Social Banking in India -An Overview

Any business, in order to achieve sustainable growth, needs to be socially oriented. This is truer in case of banking business which, due to its financial intermediation function, has to necessarily be aligned to the developmental needs of the society that it operates in. Banks being commercial organisations must earn profit in order to deliver greater value to its stakeholders and to be able to absorb shocks. But at the same time, they should also serve a social purpose; otherwise, they will become irrelevant for the society. The success of European social banks during the recent financial crisis between 2007 and 2010, where they achieved a growth rate of more than 20% per year proved that Banking can never be “unsocial” if they are willing to grow. Thus, social banking may provide important lessons for the banking and finance sector in order to avoid further crises in the future.

In a developing country like India where 21.9% of population is below poverty line, and only 58.7% of total population has access to banking services, the need for social banking is even more. Many initiatives have been taken by Reserve bank of India to promote social banking. Cooperative banking movement, nationalization of banks, creation of Regional Rural Banks etc are some of the measures taken by the government and other concerned organizations for promoting social banking to combat poverty and to achieve overall objectives of inclusive growth.

This paper is an attempt to:

Examine the various initiatives taken by Indian banking fraternity to promote social banking.

Study the impact of social banking on financial inclusion in India.