RBI asks banks to step up CSR efforts

Reserve Bank of India (RBI) has directed banks to undertake corporate social responsibility (CSR) initiatives for sustainable development.

The regulator has also asked banks to begin non-financial reporting, which will give an account of the banks' intangible assets.

"There is a general lack of adequate awareness on issues like global warming and climate change. A majority of the Asian companies are not aware of the risk climate change can pose to their business models and the environment. In this context, the need for sustainable developmental efforts by financial institutions in India assumes urgency, and banks, in particular, can help contribute to this effort by playing a meaningful role,'' said the RBI in a circular issued to banks.

Banks have been directed to put in place board-approved plan of action to meet the cause of sustainable development. Banks will have to keep themselves abreast of the developments on an on-going basis and modify their strategies and plans in the light of such developments. The initiatives taken by banks will have to be placed in public domain along with the annual accounts of banks.

"Non-financial reporting is an opportunity to communicate in an open and transparent way with the stakeholders. In their non-financial reports, firms volunteer an overview of their environmental and social impact during the previous year. The information in non-financial reports contributes to building up a company's risk. The importance of non-financial disclosure in the overall assessment of a company's risk profile is steadily gaining ground,'' the central bank said.