”. This definition lays emphasis on stakeholder approach with ethical
responsible behaviour.
Wood has defined CSR as “the basic idea of corporate social responsibility is that business and
society are interwoven rather than distinct entities; therefore, society has certain expectations for
appropriate business behaviour and outcomes”.
World Business Council for Sustainable Development12 defined CSR as “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.

13
An analysis of the contents of various definitions reveals that there are no universally agreed-upon
definitions of the term ‘Corporate Citizenship’ and ‘Corporate Social Responsibility’. The nature
and scope of corporate social responsibility has changed over time. CSR has been gathering more
and more interest worldwide over recent years.

BASIC Principles of CSR:

1. Sustainability: This is concerned with the effect which action taken in the present has
upon the options available in the future. If resources are utilized today without any control
then they will no longer be available for use in the future, and this is of particular concern
if the resources are finite in quantity. Sustainability implies that the society must not use a
particular resource than can be restored. Thus paper industry should have a policy of re-
planting trees to replace those felled for making paper. Viewing an organization as a part
of a wider social and economic system implies that these effects must be taken into
account, not just for the measurement of costs and value created in the present but also
for the future of the business itself.
2. Accountability: This is concerned with an organization recognizing that its actions
affect the external environment, and therefore the company assumes responsibility
for the effects of its actions. This suggests quantifying the effects of actions taken,
both internal to the organization and externally. More specifically the concept involves
reporting of those quantifications to all parties affected by those actions. It includes
reporting to external stakeholders of the effects of actions taken by the organization
and how they are affecting those stakeholders. Accountability necessitates the
development of appropriate measures of environmental performance and reporting
of the actions of the firm.
3. Transparency: The principle of transparency imports the idea that the external impact of
the CSR initiatives of the organization can be ascertained from its reports and pertinent
facts are not concealed within that reporting. Thus all the effects of the actions of the
organization, including external impacts, should be traceable to all from using the
information provided by the organization’s reporting mechanisms.

14
Theories of Corporate Social Responsibility:

1. Legitimacy Theory: Legitimacy theory is derived from the concept of ‘Organizational

Legitimacy’ which has been defined by Dowling and Pfeiffer. The theory states that
corporate responsibility responds to environmental factors, namely economic, social, and
political and the disclosures of legitimate actions. Legitimacy theory is based upon the
notion that business operates in society through a social contract where it agrees to
perform various socially desired actions in return for approval of its objectives, other
rewards and its ultimate survival. It therefore needs to disclose enough social information
for society to assess whether it is a good corporate citizen. The theory is largely reactive in
that it suggests organizations aim to produce congruence between the social values
inherent or implied in their activities and social norms. Corporate social disclosures may
then be conceived as reacting to the environment where they are employed to legitimize
corporate actions.
2. Stakeholder Theory: Ian Mitroff in his book "Stakeholders of the Organizational Mind”,
published in 1983 in San Francisco13 gave a comprehensive explanation on stakeholder
theory. However there are large number of articles and books on stakeholder theory which
acknowledge R. Edward Freeman as the "father of stakeholder theory." Freeman's
“Strategic Management: A Stakeholder Approach” is widely quoted in the field as being
the underpinning of stakeholder theory, although Freeman himself praises several bodies
of literature in the development of this methodology.
While analysing corporate social responsibility, the most relevant model is the well-known
and widely accepted stakeholder theory. It puts forward that a company needs to take into
account the interests and views most, if not, all of its stakeholders in order to be accepted
and to be successful in the market place. The concept of stakeholder theory is about
organizational management and business ethics that discourses on morals and values in
managing an organization. Classical definition of stakeholders, arguably the most popular
definition cited in the literature proposed that stakeholders are “Any group or individual
who can affect or is affected by the achievement of a corporation’s purpose”. This is
clearly a very broad definition and leaves the notion of stake and the fields of possible
15
 stakeholders unambiguously open to include virtually everyone. Clarkson14 distinguishes
between “primary” and “secondary” stakeholders adding to the earlier concept. A primary
or participant stakeholder is one without whose on-going participation the corporation
cannot survive as a going concern. Secondary or non-participant stakeholders are defined
as those who influence or affect, or are influenced or affected by the corporation, but they
are not engaged in transactions with the corporation directly and are not essential for its
survival. These can be people who exist within an organization. They havemore or
less a direct interest that the company.
According to the World Business Council for Sustainable Development, companies had a
responsibility to the following stakeholders:
 Owners and Investors: Profit Maximization
 Employees - Consistent, Fairly Compensated Employment
 Customers - high quality products and services.
 Business partners - fair, ethical treatment as partners;
 Suppliers - consistent customer upon which to base the supplier’s business;
 Competitors - maintain industry image;
 Government regulators - abide to the rules and regulations;
 Non-governmental organizations - meeting or exceeding their expectations;
 Communities - safe and sustainable livelihood.

Models of Social Responsibility:

Several models are proposed to understand the relationship between the corporate world and
society. The problems regarding CSR are the concepts that are difficult to measure and evaluate.
Therefore different models have arisen in an attempt to depict what is included in CSR. The
popular models of CSR are Walton’s Model, Ackerman’s Model and Pyramid Model by Carroll.
C.C.Walton in 1967 suggested some models of social conduct adoptable by top managers as a way
of responding to public needs. The five models propounded by Walton are as follows;
 Austere Model: In Austere model the emphasis of business is on ownership interest and
profit objective. Social responsibility is non-existent in model;

16
  Household Model: In this model also social responsibility is at the low ebb. Greater
emphasis is on employee jobs and benefit;
 Vendor Model: Vendor model gives more emphasis to consumer interest, taste and right;
Emphasis on social responsibility is still low but higher than house hold model;
 Investment Model: Investment model sees organization as an entity that requires long-
term profit and survival. Social responsibility in this model is much higher than vendor
model;

 Civil Model: Civil model views organization as a corporate citizen that goes beyond
improved obligations which accepts social responsibility and makes a positive commitment
to social needs. It gives higher emphasis to social responsibility.

Ackerman’s Model:

Robert Ackerman, the micro-theorist was one of the foremost scholars to suggest that
responsiveness should be the goal of corporate social endeavour. “Responsiveness” was the term he
preferred to use. According to him, companies tend to pass through three stages in evolving a social
response to the issues of the society.
In Stage 1, the top managers of the corporation deal with an existing social problem. At this stage,
the company is not required to be reminded to do it by anybody. The Chief Executive Officer
merely acknowledges the problem by making a written or oral statement of the company’s policy
towards it.
Stage 2 deals with the observation and preparation. The company hires staff specialists or engages
outside consultants to study the problem and to suggest ways and means of dealing with it. Till this
point, the company has limited itself by declaring its intentions and plan formulations only.

17
Stage 3 deals with implementation. The company now integrates the policy into its on-going
operations. Implementation often comes slowly and often not until the government or public
opinion forces the company to act. But by that time, the company has lost the initiative. Ackerman
thus advises that managers should “act early in the life cycle of any social issue in order to enjoy
the largest amount of managerial discretion over the outcome.”

The Archie Carroll Pyramid Model:

The Pyramid of Corporate Social Responsibility propounded by Archie Carroll is the foremost
model that has enjoyed wide popularity among businesses. Carroll discerned corporate social
responsibilities into four dimensions: “Economic (required), Legal (required), Ethical (expected),
and Discretionary (philanthropy)”.

