Strategic alignment of CSR activities in banking sector for profitabilityA project report submitted in partial fulfillment of the requirements for MBA ProjectM.B.A.ByYashika Singh (MBA Gen -037)

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Name: Yashika SinghRoll No.: MBA Gen 037Date: 03/12/2014

2

AbstractThe main purpose of the study is to analyze the corporate social responsibility (CSR) activities carried out by Indian commercial banks. Variables used in the study are: rural branch expansion, priority sector lending, environment protection, community welfare, and women welfare, new initiative related to CSR, financial literacy, education and healthcare. 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.Keywords: Commercial banks, Community welfare, corporate social responsibility, financial literacy, Public sector banks.AcknowledgementsI am highly indebted to Dr. Gaurav Agrawal and obliged for giving us the autonomy of functioning and experimenting with ideas. I would like to take the opportunity to express our profound gratitude to him not only for his academic guidance but also for his interest in our project and constant support coupled with confidence boosting and motivating sessions which proved very fruitful and were instrumental in infusing self-assurance and trust within us. The nurturing and blossoming of the present work was mainly due to his valuable guidance, suggestions, astute judgment, constructive criticism and an eye for perfection. My mentor always answered myriad of my doubts with smiling graciousness and prodigious patience, never letting me feel that I am novice by always lending an ear to our views, appreciating and improving them and by giving me a free hand in my project. Its only because of his overwhelming interest and helpful attitude, the present work has attained the stage it has.

Finally, I am grateful to all our friends and colleagues, whose constant encouragement served to renew our spirit, refocus our attention and energy and helped us in carrying out this work.

Yashika Singh03/12/2014

ABVIIITM, Gwalior

4Content1. Introduction 1.1 Defining Corporate Social Responsibility (CSR)....71.2 Evolution of CSR81.3 CSR in Indian Banking Industry.101.4 CSR and Profitability..111.5 Literature Review

1.5.1 Concepts and proposed relationship121.5.2 Corporate Social Responsibility: A Study of Selected Public Sector Banks in India..131.5.3 Corporate Social Responsibility and Corporate Governance in Banking Sector in India...141.5.4 Corporate Social Responsibility: An analysis of Indian Commercial Banks.141.5.5 Corporate Social responsibility of Public Sector Banks Of India1.5.6 CSR Practices in Indian Banking Sector.151.5.7 CSR Practices and CSR reporting in Indian Banking Sector...161.5.8 CSR Orientation of Indian Banks and Stakeholder Relationship Marketing Orientation: An Empirical Investigation172. Research Gap.183. Motivation..184. Objective ...195. Research Methodology

a. Research Method ..20b. Research design.226. Data Analysis

a. Method23

b. Year Wise Score of CSR activities of Banks..24

c. CSR activity wise Mean Score of Banks25

d. Percentage of Banks Performed CSR activities 267. References.28Introduction and Literature Review

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

1.1 Defining CSRCorporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (Triple-Bottom-Line- Approach), while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that.The term "corporate social responsibility" became popular in the 1960s and has remained a term used indiscriminately by many to cover legal and moral responsibility more narrowly construed.

Proponents argue that corporations increase long term profits by operating with a CSR perspective, while critics argue that CSR distracts from business' economic role. A 2000 study compared existing econometric studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact, were due to flawed empirical analysis and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes.

1.2 Evolution of CSR

The evolution of corporate social responsibility in India refers to changes over time in India of the cultural norms of corporations' engagement of corporate social responsibility (CSR), with CSR referring to way that businesses are managed to bring about an overall positive impact on the communities, cultures, societies and environments in which they operate. The fundamentals of CSR rest on the fact that not only public policy but even corporates should be responsible enough to address social issues. Thus companies should deal with the challenges and issues looked after to a certain extent by the states.

First Phase

The first phase ofCSRwas driven by noble deeds of philanthropists and charity. It was influenced by family values, traditions, culture and religion along with industrialization. Till 1850, the wealthy businessmen shared their riches with the society by either setting up temples or religious institutions.. In 1900s, the industrialist families like Tatas, Birlas, Modis, Godrej, Bajajs and Singhanias promoted this concept by setting up charitable foundations, educational and healthcare institutions, and trusts for community development. It may also be interesting to note that their efforts for social benefit were also driven by political motives.

