Academic journal article IUP Journal of Corporate Governance

Corporate Social Responsibility of Banks and Public Awareness: A Study in Assam [Dagger]

Academic journal article IUP Journal of Corporate Governance

Corporate Social Responsibility of Banks and Public Awareness: A Study in Assam [Dagger]

Article excerpt

Introduction

The advent of 1991 LPG model has not only opened up our economy but also moved us towards a globalized market where it becomes important to satisfy all the stakeholders of the economy in a more sustainable way. The business organizations were expected to play a central role in efforts to eliminate poverty, achieve equitable and accountable system of governance, and ensure environmental security, in the backdrop of which the term Corporate Social Responsibility (CSR) comes to the fore in the development discussions. Business basically being a socioeconomic entity cannot be carried out in isolation of society. It is a group endeavor and therefore has a number of responsibilities towards different stakeholders. The term stakeholders can be defined as "those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends" (Johnson and Scholes, 2002); then one organization is concerned with a very large amount of people, if not everyone since many people depend, either directly or indirectly, on an organization's activity. And, if the organization is accountable to all its stakeholders (i.e., everyone) rather than to one constituency (i.e., the shareholders), then the notion of accountability becomes valueless because it is too broadly set and useless from a managerial point of view (Hummels, 1998; and Vinten, 2000).

In order to limit the scope of the term 'stakeholder', various authors have sub-categorized them. The most widely used is the external/internal stakeholder framework (Johnson and Scholes, 2002). So, different stakeholders can be-management, workers, customers, shareholders, government and the society. So, in simple terms we can say that realization and fulfillment of responsibilities towards these stakeholders is termed as CSR. The concept of CSR revolves around issues like ethics, social upliftment, environmental protection and solution to other global problems and the three keys to an effective CSR policy are commitment, clarity and congruence with corporate values.

To highlight the role of banks in CSR, the Reserve Bank of India (RBI) circulated a notice on December 20, 2007 among all the scheduled commercial banks titled "Corporate Social Responsibility, Sustainable Development and Non-Financial Reporting: Role of Banks". Regarding the banking sector, banks do not exist in a vacuum. They make a large contribution to the country's GDP growth, meet the demand of the growing middle class, contribute to infrastructure spending, and reach out to the semi-urban and rural areas. The RBI (2007), stressing the need for CSR, suggested that the banks should pay special attention towards integration of social and environmental concerns in their business operations to achieve sustainable development. RBI also asked the banks to start Non-Financial Reporting (NFR) which will cover the work done by the banks towards the social, economic and environmental betterment of the society. Also the Basel Committee in the year 1999 had brought out certain important principles on corporate governance for banking organizations which more or less have been adopted in India.

CSR is generally understood as a moral obligation that is supposed to be shown by organizations towards the society in lieu of profits generated through customers who are a part of the same society. Companies also have to show a concern for CSR to prove the value proposition of the brand to the current as well as prospective customers. Today customers are of the view that if it is a well-known company, it undertakes certain activities not merely for the motive of profit but also for a social cause.

The RBI has asked the banks to pay special attention towards integration of social and environmental concerns in their business operations. Stressing the need for CSR, RBI pointed out that these initiatives by the banks are vital for sustainable development. Issues such as global warming and climate change pose a great risk to the environment and can be quite damaging to the business models of companies. …

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