18
Dimensions of Pyramid Model:
The CSR pyramid is based on four important dimensions, viz. Economic, Legal, Ethical and
Philanthropic standpoint. The concept of the dimensions of CSR model includes the idea that the
organizations have not only economic and legal obligations, but ethical and discretionary
responsibility as well. It is during the recent years that ethical and philanthropic functions have
taken a more significant role. The pyramid of CSR is a tool for measuring the level of CSR at the
firms based on how they fulfil their responsibilities towards the society.
1. Economic Responsibility:
Economically speaking, all firms have a responsibility to earn a profit, since capitalism and
a free market society deem that this is necessary. Businesses were created as economic
entities, designed to provide goods and services to the members of the society. Economic
responsibility explained the most fundamental one since all other business responsibilities
are rested upon the economic responsibility of the firm, because without it the others
become unresolved aspects. It is worth noting that Carroll‘s pyramid of CSR begins with
the economic performance. According to this principle, if a firm is not making profits and is
not providing high quality of goods and services to meet consumer’s needs, it cannot be
considered socially responsible even when the firm has devoted many efforts in social
causes. The economical responsibilities are the foundation upon which all rests and refer
to the firm’s responsibilities towards their shareholders. These responsibilities are
required by the society.

2. Legal Responsibility:
Businesses are expected to pursue its economic responsibility within the constraints of the
existing laws. At the same time business is expected to comply with the laws and
regulations stipulated by federal, state and local governments as the ground rules under
which business must operate. Legal responsibilities express basic notions of fair operations
as established by our lawmakers. Even though they are depicted as the next level of the
pyramid it is seen co-existing with the economic one.

3. Ethical Responsibility:
19
 Ethical responsibility is referring to those activities and practices that are expected or
prohibited by the members of the society even if they are not classified into written law.
Carroll did not offer much explanation about what the ethical responsibilities of businesses
are; beyond the general statement above. However, perhaps this is because, in general,
ethics are difficult to explain. Levy18 stated that ethics are simply values in action, and as a
result, they tend to change as societal values change. Ethical responsibilities are about
accepted norms, standards and expectations that reflect a concern for what consumers,
employees, shareholders, and the community regards as fair. It is simply about respecting
and protecting stakeholder‘s moral rights. Even though ethical responsibility is the next
layer in Carroll‘s CSR pyramid, it must according to Carroll be consistently recognized that
it is in dynamic interplay with the legal responsibility category. Henderson19 points out
that it is hard to tell which voice is actually mirroring the society at large and which is from
critical non-governmental organizations. Furthermore there is a dynamic process between
the ethical responsibilities and the legal responsibilities since what have earlier been
ethical often become laws when there is a strong enough consensus in the society.

4. Philanthropic Responsibility:
At the top of the pyramid there are the philanthropic responsibilities of the firm, which
responds to the society‘s expectation of the firm to be a good citizen.
Philanthropic responsibility refers to corporations acting as a good corporate citizen, by
contributing resources to the community and improves quality of life. The distinction
between ethical and philanthropic is that the philanthropic one is not expected in an
ethical or moral sense. It is good if businesses give away contributions, but they are not
seen as unscrupulous corporations if they aren‘t engaged in those kind of activities.
Philanthropic responsibility is therefore more discretionary on the part of businesses. In
other words, philanthropy is highly desired and prized but actually less important than the
other three categories of social responsibility.

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 Origin and Development of CSR in India
In India CSR activity mainly includes philanthropic and community development activities.
According to a survey conducted by German Development Institute in 2007 Indian companies
and stakeholders are beginning to adopt integration of CSR into their business processes and
engagement in multi-stakeholderdialogues. To comprehend the present state and future
prospects of CSR India’s political and history must be taken into account. Evolution of CSR is
divided into four main phases.
1. First Phase: CSR Motivated by Charity and Philanthropy:

The first phase of CSR is predominantly determined by culture, religion, family tradition,
and industrialization. Business operations and CSR engagement were based mainly on
corporate self-regulation. Being the oldest form of CSR, charity and philanthropy still
influence CSR practices today, especially in community development. In the pre-industrial
period up to the 1850s, merchants committed themselves to society for religious reasons,
sharing their wealth, for instance, by building temples. Moreover, the business community
occupied a significant place in ancient Indian society and the merchants provided relief in
times of crisis such as famine or epidemics throwing open warehouses of food and
treasure chests.
Under colonial rule, western type of industrialization reached India and changed CSR from
the 1850s onwards. The pioneers of industrialization in the 19th century in India were a
few families such as the Tata, Birla, Bajaj, Lalbhai, Sarabhai, Godrej, Shriram, Singhania,
Modi, Naidu, Mahindra and Annamali, who were strongly devoted to philanthropically
motivated CSR.
The early pioneers of industry in India were leaders in the economic, as also in the social
fields. Nevertheless, it has been pointed out that their engagement was not only altruistic
and stimulated by religious motives; it had business considerations in supporting efforts
towards industrial and social development of the nation and was influenced by caste
groups and political objectives. The underlying pattern of charity and philanthropy means
that entrepreneurs sporadically donate without any concrete or long-term engagement.
Charitable and philanthropic CSR is practised outside the company, focusing on such

21
 external stakeholders as communities and general social welfare bodies.

2. Second Phase: CSR for India’s Social Development:

The second phase of Indian CSR (1914-1960) was dominated by the country’s struggle for
independence and influenced fundamentally by Gandhi’s theory of trusteeship, the aim of
which was to consolidate and amplify social development. During the struggle for
independence, Indian businesses actively engaged in the reform process. Not only did
companies see the country’s economic development as a protest against colonial rule;
they also participated in its institutional and social development.
The corporate sector’s involvement was stimulated by the vision of a modern and free
India. Gandhi introduced the notion of trusteeship in order to make companies the
“temples of modern India”. Businesses, especially well-established family businesses, set
up trusts for schools and colleges; they also established training and scientific institutes.
The heads of the companies largely aligned the activities of their trusts with Gandhi’s
reform programs. These programs included activities that sought in particular the abolition
of untouchability, women’s empowerment and rural development.

3. Third Phase: CSR under the Paradigm of Mixed Economy:

The paradigm of the “mixed economy,” with the emergence of Public Sector Undertakings
(PSUs) and ample legislation on labour and environmental standards, affected the third
phase of Indian CSR (1960-1980). This phase is also characterized by a shift from corporate
self-regulation to strict legal and public regulation of business activities. Under the
paradigm of the “mixed economy”, the role of the private sector in advancing India
receded. During the cold war, India decided to take a third course between capitalism and
communism. In this scenario, the public sector was seen as the key force of development.
The 1960s have been described as an ‘era of command and control’, because strict legal
regulations determined the activities of the private sector. The introduction of a regime of
high taxes and a quota and licence system imposed tight restrictions on the private sector
and indirectly triggered corporate malpractices. As a result, corporate governance, labour
22
 and environmental issues rose on the political agenda and quickly became the subject of
legislation. Furthermore, state authorities established PSUs with the intention of
guaranteeing the appropriate distribution of wealth to the needy.

4. Fourth Phase: Interface between Business and Philanthropic Approaches:

In the fourth phase (1980 to date) 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. In the
1990s, the Indian government initiated reforms to liberalize and deregulate the Indian
economy by tackling the shortcomings of the “mixed economy” and tried to integrate India
into the global market. Consequently, controls and license systems were partly abolished,
and the Indian economy experienced a pronounced boom, which has persisted until today.
This rapid growth did not lead to a reduction in philanthropic donations; on the contrary,
the increased profitability also increased business willingness as well as ability to give,
along with a surge in public and government expectations of businesses. Against this
background, India has meanwhile become an important economic and political factor in
the process of globalization. This new situation has also affected the Indian CSR agenda.
With more Trans National Corporations resorting to global sourcing, India has become an
attractive and important production and manufacturing site. As western consumer
markets are becoming more responsive to labour and environmental standards in
developing countries, Indian companies producing for the global market need to comply
with international standards.