Second Phase

The second phase was the period of independence struggle when the industrialists were pressurized to show their dedication towards the benefit of the society. Mahatma Gandhi urged to the powerful industrialists to share their wealth for the benefit of underprivileged section of the society. He gave the concept of trusteeship. This concept of trusteeship helped in the socio-economic growth of India. Gandhi regarded the Indian companies and industries as Temples of Modern India. He influenced the industrialists and business houses to build trusts for colleges, research and training institutes. These trusts also worked to enhance social reforms likerural development, women empowerment and education.

Third Phase

In the third phase from 1960-1980,CSRwas influenced by the emergence of Public sector undertakings to ensure proper distribution of wealth. The policy of industrial licensing, high taxes and restrictions on the private sector resulted in corporate malpractices. This led to enactment of legislation regarding corporate governance, labor and environmental issues. In 1965, the academicians, politicians and businessmen set up a national workshop onCSR, where great stress was laid on social accountability and transparency.

Fourth Phase

In the fourth phase from 1980 onwards, Indian companies integratedCSRinto a sustainable business strategy. With globalization and economic liberalization in 1990s, and partial withdrawal of controls and licensing systems there was a boom in the economic growth of the country. This led to the increased momentum in industrial growth, making it possible for the companies to contribute more towardssocial responsibility. What started as charity is now understood and accepted as responsibility.

In the current scenario in India, the new companies act amended in December 2012 mandates the corporate to spend 2% of their average net profits of the last three financial years towardsCSR. This is applicable for companies with a turnover of 1000 Cr/ PAT of 5 Cr/ or net worth of 500 cr. The new bill replaces the Companies act 1956 and emphasizes carrying forward the agenda of Corporate Social Responsibility.

1.3 CSR in Indian Banking Industry

Taking deposits, granting loans and providing complementary services are the core business of banks. No matter what kinds of countries, what kinds of culture, and what kinds of banking products and investors, banks need to be responsible for their customers in a social responsible way.

From literature, global regulations imposed for banks is holding reserve against loans and achieving AAA grade ratings. In the past years, some banks tried to bundle up loans to private customers and companies, and selling these to one another on the inter-bank market.

Besides, the importance of internal audit has to been emphasized, especially in banking industries. Coetzee and Fourie (2010) mentioned that internal audit had been perceived positively. They indicated that internal audit should focus on strategic, operational and business risks in addition to financial and compliance risks as 80% of loss in external shareholders value in Fortune 500 companies could be linked to the first set of risks. Senior management and those of the chairpersons of the audit committees expect an increase in internal auditing involvement in risk-related issues. Coetzee and Fourie (2010) also highlighted that risk assessment had to be performed annually under the requirement of industries. So, what is the value from Internal Audit Function (IAF)? Barac, Plant and Motubatse (2010) quoted a survey conducted by (Institute of Internal Auditors (IIA) on five value-adding attributes for IAFs. They were: organizational alignment, extensive staff expertise, challenging work environment, risk assessment of the audit universe; and an array of audit services.

Furthermore, Barac, Plant and Motubatse (2010) shared the idea of Dittenhofer (2001) in the aspect of making a smooth internal audit process. They were: interaction with organization, internal restructuring, creation of new services and methods, and using technology.

All in all, CSR in banking industries shall comprise the above-mentioned elements: risk assessment, effective and efficient internal audit process with value added to stakeholders. Hence, in order to maintain competitiveness in the market and responsible to customers, bankers need to understand the economic situation, re-focus marketing strategy with prudent risk management system, identify the concerns of customers, implement fair operation procedures to protect customers and the community as a whole.

1.4 CSR and profitabilityCorporate social responsibility (CSR) is a doctrine that promotes expanded social stewardship by businesses and organizations. CSR suggests that corporations embrace responsibilities toward a broader group of stakeholders (customers, employees and the community at large) in addition to their customary financial obligations to stockholders. A few examples of CSR include charitable giving to community programs, commitment to environmental sustainability projects, and efforts to nurture a diverse and safe workplace.

As more attention is being paid by outsiders to the social impact of businesses, corporations have acknowledged the need for transparency regarding their social efforts.

