Role of Banks for CSR(Corporate Social Responsibility) in India

A Flip Flop show of Banks for CSR (Corporate Social Responsibility)

The Problem.

I would like to start off with a small story. The Government of India once launched a scheme in the national Capital (Delhi) which promised to provide financial help to lactating mothers or yet to be mothers. The scheme was the brainchild of Ministry of health and was a promising step towards the development of a healthy nation. As soon as the scheme was launched thousands of crowd gathered outside the reimbursement offices. Most of them were people who were below poverty line and they did not have a Bank Account. Since most people did not have a Bank account the money could not be credited. The problem-you cannot reimburse the money in cash due to legal implications.

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By

Pranjal Mitra

Thus it proved that a massive amount of banking restructuring was required in the country before we can implement any scheme.

Another example comes from a recent story of the formation of a new state (Telangana). After the formation of a new state the government announced to waive off all the loans from the farmers. The problem in this case was most of the farmers who actually required the money did not have a loan Account and it was only the wealthy farmers who were benefitted from this scheme. The farmers who actually required the money like farmers holding only a small amount of land were left in the misery of the informal financial institutions.

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Pranjal Mitra

You will be surprised to know that till date in India 41% of the population in India does not have a normal savings Bank Account. It is rather more prominent in the eastern region and the north eastern region where almost 59% and 61% still do not have a bank account. Moreover as per the problem mentioned in my 2nd

example stated above only 14% of the total population in India have a loan account. But More than 40% of India population depend on agriculture as a source of income as Our India is more of an agro based economy. Thus in an unlikely event such as drought or crop failure the farmers as well as the government agencies are clueless as in where to push in the money. It is rather very disheartening too say that the poor remains poor irrespective of all the substantial efforts taken by the government. We are about to reach the 70th Year of Independence but we still lack the basic

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amenities or rather I would say the basic economic needs in the country.

The Solution.

In the Companies Act of 2013 the Government of India has made it mandatory for all organizations having an annual profit of 1Million $ and above to contribute at least 2% of average net profit of 3 years should be spent on Corporate Social Responsibility(CSR). Thus the various Banks spend almost a fortune on CSR.

According to Archie B.Carrol an organization has its obligations towards the society, divided in to four parts in the order of importance namely Economic, Legal, Ethical and Discretionary obligations. It is evident that when the economic, legal and ethical obligations of an organization are fulfilled, only then it should focus on

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its discretionary social obligations. Thus it is highly recommendable for the Banks to focus on the fulfilling the economic obligations first and then look at social obligations. What I mean here exactly is Banks should first focus on increasing the number of Savings Bank account in the country first. A strong backbone is required for efficient implementation of a Social policy.

Banks should be spared for a period of 5 Years so that they can fulfill the economic responsibilities first and then should move towards a social responsibility. India has a massive increase in the number of mobile phone users, almost 75 % of the population now has mobile phones. Thanks to the telecom revolution which brought in cheap call and data rates across the country. Banks should work towards mobile banking so that even the remotest part of the country has access to banks and it is easy for the organizations to implement financial schemes or easier access to loans helping millions of farmers.

I wish to see a country with a head count of 1.2 Billion marching towards a bright future.

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