23
 CSR in India – Present Scenario
India’s economic reforms and its rise to become an emerging market and global player have not
resulted in a substantial change in its CSR approach. Contrary to various expectations that India
would adopt the global CSR agenda, its present CSR approach still largely retains its own
characteristics, adopting only some aspects of global mainstream CSR. The empirical results of the
present study show that Indian CSR is still in a confused state. This is evident from the following:
 The Indian understanding of CSR seems to be shifting from traditional philanthropy
towards sustainable business. Nevertheless, philanthropic patterns remain widespread in
many Indian companies.

 Community development still plays the decisive role in the Indian CSR agenda.

CSR in India Voluntary Guidelines:

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. While the guidelines have been prepared for 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
prescriptive road-map, they are not intended for regulatory or contractual use.
The policy should be framed with the participation of various level executives and should be
approved by the board. The core elements of CSR Policy are as follows:
1. Care for all Stakeholders: Organizations should respect the interests of all stakeholders,
including shareholders, employees, customers, suppliers, project affected people, society at
large etc. and create value for all of them and be responsive towards their needs. They
should develop mechanism to actively engage with all stakeholders, inform them of
inherent risks and mitigate them where they occur.
2. Ethical Functioning: The Company’s 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.
24
3. Respect for Worker’s Right and Welfare: 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 system to address grievances, 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.
4. Respect for Human Rights:
Companies should respect human rights for all and avoid complicity with human rights
abuses by them or by third party.
5. Respect for Environment: 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.
6. Activities for Social and Inclusive Development: 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.

25
Areas of Activities of CSR:

Schedule VII of Companies Act, 2013 broadly mention the areas of activities where CSR spending
should be made. Following are the activities suggested.

i. Eradicating extreme hunger and poverty.

ii. Promotion of education.
iii. Promoting gender equality and empowering women.
iv. Reducing child mortality and improving maternal health.
v. Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria
and other diseases.
vi. Ensuring environmental sustainability.
vii. Employment enhancing vocational skills.
viii. Social business projects.

26
 Review of CSR Practices of Commercial Banks in India
An important component of the economic system is represented by the banks and financial
institutions. They have an important role owing to their function of attracting financial resources
from the economy and their re-distribution to business and industry that are looking for financial
resources to finance projects. Additionally, financial institutions are able to catalyse the
introduction of rules on sustainable development. Similar to other companies, banking and financial
institutions have a certain conduct in dealing with the local community, labour and the
environment, and their relationships can be used as key tools in imposing principles of
sustainability to the borrowers. The primary business of any banking institution is to take deposits,
grant loans and providing corresponding services. Banks should be responsible towards their
customers in a socially responsible way irrespective of the countries, culture, banking products and
investors.
Commercial banks have taken a keen interest in CSR in the last few years. This is evident from
their annual reports and websites where they provide a statement on their CSR involvement. In
most of their annual reports, they dedicate pages emphasizing their contributions to CSR. These
institutions have engaged in CSR activities that include education, leadership development,
financial literacy and access, entrepreneurship, agriculture, health, innovation, environmental
sustainability, enterprise development, humanitarian intervention, business ethics, community
development, corporate governance, workplace issues etc.
The banking sector can, in the course of their intermediation role, contribute a lot in this regard.
CSR practices by banks not only improve their own standards but 117 also catalyze the socially
responsible behaviour of other businesses. Banking industry itself can also be benefited from the
positive effects of CSR on the society as a whole, particularly on its clients. So, the role of banks in
pursuing appropriate CSR practices in the society, especially in a developing country like ours,
needs to be duly highlighted.

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 CSR PRACTICES BY INDIAN BANKS -A COMPARATIVE
STUDY
CSR actions can be significant and more effective under certain conditions; so, the banks can
choose CSR actions as a part of their business strategy, but they need to select their target
audiences carefully to take advantage of these activities optimally. Indian banks are making
constant efforts in the area of CSR still there is requirement of emphasis on initiatives. An analysis
of CSR practices reveals that Indian commercial banks are mostly focusing on community welfare
and farmer’s welfare programs, but the efforts for women welfare and education are not sizeable.
Some of the important initiatives by the major commercial banks in India are discussed here.
1. Allahabad Bank:

Running Rural Self Employment Training Institutes (RSETI): Rural Self Employment
Training Institutes (RSETIs) and Rural Development and Self Employment Training
Institutes (RUDSETIs) provide intensive short-term residential self-employment training
programs to poor rural youths with free food and accommodation for taking up self-
employment initiatives and skill up-gradation for running their micro-enterprises
successfully. At present 21 RSETIs are run by Allahabad Bank Rural Development Trust
which is being sponsored by Allahabad Bank.

Opening of Financial Literacy Centres (FLC) & Credit Counselling Centres: The basic
purpose of FLC is to impart financial literacy that is to impart knowledge regarding the
purpose of savings, why to save early in life, the need for saving in banks, to borrow from
banks, why borrow as far as possible for income generating activities, the necessity of
repaying in time, the advantage of insuring yourself, and why you should save for your
retirement etc. At present the bank has opened 18 FLCs at various locations. In order to
provide financial education on one hand and to offer credit counselling on the other, to
people having limited resources and skills to understand the difficulties of financial
dealings, the bank has opened Financial Literacy and Credit Counselling Centres christened
‘Samadhan’. The centres act independently on its own under the auspices of ‘Allahabad
Bank Rural Development Trust’.

28
 wild animals at ‘Van Vihar’ at Bhopal.

Other activities: For the financial year 2015-16 a sum aggregating Rs.55.44 lakh has been
provided as scholarship to 1848 numbers of meritorious girl students from 405 schools
under All Bank Girl Child Scholarship Scheme in lead district belonging to BPL families.
Bank has contributed Rs.210 lakhs in ‘Swachh Bharat Kosh’ for making provision for
toilets for girls with provision of water under Swachh-Vidyalaya Campaign. Bank has
incurred cost of Rs.11.66 lakhs under bank’s scheme for providing electric fan in
government/government aided schools in Allahabad Bank’s lead districts.

2. Bank of India:
Bank of India has undertaken the following initiatives as a part of their social responsibility;
 Solar street lights and hand pump sets in rural areas.
 Providing rain water harvesting mechanism, agricultural equipment, and safe drinking
water including development of the area.
 Ambulances to hospitals catering to economically challenged sections of the society, rural
areas, etc. Further bank has provided ultra-modern medical equipment to family planning
centres and other hospitals and gensets for running equipment in hospitals for the cancer
patients.
 Wheel chairs to physically challenged sportspersons and others. Support to orphaned /
blind students requirements.
 Bank set up credit counselling centres named ‘Abhay’ in 6 cities.
 Bank opened Financial Literacy Centres (FLC) in 54 places on various states.
 RUDSETIs/RSETIs – 42 Centres for imparting vocational training in rural areas.

3. Bank of Baroda:
Bank of Baroda has a long legacy and tradition of contributing actively to the social and
economic development of the communities in which it operates through various
development activities in the realm of education, health, human welfare and other social
activities.
 For providing self-employment to rural youths bank has set up 49 Baroda Swarozgar

29
 Vikash Sansthan (Baroda-RSETI) in seven states.
 51 Financial Literacy and Credit Counselling centres (FLCC) in the name of ‘SAARTHI’
in nine states.