Is CSR Socially Desirable?

Despite the apparent acceptance of CSR by businesses, many economists have taken a skeptical view of CSR and its viability in a competitive environment. Friedman noted that there are many circumstances in which a firms manager may engage in actions that serve the long-run interest of the firms owners and that also have indirectly a positive social impact.

Examples are: investments in the community that can improve the quality of potential employees, or contributions to charitable organizations to take advantage of tax deductions. Such actions are justified in terms of the firms self-interest, but they happen to generate corporate goodwill as a byproduct. Furthermore, this goodwill can serve to differentiate a company from its competitors, providing an opportunity to generate additional economic profits.

Economists Bryan Husted and Jos de Jesus Salazar, for example, recently examined an environment where it is possible for investment in CSR to be integrated into the operations of a profit-maximizing firm. The authors considered three types of motivation that firms consider before investing in social activities.

Table 1: Overview of significant literatureStudyFactorsSample and methodResults

Corporate Social Responsibility: A Study of Selected Public Sector Banks in IndiaCommunity welfare,Education ,Rural Development,Vocational training,Women, HealthcareData are mainly collected both from primary and secondary sources. Primary data were collected on personal interaction with HR executives who are dealing with CSR activities in the respective banks. The secondary data has been collected from different sources like scholarly articles, annual reports of the selected banks, newsletters, and various web sites.Study of the existing CSR practices in selected Nationalized Banks.Suggestions for the implementations of model CSR practices in Indian Banks.

Corporate Social Responsibility and Corporate Governance in Banking Sector in IndiaCorporate Social Responsibility , Sustainable Development, Non-Financial ReportingData are mainly collected from secondary sources which have been collected from different sources like scholarly articles, annual reports of the selected banks, newsletters, and various web sites.These papers have highlighted the fact that sound corporate governance should have, as its basis, the following strategies and techniques: 1. the corporate values, codes of conduct and other standards of appropriate behavior and the system used to ensure compliance with them. 2. A well-articulated corporate strategy against which the success of the overall enterprise and the contribution of individuals can be measured.

CORPORATE SOCIAL RESPONSIBILITY: ANANALYSIS OF INDIAN COMMERCIAL BANKSRural Branch Expansion ,Priority Sector lending ,Environment Protection ,Community Welfare ,Women Welfare , Farmers Welfare , New Initiative related to CSR, Financial Literacy ,EducationThe study is based on the secondary data collected from the annual reports of the banks. On the basis of ownership structure of the banks a sample of 30 banks has been taken for the study. Out of 30 banks, there are 10 private sector banks, 15 public sector banks and 5 foreign banks.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 requirement of Priority sector lending and rural branch expansion. Even after the RBIs guidelines for financial literacy programs the banks have not take substantial steps in this direction.

CORPORATE SOCIAL RESPONSIBILITIES OF PUBLIC SECTOR Banks Of indiaEducational support, Poverty eradication, Rural development, Vocational training to unemployedThe study is based on the case study method. Seven Public Sector Banks are selected. Data are collected from the secondary sources most particularly from concerned Banks Annual Report, web sites, newsletters and other secondary sources. The study covers the period 2007 to 2010.The Banks under study have recognized their responsibility towards the society and are making their contribution in the field of employment generation, education, health care, farmer training, women welfare and women empowerment. We suggest that banks should disclose the amount spent on CSR activities in their annual reports.

CSR Practices in Indian Banking SectorEmployment, Children Welfare , Environment, Community Welfare, Rural development, Health care, Responsible bankingData are mainly collected from secondary sources which have been collected from different sources like scholarly articles, annual reports of the selected banks, newsletters, and various web sites.The study found out that among the reporting banks also, some banks are making false gestures in respect of their efforts for socioenvironmental concerns. Most of the Banks use CSR practices as a marketing tool and many are only making token efforts towards CSR in tangential 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 ad-hoc manner, unconnected with their business process and dont state how much they spend on CSR activities.

