The future of responsible lending in India: perceptions of the environment and sustainability

Financial institutions are becoming increasingly accountable to a broader range of stakeholders, particularly with regard to their lending habits and their subsequent social and environmental footprint. As a consequence, a substantial number of banks, predominantly from the minority world, have voluntarily adopted the Equator Principles, a set of environmentally and socially sound lending guidelines aimed at the project finance industry. It is imperative that Indian banks become signatories; increasingly they are funding national infrastructure growth at the expense of the environment and communities which inhabit areas of development. Previously, Indian bankers have been absent from the Equator dialogue; this research sought to include them and ascertain the future of responsible lending within the Indian context. Across the minority world, responsible lending is entwined with the motivation to become a good corporate citizen. An analysis of Indian corporate social responsibility initiatives demonstrated that a number of financial institutions and corporations are encouraging innovation, sustainable development and independence within their local communities; a positive outcome for the potential of Equator adoption in India. The global financial crisis presently threatens to negate the progress banks have made with their commitment to responsible project finance. However, the reshaping and redefining of the global banking system presents an opportunity for financial institutions worldwide to be more responsible with the allocation of credit on an individual basis and the financing of large-scale development projects. India, at this time of major infrastructure growth, can either develop at the expense of its natural and social environments, or strive towards lifting its population out of poverty within a sustainable, responsible framework.