4. Bank of Maharashtra:
A trust viz. Mahabank Agricultural Research and Rural Development Foundation
(MARDEF) has been established by Bank of Maharashtra, it undertakes various projects
and village improvement programs. The Rural Development Centres 120 (RDC) has been
undertaking various rural developmental activities for the benefit of farmers’ viz. Vermi-
compost, re-development of saline soils, soil testing etc. Bank has established Soil Testing
Lab (STL) through MARDEF Trust at RDC Bhigwan. The Soil Testing Laboratory has
analyzed 7418 soil and water samples in the year 2015-16 and accordingly counselling is
given to farmers about the techniques to be applied based on the soil. Farmers from the
districts of Pune, Ahmednagar, Solapur and Satara are taking benefit of the lab. MARDEF
is imparting training to farmers on various subjects in agriculture. The Bank has established
seven Mahabank Self Employment Training Institutes (MSETI) for providing training to
rural youth. The Institute has so far imparted training to 21,386 educated unemployed
youths and women to enable them to acquire skills for self-employment through small
business enterprises.
5. Canara Bank:
Canara Bank is engaged in varied corporate social responsibility (CSR) activities. CSR
initiatives of the bank are diverse, covering activities, like, training unemployed rural youth,
providing primary health care, drinking water, community development, empowerment of
women and other social initiatives.
The bank, through its Canara Bank Centenary Rural Development Trust (CBCRDT), has
established 34 exclusive training institutes, including 26 Rural Self Employment Training
Institutes (RSETIs), 5 Institutes of Information Technology and 3 Artisan Training
Institutes to promote entrepreneurship development among rural youth and encourage them
to take up self-employment activities.
During 2015-16, these Institutes trained 30,387 candidates. The bank has co-sponsored
another 27 Rural Development and Self Employment Training Institutes (RUDSETIs)

30
 programs. During 2015-16, these institutes trained 26,909 candidates with a settlement rate
of 72%.
Education being one of the prime sectors of CSR and a vital part of personality
development, bank has assisted various educational institutions.
Canara Vidya Jyothi Scholarship scheme to meritorious SC/ST girl students studying in
government/government aided schools has been implemented for the third successive year
and as many as 9,390 students have been benefitted utilising a total amount of 3.68 crores.
The bank has undertaken an ambitious project of providing de-fluoridation – RO plants for
pure drinking water facility in fluoride affected 217 villages in Karnataka.

6. DENA Bank:
Dena Bank has set up a society known as Dena Rural Development Foundation (DRDF)
with a corpus of Rs.50 Lakhs. Subsequently, bank has contributed Rs.500 lakhs towards
corpus fund thereby increasing the corpus to Rs.550 lakhs.
DRDF has set up 12 Rural Self Employment Training Institutes (RSETIs) in its lead
districts where bank is shouldering lead bank responsibility.
Bank has approved an amount of Rs.50 lakhs for undertaking various development
activities in two adopted villages namely Naka (Kalol) & Bindra Navagarh from Gujarat
and Chhattisgarh states respectively under “Swachh Bharat Campaign”.
Bank has incurred Rs. 23.14 lakhs for various development activities such as construction
of public toilets, providing ambulance, solar street lights, school bags, tube well & hand
pumps, water purifier and water cooler for schools, construction of community hall etc.

7. IDBI Bank:
IDBI Bank has through diverse CSR activities, has inter alia, contributed towards promotion
of healthcare, improved access to health services and sanitation facilities, advancement of
vocational and employable skills, enhancement of livelihood opportunities for
disadvantaged strata of the society, supplementing environmental sustainability and holistic
development of villages by undertaking planned interventions. Furthermore, in order to
assist local government’s efforts to provide relief measures to the populace stranded at the
flood-affected areas of Tamil Nadu, Bank contributed to ‘Chief Minister’s Public Relief

31
 rehabilitation of ex-servicemen, war widows and their dependents.

8. Indian Bank:
Indian Bank as a part of their CSR initiatives has conducted cleanliness drive on an ongoing
basis. 270 trainees have been exposed to such CSR activities. Bank has organized 237
health camps including blood donation and organ donation.
The other initiatives of the bank include, at the time of floods in Chennai, adoption of
fishermen village - Nochikuppam, Chennai. Health check-up camp was organized in the
village in association with Apollo Hospital and Kaveri Hospital.

9. Indian Overseas Bank:

Various programs are undertaken by Indian Overseas Bank as a part of their CSR
endeavour. Indian Overseas Bank through its IOB Chidambaram Chettiyar Memorial Trust
is providing entrepreneurial development training to women to empower them socially and
financially to meet the challenges.
The trust has conducted several Entrepreneurial Development Programs (EDP) and skill
based training programs exclusively for women at various centres. During the year 2015-16,
the bank conducted 7 programs covering 147 beneficiaries. The bank has so far conducted
86 programs covering 3951 beneficiaries.
The special industry initiative of the bank for Jammu & Kashmir named “UDAAN” is a
placement linked scheme in which public and private sector organizations were called to
participate by selecting students from the Jammu & Kashmir state, providing them training
and placing them either within their organization or outside or enabling them to become
employable.
The scheme was initiated by the bank as part of corporate social responsibility in
coordination with National Skill Development Corporation (NSDC). As a part of CSR
initiative financial literacy centres named ‘SNEHA’ was established at 23 centers through
which the bank aims to impart financial literacy.
During 2015-16, they have handled sessions on financial literacy to 8687 students of
Industrial Training Institute, skilling centres and various schools in the state of Tamil Nadu

32
10. Oriental Bank of Commerce:
Some of the major initiatives undertaken by the Oriental Bank of Commerce as part of CSR
during the financial year 2015-16 are as follows.
 Donation for free education to poor and needy tribal students.
 Donation of ceiling fans and various utilities to schools including special schools.
 Donation of LCD Projector and Screen to 'Manasa Rehabilitation Centre & Training Centre'
(School for Special Children), Bengaluru and donation of utility items i.e school bags, water
bottles & food items to orphan children at 'Bal Sahyog', Connaught Place, New Delhi.
 Donation for establishment of a dialysis unit in Civil Hospital, Gurgaon in coordination
with district administration.
 For the treatment of eye ailments the bank donated a vitrectomy machine to 'Arunodaya
Charitable Trust’ (ACT), Gurgaon.
 The bank also made efforts for the treatment of cancer diseases in association with 'Indian
Cancer Society, Mumbai'.
 Donation of tricycles to differently able persons in Lucknow which acts as a means of
livelihood.
 Bank has supported the 'Clean & Green Ganga’ program along with various organizations.
 Bank has constructed toilets in various government schools on priority and as focused CSR
activity, as a step towards achieving the dream of a “Clean and Safe” India.

11. Punjab & Sindh Bank:

The CSR initiatives are undertaken by the bank on its own or in partnership with voluntary
bodies, NGOs, autonomous bodies, statutory agencies, state and central government
agencies; The CSR activities include;
 Adoption of villages surrounding the bank branches.
 Provision of infrastructural facilities like paving of roads, drainage system, digging of bore
wells and tube wells, construction of community welfare centres, vocational training centre,
building for primary health centres, etc.
 Construction of community centres/ night shelters/ old age homes.

33
 Supplementing development program of government towards promotion of literacy and
higher education. Constructing educational facilities viz. school buildings, additional
classrooms, repair and maintenance of schools and opening of adult education centres.
 Construction of washrooms and other facilities for girls in schools.

12. Punjab National Bank:

The bank plays a lead role in promoting financial inclusion and social welfare schemes. The
bank has further ensured adequate fund flow to the sectors such as agriculture, education,
housing, weaker sections, women and rural youth as the bank takes them to be the vital
constituents of the society. The main CSR initiatives of the bank are as follows;
Village Adoption Scheme – The bank has launched a welfare scheme named as ‘PNB
Vikas’. The objective of the scheme is to adopt villages and develop those villages in an all-
inclusive manner, which includes human, economic & other infrastructure development like
sanitation, drinking water supply, education, electricity, health, etc. Under this Scheme,
bank has adopted 167 villages (78 in lead districts and 89 in non-lead districts) in different
circles.
 Supporting Girl Child – To support popularisation of education among girls of
rural and semi urban areas the bank has started a scheme named ‘PNB Ladli’. The
scheme was launched on 17.07.2014. It was launched on pan India basis through
adopted villages. Under the scheme bank is providing education inputs of Rs. 2500/-
to 10 needy girl students of each identified village.