CSR Practices and CSR reporting in Indian Banking SectorCSR Activities, Total CSR spendRandom Sampling technique is used for selecting the Banks for this Study in which the major players two from Public Sector and two from Private Sector have been selected for the study i.e. SBI, PNB, HDFC and ICICI. The Data is collected from secondary sources particularly from concerned Banks Annual Report, Web sites, newsletters and data from various journals.Maximum number of banks whether related to private sector or public sector highly performing CSR activities as per their priority but in CSR reporting details are not disclosed. Ranking of Banks on the basis of CSR activities performed by them

CSR Orientation of Indian Banks and Stakeholder Relationship Marketing Orientation: An Empirical InvestigationEducation, Health, Community Welfare, Entrepreneurship, Environment, Market Place, Rural DevelopmentIndian banks with average assets (financial year 2009 and 2010) of more than 100,000 million INR were chosen for the study. They used content analysis to generate the underlying data for our research. They analyzed the data available from the websites, annual reports, sustainability /CSR reports (if available) of all the banks in our sample.It shatters the mythical association between profits and how banks plough these profits. It suggests that large banks need to probably indulge in CSR differently, to maintain their preferred employer status, and to appeal to employee stakeholders. It also suggests that time spent by the bank also leads them to adopt a higher and different CSR orientation

2. Research Gap

Although many studies have been made to evaluate the various CSR activities being implemented by public and private sector banks in India. Different factors may be some independent variables that affect the choice for activities. For example, alignment of the activity with their organizational values, vision and mission, association with its products, with a choice to differentiate themselves from other banks etc. But until now, there has been no specific relation that describes how these activities can be ranked in terms of their efficiency to drive profitability for these financial institutions, in terms of Return on Investment, building of brand image and brand awareness. 3. Motivation

Too often, executives have viewed corporate social responsibility (CSR) as just another source of pressure or passing fad. But as customers, employees, and suppliersand, indeed, society more broadlyplace increasing importance on CSR, some leaders have started to look at it as a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time. They view CSR as central to their overall strategies, helping them to creatively address key business issues.

The big challenge for executives of these financial institutions is how to develop an approach that can truly deliver on this lofty ambition

The study will help to find out:

The Major areas of CSR initiatives in Indian Banking Sector.

To Focus on the Present Status of CSR in Banking.

To strategically align widely used CSR activities in Indian Banking sector for profitability.

Important Factors Identified

Based on the literature review we have identified various factors .The detailed factors are presented in the following table:

Table 2: Factors identified after the literature reviewS.VariableExplanation

NoVariabl

e Code

1Priority Sector lendingPSLThe ratio of advances made to priority sector to

total advances

2Environment ProtectionEPNumber of activities done for environment

protection

3Community WelfareCWNumber of activities done for community welfare

4Women WelfareWWNumber of activities done for women and girl child welfare.

5Farmers WelfareFWNumber of activities done for farmers welfare

6New Initiative related toNINew initiatives related to CSR activities taken in

CSRthe year 2010-11

7Financial LiteracyFLEfforts done for promoting financial literacy

8EducationEDUNumber of activities done for promotion of Education

Priority Sector Lending: As described by the Reserve Bank of India, Priority Sector lending means lending to the agriculture, small scale and ancillary industries, new and renewable sources of energy, cottage industries, artisans, food and agro based processing, education, housing and weaker section. While for domestic banks, both the public and private sectors are required to lend 40 per cent of their net bank credit (NBC) to the priority sector, foreign banks are required to lend 32 per cent of their NBC to the priority sector. It has been observed that while banks often tend to meet the overall priority sector targets, they sometimes tend to miss the sub-targets. This is particularly true in case of domestic banks failing to meet their sub-targets for agricultural advances. One of the reasons banks often site for not lending to this sector is that recovery is often difficult.Environment Protection: This variable includes all the activities carried out by the banks for the purpose of environment protection or to reduce the environmental harm by adopting different initiatives, replacing traditional activities by eco friendly processes or activities in day to day business. Adenekan (2007), Joyner and Payne (2002), concluded that a growing number of companies in many sectors and geographic regions discovered concrete value and competitive advantage from socially responsible practices in pollution prevention, energy efficiency, environmentally oriented design, supply chain management, and health and sustainable agriculture initiatives, among others. For these firms, CSR has had a positive impact on profits. The World Bank has also pressurized the banks not to finance the projects, which are causing harm to the environment either directly or indirectly.