 Swachh Vidyalaya Campaign – This scheme aims to provide financial assistance

for construction of toilets in government schools of adopted villages of ‘PNB
Vikas’. It focuses on co-educational and girls’ government schools wherein the bank
provide separate toilet facility for girl student within an estimated expenditure of
Rs.1.20 lakh per toilet in all 167 identified villages.

 PNB Farmers Welfare Trust – Punjab National Bank Farmers’ Welfare Trust
(PNBFWT) was established on 22nd September, 2000, as a part of corporate social
responsibility for capacity building and welfare of the farmers. PNB Farmers’ 126

34
 Welfare Trust (PNBFWT) is running 10 Farmers Training Centres (FTCs) in 9 states
for the development of farmers. These FTCs provide free of cost training and
residential training to farmers, women and rural youth. FTCs provide training on
agriculture & allied activities, computer courses, cutting, tailoring & embroidery,
etc.

13. Syndicate Bank:

Bank undertook various CSR activities which aimed at socio-economic transformation,
rural uplift & sustainable development of the society. Some of them are outlined as under:
 Syndicate Bank adopted 26 villages spread over the country under Synd Samagra Gram
Vikas Yojana (SSGVY) for their all-round development.
 Donated mobility appliances and wheel chairs to handicapped and differently abled persons.
 Donated hearing aids to an NGO catering to hearing impaired people.
 Donated towards construction of toilet blocks in government schools and public places.
 Donated wheel chairs, ambulances, water purifier and waste disposal unit to hospitals/trusts.
 Donated white canes for blind/visual impaired.
 Donated towards installation of mineral RO Plants.
 Donated to charitable trust for cancer check-up camps.

14. Union Bank of India:

Union Bank of India has well developed corporate social responsibility initiatives in place.
All the CSR initiatives have shown good results and they consider these initiatives as an on-
going part of their contribution to the building of this nation.
The bank has registered a charitable trust under the name Union Bank Social Foundation
(UBSF) to carry out its CSR activities. Major Initiatives of the bank are;
 Farmers' Club is an initiative by Union Bank of India to encourage farmers in villages
catered by our rural branches. Basic idea is to bring farmers together and discuss their
problems, solutions and new agricultural practices. This initiative will help in overall
adoption of better farming practices. Any farmer can be a part of this scheme irrespective of
whether he is customer of the bank.

35
 Union Adarsh Gram (UAG) – UAG is the village adoption scheme of UBI. The bank has
adopted 211 villages across the country under the scheme. The officers responsible for the
scheme have prepared a credit cum development plan for the village for basic needs in rural
infrastructure, production and investment besides banking. The main activities undertaken
by the bank under UAG are adoption of meritorious girl child belonging to economically
weaker section and sponsoring their study up to standard XII. Providing toilet facilities in
government girls' schools and solar lights for street lighting.
 Health care facilities for flood and landslide affected villagers of Rudraprayag district
through Smile India.
 Residential livelihood training & audio book recording centre for visually challenged
persons throughout the country. Support towards cost of audio books production in CD
form
 The adjacent ATM at bank’s NIFT branch, Bengaluru has been converted to ‘Talking
ATM’ for visually impaired persons.
 Support for purchase of customised vehicles for distribution of mid-day meals to
government schools.
 Support by adopting girl children for their education.
 Support for construction of free students hostel for tribal girl students and also toilets for
girls in village schools.
 Creating environmental awareness by planting of trees, solar home lights to BPL
households, solar power at schools, clean solar cooking stoves.
 Providing furniture, electrical items, ceiling fans, computers, water purifiers at rural
schools.
 Supported the cause of the mentally and physically disabled by donating for artificial limbs,
callipers, tricycles to handicapped and arranging physiotherapy sessions at school for
mentally challenged.
 Support to haemophilia patients by providing care and treatment.

15. State Bank of India:

The bank is a corporate citizen, with resources t its command and benefits which it derives
from operating in society in general. It therefore owes a solemn duty to the less fortunate

36
 and under-privileged members of the same society. Staff members are encouraged to make
their contribution by understanding the aspirations of the public around them and by
endeavouring to evolve measures to remove indisputable social and developmental lacunae.

Sr. Amt. (Rs. in

Focus Area
No. Crore)
1 Healthcare 56.00

2 Education 19.50
3 Skill development 44.66
4 Sanitation 4.04
5 Disability 5.41

6 Environment 4.78
7 Sports 2.21
8 Culture 1.20
9 Natural calamities 2.16
10 Others 1.98
11 R & D Fund 1.98
Total 143.92
The Bank has spent Rs.143.92 crore for its CSR activities in the financial year 2015-16 which is 1%
of its annual profit. Health care and sanitation has given primary importance followed by skill
development .Major part of our population is living in rural areas and manyof them are deprived of
basic health care facilities, the Bank has identified this and allocated39% of total CSR spending for
providing health care facilities. Rural areas of our country areblessed with skilled labour, but they
lack adequate financial and other support. The Bank has allocated Rs.44.66 crore for skill
development. Rs.19.50 crore has been allocated for education because it plays an important role in
the development of an economy. The Bank has set apart a considerable amount for disability,
environment, sanitation, sports, natural calamities, R&D Fund, culture and others.
 Health Care and Sanitation: Ensuring healthy lives and promoting well-being for
all ages is one of the primary sustainable development goals. Poor sanitation
conditions and lack of primary health care facilities have increased vulnerability of

37
 dropout rate among students, especially adolescent girls and affects other areas of lives.
Making basic health care and sanitation conditions available is thus an area of key importance
for SBI Foundation.
 Education: Education is the key element to national human resource development.
Providing quality education to masses has been a challenge due to growing population
and lack of quality resources in education. Lack of proper infrastructure, quality
teaching staff and limited access to schools, especially for girls, are just few of the
issues that plague the education system in India. Countering these issues is a long-
term process which the SBI Foundation intends to stand by.
 Skills and Livelihood Development: In the area of livelihood options and skills,
there is a disconnection between the market needs and human resources available.
Improving these conditions is necessary to be able to harness human resources of our
nation to the best of its capabilities and capacity. The country’s strength in the coming
years lies in its man-power. Improving its quality and creating opportunities for it is
thus of prime importance.
 Women Empowerment and Care for Senior Citizens: Women and senior citizens
are one of the most marginalized and least empowered sections of our society. The
fight for equal right for women is far from won as there is still sever discrimination
and acts of violence against them in rural as well as urban parts of India. Senior
Citizens are integral parts of our population who are neglected across areas of policy
and at times do not receive the amenities they are entitled to. SBI Foundation feels
that these sections of our population need to be served with dignity and care so as to
empower them to create an equal society.

 Sustainability & Environment: For development to be stable and inclusive, it is

important to consider it within the scope of environmental resources available.
Environment and sustainability are the driving forces of good business practices.
Staying connected with environmental impact of businesses is a step towards creating
a sustainable future.
 Rural Development: Inequality has been a long-standing feature of Indian economic
growth story and with every stride the nation takes, the chasm between urban and

38
 rural is deepening. With 83.3 crore Indians living in villages, it is of paramount
importance that opportunities are created for them so as to reduce their exclusion from
this growth story. Lack of basic facilities and opportunities are two of the major
hindrances in rural development. SBI Foundation wishes to address these issues
through its programs.
 Protection of national heritage, art and culture including restoration of buildings
andsites of historical importance and works of art
 Promotion and development of traditional arts and handicrafts
 Setting up public libraries
 Measures for the benefit of armed forces veterans, war widows and their dependents
 Training to promote rural sports, nationally recognized sports, para-Olympic sports
and Olympic sports
 Contribution to the Prime Minister's National Relief Fund or any other funds 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;contributions to Swacch Bharat Fund and Clean Ganga Fund
 Contributions or funds provided to technology incubators located within academic
institutions which are approved by the Central Government.

 On Going Projects by SBI:

 SBI foundation has started 200 BETI PADAO KENDRAs (BPK) in association
with IIMPACT, an NGO started by alumni of 1978 batch of IIM Ahmadabad. These
Beti Padao Kendras are aimed at imparting basic education (upto class 5th) to girl
children in remote rural areas where there are no formal schools. BPK is a tiny school
in itself set up in the vicinity of the community and the school is run by the teacher
recruited from the respective village itself. Looking at the girl child’s progress some
of the mothers have also developed interest in resuming or starting their own
education. These BPKs are opened in remote rural locations of Bihar, Chattishgarh,
Madhya Pradesh, Odisha and Uttarakhand.
 CARE FOR HELPLESS OLD AGED CITIZENS:
SBI Foundation has partnered with SHEOWS, for adopting the elderly persons at

39
 Garhmukteshwar Old age home in Uttar Pradesh. SHEOWs is a Non-Profit
Organization which serves the old people through holistic institutional support free of
cost.
 DIGITAL CLASS:
SBI Foundation in collaboration with BalaVikasa Social Service Society will
implement this project of Digital class rooms in 50 government schools in Medak
district of Telangana state.SBI Foundation is also partnering with Rotary
International for Introducing Digital Class initiatives in over 1000 schools across
India. This project will be implemented soon.
 DROUGHT PROOFING OF VILLAGES:
The Foundation is implementing a project for drought proofing of 10 villages in Beed
district in partnership with Dilasa Sanstha. The project involves construction of
Dohas in the bed level of stream so as to harvest rain.
 MID-DAY MEAL:
SBI foundation supports mid-day meals program together with Akshaya Patra
foundation.As part of our support, we provided financial aid for the procurement of
1530 distribution insulated vessels to be used for mid-day meals program. The
locations of project execution are Bangalore, Ahmedabad, Nathdwara and Guwahati.
The basic reason is to expand the reach of our food distribution proportional to the
growing demand; they need to have additional food distribution vessels. Akshaya
Patra has in these cities their mechanized kitchen which will cater many schools in
and around of the city.
 HEALTH CHECKUP OF FEMALE INMATES
SBI Foundation is committed to bring about positive changes in the lives of
underprivileged sections of society. One of the groups that belong to this section is
that of jail inmates. Being away from their families and conditions of jail lead to
depression in most of the jail inmates which in turn causes them to neglect their
health resulting in poor physical and mental health. In an endeavour to work on the
health issue, we partnered with Indira Health & Lifestyle Pvt. Ltd. (Apollo Clinic) for
conducting a health check-up camp in July 2016, which covered 132 female inmates
of Arthur Road jail in Mumbai. Various tests viz. Complete Blood Count, Random

40
 Blood Sugar, Total Bilirubin, Serum Creatinine, Urine routine, T3, T4, TSH, Vitamin
D3, Vitamin B12, Iron profile etc. were conducted which helped in identifying
several ailments in the inmates. Consultation/counselling/medicines was provided by
the doctors as remedial measures.
 Project Eye-Care: SBI Foundation partnered with Sri Chaitanya Seva Trust to
eradicate preventable blindness through cataract surgeries of rural & tribal population
of Thane & Palghar districts of Maharashtra state. Sri Chaitanaya Seva Trust carries
out check-up camps with the help of doctors and provides service free of cost to the
identified patients in their multi-specialty hospital. Eye check-up camps would be
organized in the vicinity of selected villages where patients will be counselled and
examined before advising for cataract surgery.
 Project Himalayas: SBI Foundation has partnered with Sankalp Taru Foundation, a
not-for-profit organization for planting over 10,000 trees in the Pokri tehsil of
Chamoli district of Uttarakhand Chamoli district of Uttarakhand and through this
project we plan to ensure environmental sustainability, ecological balance, protection
of flora and fauna, animal welfare, agro forestry, conservation of natural resources
and maintaining quality of soil, air and water. It will also support rural livelihood,
empower women and make schools cleaner and greener.
 SBI Youth for India: (SBI YFI) is a unique, Indian rural development fellowship
program initiated, funded and managed by the State Bank of India in partnership with
reputed NGOs of the country. It provides a framework for India's bright young minds
to join hands with rural communities, empathize with their struggles and connect
with their aspirations. The selected fellows, from some of the top
institutes/corporates, work with experienced NGOs on challenging development
projects

41
16. HDFC Bank:
HDFC (The Housing Development Finance Corporation) is a private bank. The bank
introduced an AI-based chat-bot Eva on all its digital platforms, which helps customers find
information in quick time. HDFC bank drives the holistic growth of communities. It works
on five distinct areas i.e. rural development, promotion of education, skill development,
healthcare and hygiene, and financial literacy.
In rural development, along with various NGO’s, it has covered 2.98 lakh houses impacting
870 villages. HDFC has also been working on various initiatives of the government like
MANREGA, Ministry of electronics and Information Technology.
HDFC believes that a nation truly develops when its community sustains in livelihood.
HDFC started a new initiative named PARIVARTAN which means a step towards progress.
Bank also started ZIIEI zero investment innovation for education initiatives to improve the
quality of education in government schools. Every year, the Bikaner branch of HDFC bank,
organizes blood donation camps in Colleges, and in 2018 they collected 32 units blood from
a college, which was a great initiative towards the health sector.
HDFC bank also provides education to the poor socio-economic society; they established a
day boarding school in village Gharsisar, Bikaner.
An event named ‘DAAN UTSAV 2018 GOONJ’ was also organized, in which the bank
employee’s donated clothes and sanitary pads to needy people.

42
17. Vijaya Bank:

 Under the girl child adoption scheme introduced by Vijaya Bank, 127 girl children
from SC/ST/OBC/Economically Weaker Section families was adopted during 2015-
16 taking the total number of girl children adopted by the Bank to 196.
 Bank has constructed toilet blocks in 56 schools, mostly in rural areas, for which
Bank also pays monthly maintenance.
 Bank has established 32 rural health centers where patients are provided primary
health care and medicines free of cost.
 Bank has donated water purifiers, computers, printers, furniture, fans, uniforms,
books, generators etc. to educational institutions.
 Bank has made several donations for water storage tanks, water purifiers, water
treatment plants, water-coolers; water filters etc. to facilitate clean and safe 129
drinking water in schools, orphanages, and various charitable organizations and

43
  Bank has donated ambulances/vehicles to old age homes, blind schools, nonprofit,
charitable organizations engaged in serving the abandoned/disabled/ helpless/ sick
persons.
 Bank has also donated wheelchairs to railway station and to physically handicapped
persons, customised wheel chairs for children affected by muscular dystrophy,
medical equipment to hospitals etc.
 Bank also sponsored several health camps/ check-up camps to promote preventive
healthcare.

18. ICICI Bank:

The bank established the ICICI Foundation for Inclusive Growth (ICICI Foundation) in
2008 with a view to significantly expand the activities in the area of CSR. The bank’s
contribution to social sector development includes several pioneering interventions, and is
implemented through the involvement of stakeholders within the bank and the broader
community.
 Blood Donation Camps: ICICI Foundation has given ICICI Bank employees the
opportunity to save lives in the time it takes for a tea break. ICICI Foundation aims to
organize the drives on a regular basis especially between May and August when most blood
banks face shortages. Blood donation provides an ideal platform for employee participation
in bank’s CSR endeavour and fulfils the community needs since it can be conducted at any
location and requires only 15 minutes per donor. ICICI Foundation’s partnership with the
State Blood Transfusion Council (SBTC) ensures that every blood donation event meets the
highest hygiene and comfort standards.