The major activities performed by banks in this field are as follows:

No credit to businesses involved in Ozone depletion, human rights violation, controversial weapons, gambling or pornography activities.

Awareness programs about avoiding the usage of plastic bags and reduced use of paper in offices.

Promoting and financing energy saving and solar energy projects.

Encouraging, financing and setting up of non-conventional energy generation units,

Tree plantation drives

Projects related to reduction of carbon emissions

Education: This variable is used to measure the contribution of banks in the field of education. In India Rao (1964) and the Education Commission (1966) emphasized the links between education and development. Fields (1980) and Tilak (1978) explained that education and poverty are inversely related: the higher the level of education of the population, the lower would be the proportion of poor people in the total population, as education imparts knowledge and skills that are associated with higher wages. The major activities carried out by the banks in the field of education are as follows:

Support to low income family students with financial assistance, free uniform and books

Motivational camps to go to school, for the students of rural areas. concession in interest on education loans for backward class students Establishing library-cum-reading rooms in rural areas and providing fans, water coolers etc. to schools.

Promotion and financial support education of special children,

Tie-ups with educational institutes for providing education loans, interest subsidy schemes for students belonging to economically weaker sections

School adoption projects

Special educational sponsorships for the girl child Educational assistance by giving donations

Opening of pre-schools and assistance in mid day meal programs for the students.Community Welfare: This variable is used to measure the activities performed by the banks for the welfare of the community. As per the data, highest number of banks has contributed in this CSR activity.

Some of the common activities in this field are:

Donations to orphanages

Free food distribution to the poor patients of government health care centers Health awareness programs

Free health checkups

Campaigns against usage of drugs, alcohol and smoking Construction of toilets, community halls and dispensaries.

Helping disabled persons by donating artificial limbs/calipers/wheelchairs etc. Providing free medical facilities to the poor people

Community welfare through helping NGOs Blood donation camps

Donations for disaster relief and accident victims

Financial Literacy: As per the Reserve Bank of India, Financial literacy is providing familiarity with and understanding of financial market products, especially rewards and risks, in order to make informed choices. It is the ability to know, monitor, and effectively use financial resources to enhance the well- being and economic security of oneself, one's family, and one's business. Financial literacy has assumed greater importance in the recent years, as financial markets have become increasingly complex and as there is information asymmetry between markets and the common person, leading to the latter finding it increasingly difficult to make informed choices. In India, the need for financial literacy is even greater considering the low levels of literacy and the large section of the population, which still remains out of the formal financial set- up. Credit Counselling can be defined as counselling that explores the possibility of repaying debts outside bankruptcy and educates the debtor about credit, budgeting, and financial management. In view of the above two points the RBI has initiated a scheme for setting up of Financial Literacy and Credit Counselling (FLCC) Centers by the banks. Certain banks have not just opened the FLCC centers but have also taken other measures to promote finance education among people.

New Initiatives related to CSR: This variable is used to measure the new CSR initiatives taken by the banks in the respective year for which CSR has been measured. Some of the major initiatives taken by the banks are listed below:

Programs for promotion of women entrepreneurs Village adoption schemes

Green initiatives like electricity audit of bank office

Establishment of Butterfly park which houses medicinal plants Tree Plantation Drives

Spreading awareness on Climate Change and Global Warming, joining hands with World Wide Fund of Nature (WWF) and The Indus Entrepreneurs (TIE)Women Welfare: This variable indicates the activities done in the direction of welfare of women and girl child. Some of the activities which banks are performing in the field of the women welfare are as follows:

Farmers Welfare: Indian economy has always been an agriculture based economy. Although the contribution of agriculture to the GDP of the country has decreased in past years, a large portion of population still depends upon agriculture for its survival. However, the agriculture sector is still in a meagre state. Due to the poor economic health of agriculture sector, India observes a large number of cases of suicide among the farmers. It has been felt that there is an urgent requirement to promote investments in this sector and welfare of the farmers. Some of the major activities done by the banks under the farmers welfare are as follows:

Agriculture Debt Waiver & Debt Relief Scheme

Loan for Solar Water Heating Systems at concessional rate,

Rural Extension Education Programs enabling farmers & entrepreneurs to improve their productivity/production,

Establishment of Farmers clubs, Farmers Training Centers (FTCs), Special credit cards for farmers,

Agriculture knowledge sharing Programs, National insurance programs for agriculture

Financing rural go downs and cold storages/warehouses, Debt Swap Schemes

Setting up agriculture clusters for better farming

Commodity finance against pledge of warehouse receipts of agro commodities

Objectives The Major areas of CSR initiatives in Indian Banking Sector.