 Primary Health Care:

ICICI Foundation for Inclusive Growth, in partnership with the Department of Women and
Child Development (DWCD), Government of Rajasthan, is implementing a pilot project in
Baran district to improve the nutritional status of 0-5 year olds through a three-pronged,
comprehensive approach of prevention, management and treatment of under nutrition. Bank
has been working with the state governments to put a curb on high levels of child under
nutrition and mortality. The projects have been developed after analysing the situation on

44
 child health and nutrition in detailed consultations with the state and district officials who
have identified improving ICDS service delivery and generating community awareness on
child health and nutrition as a priority.

 Skill Development and Sustainable Livelihood:

ICICI Foundation launched a nationwide skill development initiative, ICICI Academy for
Skills (ICICI Academy), to impart vocational training to the youth. Since its inception,
ICICI Academy has launched 21 centres across India. This includes centres at Jaipur,
Chennai, Hyderabad, Bengaluru, Pune, Coimbatore, Narsobawadi, Patna and Guwahati.
The Academy currently offers training to 25,000 youth per year in skills like electrical &
home appliance repair, refrigeration and A/C repair, pumps and motor repair, central air
conditioning, selling skills, office administration, web designing, retail café operations,
paint application techniques, tractor mechanic, lab assistant at diagnostic centres, two and
three wheeler service technician and retail sales.
Rural Self Employment Training Institutes (RSETI) is set up by banks to provide vocational
training to rural youth from marginalised communities. ICICI RSETIs have been driving
major community level initiatives aimed at economic empowerment of the community.

19. Federal Bank:

The management of Federal Bank believes that in order to bring about a sustainable
development, communities must be socially, culturally and economically empowered. The
various CSR activities undertaken by the bank are as follows;
 Federal Skill Academy:
As part of the corporate social responsibility initiatives, bank started the Federal Skill
Academy on Founder’s Day to impart quality technical education to merit oriented
candidates coming from economically underprivileged background. Placement assistance
was also provided and candidates who came out successful in the interviews have been
shortlisted for offers at leading organizations.

 Assistive Technology Centre:

Federal Bank has partnered with National Institute of Speech and Hearing (NISH)–
45
 Thiruvananthapuram to set up an Assistive Technology Center at NISH for people having
difficulties in speech and hearing.

 Bandhan – Adoption of Schools:

Through Bandhan, bank adopt and associate with more than 1200 needy schools where, in
the first phase schools are supplied 136 with drinking water facility as a CSR initiative.
Later many projects were launched to improve sanitation, infrastructure and other facilities
to the adopted schools.
Last year bank had constructed and renovated close to 60 toilets as well as provided clean
drinking water to the adopted schools. The project was done in alignment with the Swacch
Bharat Vidyalaya mission of the Government.

 Environment Sustainability:
Partnering with SEED & Palathulli- To build awareness amongst student fraternity to
conserve the natural resources, Federal Bank along with Mathrubhumi launched the SEED
Program. SEED (Student Empowerment for Environmental Development) is an initiative
aimed at spreading the message of ecological conservation. Schools carry out simple but
effective steps in environment protection like planting and protection of saplings,
agricultural activities, bio-diversity conservation, energy conservation, conservation of
water bodies, cleanliness and protection of public health, reduce, reuse and recycle plastic
waste and intervention in local area environmental issues through SEED Police. Bank is
supporting this noble cause for the last four years.
Environment conservation is one of the priority areas where bank has invested its CSR
funds and Palathulli is a unique endeavour aimed at improving ground water levels through
innovative means.
The project in which we have partnered with leading media house Malayala Manorama
aims to address drought related issues through systematically allowing rain water to seep in
to the soil to improve water table.
The project was implemented through a holistic partnership consisting of different
communities in the public, private and education sector. A total of Rs.55.82 Lakhs was

46
 expended towards environment conservation and sustainable development activities during
the financial year 2016 alone.
20. AXIS Bank:
A public trust named Axis Bank Foundation was formed by Axis Bank to carry out its CSR
initiatives in a focused manner. The foundation since then has steadily expanded its
programs and outreach. The foundation is governed by a separate body of trustees. The
major CSR initiatives of the bank are listed below.

 Sustainable Livelihood:
Vocational skills training are provided to school dropouts, unemployed youth from rural
areas, tribal communities and women with an objective to equip them with livelihood and
employment skills. These skills help the beneficiaries seek employment opportunities or
become engaged in income generation activities, thus contributing to livelihood
enhancement.
Livelihood assets including livestock are also provided to beneficiaries of some programs
which help them improve their livelihood earnings.
Differently-abled people are also supported through livelihood programs on vocational
skills training.
The programs under agriculture help farmers better manage natural resources through
practices such as water management, organic farming, prevention of soil erosion, use of
renewable energy for irrigation, etc., which not only aid in increasing agriculture
productivity but also contribute to environmental sustainability.
 Environment (Sustainable Lending):
Axis banks’ corporate lending operations have an indirect impact on the environment.
Towards providing responsible and sustainable financing options, bank has developed
‘Sustainable Lending Policy and Procedures’(SLPP) that strengthen the way it assess
environmental and social risks in their lending decisions. Under the SLPP, bank is
committed to not finance or refinance firms engaged in ‘exclusion list’ activities, which
amongst others, include:

 Dealing with banned wildlife-related products.

47
 Polluting industries unless the units have clearance from pollution control authorities and
have installed effluent treatment plants.
 Production or trade in radioactive materials.
 Production or trade in un-bonded asbestos fibres.
 Drift net fishing in the marine environment using nets in excess of 2.5 km in length, and
 Production or trade of wildlife or products regulated under Convention on International
Trade in Endangered Species of Wild Fauna and Flora (CITES).
21. Karur Vysya Bank:
The bank's CSR mission is to contribute to the social and economic development of the
community. Through a series of interventions the bank seeks to mainstream economically,
physically and socially challenged groups and to draw them into the cycle of growth,
development and empowerment. The bank's strategy is to integrate its activities in
community development, social responsibility and environmental responsibility and
encourage each business unit or function to include these considerations into its operations.
Karur Vysya Bank's focus areas under CSR are -:
 Eradicating hunger, poverty and malnutrition, promoting preventive healthcare and
sanitation including contribution to the Swatch Bharat mission and making available safe
drinking water;
 Promoting education, including special education and employment enhancing vocation
skills especially among children, women, elderly, and the differently abled and livelihood
enhancement projects;
 Promoting gender equality, empowering women, setting up homes and hostels for women
and 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;
 Ensuring environmental sustainability, protection of flora and fauna, animal welfare,
conservation of natural resources and maintaining quality of soil, air and water including
contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of
river Ganga.

48
 Protection of national heritage, art and culture including restoration of buildings and sites of
historical importance and works of art, setting up public libraries, promotion and
development of traditional and handicrafts.
 Measures for the benefit of armed forces veterans, war widows and their dependents.
 Training to promote rural sports, nationally recognized sports, Paralympics sports and
Olympic sports.
 Contributions or funds provided to technology incubators located within academic
institutions which are approved by the central government
 Rural development projects.
 Slum area development.