To Focus on the Present Status of CSR in Banking.

To strategically align widely used CSR activities in Indian Banking sector for profitability.

Research MethodologyThe study is based on the secondary data collected from the annual reports of the banks. On the basis of ownership structure of the banks a sample of 30 banks has been taken for the study. Out of 30 banks, there are 10 private sector banks, 15 public sector banks and 5 foreign banks. From the literature review and on the basis of data collected the following 9 variables have been identified to assess the corporate social responsibility of the banks (Shown in following Table).

S.VariableExplanation

NoVariable

Code

1Priority Sector lendingPSLThe ratio of advances made to priority sector to

total advances

2Environment ProtectionEPNumber of activities done for environment

Protection

3Community WelfareCWNumber of activities done for community welfare

4Women WelfareWWNumber of activities done for women and

girl child welfare

5Farmers WelfareFWNumber of activities done for farmers welfare

6New Initiative related toNINew initiatives related to CSR activities taken in

CSRthe year 2010-11

7Financial LiteracyFLEfforts done for promoting financial literacy

8EducationEDUNumber of activities done for promotion of Education

Data AnalysisOn the basis of the actual activities done and disclosed in the annual reports, the banks have been given points on the following criterion:

Number of

Activities01 to 23 to 45 to 6Above 6

Points Given01234

For the variable Priority Sector Lending (PSL) the following criterion has been used to give points to the banks.

PSL RatioAbove 40%40% to 35%35% to 30%30% to 25%Below 25%

Points

Given54321

The total score of the CSR has been calculated by adding up the individual score of each variable for the bank. The CSR score of all the banks for the studied period has been shown in the below table 2.

Table 2 Bank Wise CSR Score (2010-11 to 2012-13)Average CSR

BANKBank Type2010-112011-122012-13Score

PNB14252020

ALB12141514

SB16161114

SBIPUBLIC9141312

CBIBANKS11121111

IOB12131212

OBC13131313

CB13101212

UBOI11131312

BOI1110910

IB10101311

BOB10889

IDBI9111311

CO.B10101111

UCO11789

ICICI15181316

HDFC14141113

JKBPRIVATE13151816

ING13151414

SCETOR

AXIS11101211

BANKS

SIB912810

KMB1191311

FB1391311

KB97109

YES3686

RBS1115912

HSBCFOREIGN9101210

DEU7777

BANKS

CITI8687

SCH6597

Interpretation: A comparative analysis of CSR score of all the banks for the year 2010-11 to 2012-13 has been given in table 2. As per the CSR score of 2010-11, the highest score is recorded for public bank i.e. 16 by Syndicate bank, while the lowest CSR score is recorded for private bank i.e. 3 by YES bank. The mean value of CSR score on the basis of highest and lowest score is 10. 13 public banks out of a total of 15 have scored above or equal to the mean value of score on the basis of highest and lowest CSR score. Only one foreign bank out of a total of five has achieved the CSR score above the mean value. 7 private banks out of a total of 10 have achieved the CSR score above the mean value. The highest CSR score for private bank is 15 of ICICI bank, and highest CSR score of foreign bank is 11 of Royal Bank of Scotland.

As per the CSR score of 2011-2012, the highest score is recorded for public bank i.e. 25 by Punjab National bank, while the lowest CSR score is recorded for foreign bank i.e. 5 by Standard Chartered bank. The mean value of CSR score on the basis of highest and lowest score is 15. Only 2 public banks out of a total of 15 have scored above the mean value of score on the basis of highest and lowest CSR score. Only one foreign bank out of a total of five has achieved the CSR score equal to the mean value. 3 private banks out of a total of 10 have achieved the CSR score above and equal to the mean value. The highest CSR score for private bank is 18 of ICICI bank, and highest CSR score of foreign bank is 15 of Royal Bank of Scotland.

As per the CSR score of 2012-13, the highest score is recorded for public bank i.e. 20 by Punjab National bank, while the lowest CSR score is recorded for foreign bank i.e. 7 by Deutsche bank. The mean value of CSR score on the basis of highest and lowest score is 14. Only 2 public banks out of a total of 15 have scored above the mean value of score on the basis of highest and lowest CSR score. No foreign bank out of a total of five has achieved the CSR score equal to the mean value. 2 private banks out of a total of 10 have achieved the CSR score above and equal to the mean value. The highest CSR score for private bank is 18 of Jammu & Kashmir bank, and highest CSR score of foreign bank is12 of HSBC bank. Thus overall it can be interpret from the table 2 that on the basis of average CSR score, public bank is leading, then private sector banks and foreign banks are far behind from both the public and private banks in CSR score.

Year wise score of CSR activities of 30 BanksInterpretation: Graph 1 gives the total score of each CSR activity for the year 2011-12 to 2013-14. It can be seen from the graph 1 that in the year 2010-11, the highest score i.e. 45, was obtained by Community Welfare (CW) activity, while the lowest score i.e. 16, was obtained by financial literacy (FL) and women welfare (WW) activities by the banks. As per the score of 2011-12, the highest score i.e. 46 was obtained by Community Welfare (CW) activity, while the lowest score i.e. 16, was obtained by women welfare (WW) activity by the banks. As per the score of 2012-13, the highest score i.e. 58 was obtained by Community Welfare (CW) activity, while the lowest score i.e. 12, was obtained by women welfare (WW) activity by the banks. Thus overall it can be interpret from the graph that banks are performing well related to the community welfare activities throughout the years while lowest performance has been shown by banks in CSR activity related to women welfare. The score of community welfare increased year by year from 45 (2010 -11) to 58(2012-13).

Graph 2 CSR Activity wise Mean values of BanksInterpretation: It can be interpret from the graph 2 that public banks have shown best performance related to Farmers welfare activities, and lowest performance in women welfare activity. As per the mean values of CSR activities of private sector banks, they have shown best performance in community welfare activities and lowest performance in women welfare activities. As per the mean values of CSR activities of foreign banks, the best performance has been recorded in environmental protection activities by the foreign banks and lowest performance in farmers welfare activities. Overall it can be interpret that private banks are leading in environmental protection, education, and community welfare activities and lagging in New Initiative related to CSR and women welfare activities. Public banks are leading in financial literacy and farmers welfare activities and lagging in environmental protection and education activities. Foreign banks are leading in New Initiative related to CSR and women welfare activities and lagging in community welfare, financial literacy and farmers welfare activities. Thus overall foreign banks are far behind from public and private banks in performing CSR activities.

Graph 3 Percentage of Banks Performed CSR activities from (2010-11 to 2012-13)

Interpretation: As per the data of 2010-11, highest number of banks i.e 80 percent of total banks are performing community welfare activities, while only 40 percent of total 30 banks are performing new initiative related to CSR activities and only half of the banks i.e. 50 percent are performing financial literacy and women welfare activities. As per the data of 2011-12, highest number of banks i.e 80 percent of total banks are performing community welfare activities followed by financial literacy activities, while only 50 percent of total 30 banks are performing women welfare activities. As per the data of 2012-13, highest number of banks i.e 87 percent of total banks are performing community welfare activities followed by environmental protection activities, while only 37 percent of total 30 banks are performing women welfare activities. Thus overall it can be interpret from the graph 3 that lowest percentage are performing women welfare activities, and even the percentages of banks performing women welfare activities have decreased from 50 percent to 37 percent while highest percentages of banks are performing community welfare activities and the percentages of banks involved in this activity have increased from 80 percent to 87 percent which is a good signal.