22. Yes Bank:

Yes Foundation is the social development arm of Yes Bank, India’s fourth largest private
sector bank. Yes Bank is a pioneer in introducing some unique socially benefitting projects.
Yes Bank is adjudged as Asia’s best bank for corporate social responsibility at the Euro
money Excellence Award- 2016 held in Hong Kong.
Yes Bank won the Good Corporate Citizen Award 2016 in the ‘Banking and Financial
Companies’ category by Bombay Chamber of Commerce and Industry for manifesting
corporate social responsibility towards civic communities and operational excellence, and
embedding social and economic dimensions of sustainability in programs and practices.
Yes Bank stood at 29th position in 2017 rankings among the top 100 spenders on CSR
activities in India in a study conducted by IIM- Udaipur along with Economic Times and
Futurescape. The major activities of the bank are listed out here;
 Green Good Deeds:
Ministry of Environment, Forest & Climate Change (MoEFCC), Government of India has
launched a nationwide campaign called ‘Green Good Deeds’. The campaign focuses to
create awareness and inculcate simple lifestyle habits, which citizens can easily adopt in an
effort to reduce the hazards of climate change and global warming.
Yes Bank, through its unique community engagement initiative, Yes Community, is
supporting the Government’s campaign by conducting an awareness and engagement
initiative to sensitise people.
49
 The initiative’s objective is not only to spread awareness but also to create ‘Green Sainiks’
who in turn will propagate conservation in their communities.

 Transplanting Growth – Greening Highways:

Yes Bank is the first private sector company to enter into a CSR commitment with the
National Highways 142 Authority of India under its ‘Adopt a Green Highway’ program. As
part of the commitment, the Bank would develop and maintain a green corridor along the
Mumbai-Nashik highway in Maharashtra.

 Protection of Environment:
In 2004, Yes Bank became the first bank in India to qualify for ISO 14001:2004. The ISO
14001:2004 is a voluntary standard developed by the International Organization for
Standards (ISO) that sets out the criteria for an environmental management system (EMS).
An ISO 14001:2004 provides assurance to company management, employees and external
stakeholders that environmental impact is being monitored and measured in an organization.
 Sustainable Livelihood:
Yes Bank launched an innovative and transformational finance project in pilot mode that
works towards promoting livelihood security among 600 under-privileged women salt
farmers in the Little Rann of Kutch region while significantly lowering their emissions
footprint.

 Yes Rise:
Yes Rise is a CSR project which enables and makes available safe drinking water,
promoting preventive healthcare, sanitation and education in rural regions of India.

 Yes Steady:
Yes STEADY (Skills Training and Enhancement for Development of Youth). The projects
under this head are aimed at promotion of education and livelihood enhancement of rural
youth.

50
 Conclusion

 It is clear from above that commercial banks in India are fairly involved in corporate social
responsibility activities.
 They are putting genuine effort to give emphasis to their responsibilities towards the
society in which they are operating.
 The banking sector as a whole is taking concentrated efforts to improve the societal status
of the underprivileged section of the society through their initiatives like financial literacy
centres and credit counseling centres.
 The rural youth and women are empowered and made employable through various
programs and training sessions imparted through Rural Development and Self Employment
Training Institutes.

 Banks are also taking keen interest in the upliftment of differently abled section of the
society by providing educational assistance, medical assistance and also infrastructural
assistance for them.

 Banks partnering with various NGOs are providing healthcare facilities and medical
equipment to hospitals and old age homes and frequently conduct health camps, blood
donation campaigns and awareness programs.
 Indian commercial banks are particular these days to avoid environmental footprints by
reducing the usage of paper and by conserving energy through use of renewable energy
sources and minimising usage of conventional sources.

 Agriculture is considered as the primary sector and is often termed as the backbone of the
Indian economy. It plays a dominant role in the overall economic scenario of India and
towards this end banks as a part of their social responsibility is making efforts to improve
the productivity of this sector by starting Farmer’s Training Centres to impart training to
the farmers towards implementing new methods of cultivation, assisting in developing
infrastructure in the field of agriculture.

 Farmers are provided with improved seeds and good irrigation facilities.

51
 The Swacch Bharat Mission of central government is well supported by the commercial
banking sector of India as a part of their CSR endeavours by building toilet facilities in
schools especially for girl children and also at public places.

 Further banks are continually providing educational assistance on pan India basis through
scholarships, smart classes, providing furniture and fixtures, clean drinking water facility,
placement cells, etc.
 Educational assistance is also given to 147 differently abled students in the form of
provision of audio books and braille for visually challenged students.

 In an annual study, conducted by IIM-Udaipur along with Economic Times and

Futurescape27; an independent organization, India’s top companies for sustainability and
CSR are identified and in the year 2017 Yes Bank Ltd. stood at 29th position among top
spenders on CSR, HDFC Bank Ltd at 40th, Axis Bank Ltd. at 45th, IndusInd Bank Ltd stood at
50th, State Bank of India at 80th, Union Bank of India is at 93rd position this year, Kotak
Mahindra Bank Ltd. stood at 87th and Punjab National Bank at 95th position, were listed
among 100 top Indian companies.
 Commercial banking industry in India has undergone thorough change since post
liberalization period and the industry has developed into a major player in the economy.
 The current study is undertaken to find out whether the corporate social responsibility
efforts of the bank has any effect upon the organizational performance and also to find out
the awareness and perception of employees of the banking industry and beneficiaries of
CSR initiatives.
 The study revealed that CSR is having a positive relationship with organizational
performance.

 It is further found out that CSR variables like economic, philanthropic and legal
responsibilities also have a positive relationship with organizational performance however
there exists no significant relationship between ethical responsibility and organizational
performance.

 While considering bank wise comparison the mean score of CSR and organizational
performance does not differ with banks.

52
 In location wise comparison the mean score of organizational performance does not differ
by location of banks but there is difference in mean score 293 of CSR. Post hoc test
revealed that mean score of CSR significantly differs between Coimbatore and Bengaluru.

 Regarding the awareness of employees and how they perceive CSR; the current study
shows that even though the employees do not have a greater role or say in the CSR
initiatives, they are fully aware of the social initiatives put forth by the bank.
 Further the study clearly shows that the employees have a good intellectual acuity
regarding the CSR initiatives.

 They are well aware of the areas that need to be focused urgently, the possible benefits
and the stakeholders which they feel are most important. Respondents of the study
opined that ‘Concern for Community’ and ‘Overall Economic Development’ as the two
important factors contributed by CSR which according to them leads to ‘Corporate
Reputation’ and considers as the greatest benefit of CSR to the organization.
 All the beneficiaries or stakeholders of corporate social responsibility initiatives may not be
equally aware of all the social issues like environmental aspects, human rights, consumer
protection, and societal responsibilities of corporations and so on. The objective of this
study was to measure the perception level and awareness of beneficiaries regarding the
CSR activities in general and also regarding the CSR projects and services they are
benefitted from the banks in general.
 The study reveals that the beneficiaries have a reasonable understanding about corporate
social responsibility and the CSR efforts put forth by the banking institutions.
 Social responsibility performance has been stalled by factors like lack of corporate and
public awareness. Therefore, for this important concept to be included by corporate
organizations, attempts must be embraced by organizations that must be aimed at
harmonizing and reconciling the corporate objectives and social needs.

53
 12.0. Suggestions

 Banks need to concentrate more on controlling their NPAs since making profits is
considered as one of the economic responsibilities of an organization. Only a profitable
enterprise can discharge their social commitments properly.
 Banks should encourage staffs to act ethically and responsibly during and after working
hours.
 Banks should arrange programs and in-house training measures to increase the awareness
among employees about CSR policies of the banks on community welfare activities.

 Banks must have policies in place to support family members during death, permanent
disability or incapacity of an employee. This forms part of the bank’s social commitment
towards the employees.
 For the successful implementation of a CSR project it is necessary to have the support of
employees. Banks should consider the suggestions of employees pertaining to the matters
of CSR. Employees must be allowed to actively participate in the field work since they are
more in touch with the local community and are more aware of the needs of the
community than the top management.

 Bank’s representative should visit the site of project implementation so as to see through
that the projects are being implemented as planned and there is no deviation from it.
 Banks are the pillars of an economy so they should instead of expending the benchmark 2
per cent on CSR activities should try to spend more on a need basis rather than this
stipulated amount.

54
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