Priority Sector Lending Ratio

(PSL)

BANKBank Type2009-102010-112011-12

PNB35.7032.4831.33

Al.B33.9132.8633.65

SB34.3830.1329.46

SBI26.9930.6128.84

CBIPUBLIC32.1431.2326.11

IOB34.4829.1930.03

OBCBANKS33.6536.4535.75

CB33.4832.1929.80

UBOI31.6831.9435.15

BOI25.4825.7622.56

IB34.8434.2932.98

BOB26.3524.0122.59

IDBI22.4326.8726.74

CO.B31.5727.5229.19

UCO29.5324.3225.03

ICICI29.7924.6823.37

HDFC35.0934.2432.68

JKBPRIVATE37.4439.2330.11

INGSECTOR37.1534.0933.04

BANKS

KMB32.6929.7931.47

FB36.5533.1332.28

KB36.3935.9636.53

YES20.2426.3025.92

AXIS28.6928.9928.56

SIB31.2330.2518.76

HSBCFOREIGN34.9935.0530.25

RBS45.2444.1740.56

BANKS

DEU26.5532.2624.89

CITI36.2032.7828.87

SCH27.5626.3726.39

From the table it can be interpreted that PSL Priority sector lending ratio was 35.70 (Maximum) and 22.43 (Minimum) in the year 2010-11 for public banks, while the PSL ratio has increased from 35.70 to 35.75 in the year 2011-12. The top performer among public banks in PSL ratio variable is Oriental Bank of Commerce while the least performer bank is Bank of India as per the PSL ratio of 2011-12. Priority sector lending ratio was 37.44 (Maximum) and 20.24 (Minimum) in the year 2010-11 for private sector banks, while the PSL ratio has decreased from 37.44 to 36.53 in the year 2011-12. The top performer among private sector banks in PSL ratio variable is Karnataka Bank while the least performer bank is South Indian Bank as per the PSL ratio of 2011-12. Priority sector lending ratio was 45.24 (Maximum) and 26.55 (Minimum) in the year 2010-11 for foreign banks, while the PSL ratio has decreased from 45.24 to 40.56 in the year 2011-12. The top performer among foreign banks in PSL ratio variable is Royal Bank of Scotland while the least performer bank is Deustche bank as per the PSL ratio of 2011-12. Thus overall it can be interpret from the table 3 that foreign banks are leading in the PSL ratio variable, then private sector banks and at last public banks.

Banks are usually judged from the point of view of their financial performance but this study has explored a new dimension for analyzing the performance of banks. It could be inferred from the study that certain banks like ICICI bank, HDFC bank and State Bank of India which are top performers in terms of profitability and growth are not at the top in CSR activities.

This study might valuable for commercial banks to understand their own position among the overall banking sector and also it is important for policymakers to judge the banking performance from the angle of corporate social responsibility. However, a number of limitations of this study could be identified. First, the study is limited to a sample of 30 Indian banks hence more evidence is needed on the CSR activities before any generalization of the results can be made. Second, the data was collected only for the year 2010-11 and hence the results of the study cannot be assumed to extend to different study periods. The study has a scope of further research where the CSR performance of banks can be related to financial performance of the banks.

Alignment of the CSR activities as per the data analyzed is as follows:

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Public Banks: ALB: Allahabad Bank, BOB: Bank of Baroda, BOI: Bank of India, CB: Canara Bank, CBI: Central Bank of India, IDBI: Industrial Development Bank of India,PNB: Punjab National Bank, UBOI: United Bank of India, SBI: State Bank of India, IOB: Indian Overseas Bank, OBC: Oriental Bank of Commerce, SB: Syndicate Bank, CO.B: Corporation Bank, IB: Indian Bank, UCO: UCO Bank.

Private Banks: AXIS: Axis Bank, JKB: Jammu Kashmir Bank, KMB: Kotak Mahindra Bank, KB: Karnataka Bank, ICICI: Industrial Credit and Investment Corporation of India, HDFC: Housing Development Finance Corporation Bank, YES: YES Bank, FB: Federal Bank, SIB: South Indian Bank, ING: ING Vysya Bank.

Foreign Banks: CITI: Citi Bank, DEU: Deutsche Bank, HSBC: Hongkong Shanghai Banking Corporation, SCH: Standard Chartered Bank, RBS: Royal Bank of Scotland.

_1487344078.xlsChart1

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1.733.62.4

4.276.63.8

2.731.51

2.332.12.8

1.612

4.871.20.4

1.81.51.2

Public

Private

Foreign

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EP2.074.84.2

EDU1.733.62.4

CW4.276.63.8

FL2.731.51

NI2.332.12.8

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FW4.871.20.4

PSL1.81.51.2

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