A STUDY OF SOCIAL AND ETHICAL ISSUES IN BANKING …

1 , , Int. J. Eco. Res., 2011 2(5), 49-57 ISSN: 2229-6158. A STUDY OF SOCIAL AND ETHICAL ISSUES IN BANKING . industry . Dr. Goyal1 and Vijay Joshi2. 1. Convener & Head, Department of Management Studies, College, Udaipur. 2. Research Scholar, Department of Business Administration, UCCMS, MLSU, Udaipur. Abstract Economic performance of a country is largely determined by BANKING and financial system. BANKING and finance play a vital and crucial role in framing public policies in today's business environment. This article highlights SOCIAL and ETHICAL ISSUES such as SOCIAL BANKING , ETHICAL BANKING , green BANKING , global BANKING , rural BANKING , and agri- BANKING , which help in achieving sustainable development of BANKING and finance. For this purpose, we have gone through a series of development that are taking place in current business scenario. This paper is divided in four parts. First part discuss introduction of BANKING industry in India.

2 Second part explains historical background of BANKING and its development. It also discusses concept of Banks. Third part analyzes the review of past studies on the theme. Fourth part highlights SOCIAL and ETHICAL ISSUES related to BANKING industry and finally conclusion has been given. Key words: BANKING industry , SOCIAL and ETHICAL BANKING , green BANKING , global BANKING , rural BANKING , and agri- BANKING . Introduction day-to-day activities of our life. As we As time passes, we realize and adopt the know that a bank is a financial institution changes that are taking place around us. and whether it is a common person, private We keep on evaluating effects of changes organization or government organization, on us. It is obvious that technology has all of them are dealing with banks. changed and modified the life styles of Therefore, the responsibility of banks human beings. In the process of increases and we need to understand the industrialization, modernization and role of banks in the Global Economy of globalization, we are observing some 21st century.

3 Global ISSUES like global warming, environmental concerns, SOCIAL and ETHICAL BANKING industry : Historical ISSUES . These ISSUES and concerns do not Background emerge instantly rather it takes years of BANKING industry is one of the oldest continuous and gradual change. It is said industry of the world. The first record of that every action ends up with some BANKING activity can be traced way back in reaction. Therefore, the uninterrupted 2000 BC in Assyria and Babylonia when industrialization has been significantly merchants of ancient world made loans to threatening to our society, nature, and farmers and traders that carried goods. human life as well. It is again technology Later in ancient Greece and during the that has helped scientists to undrape the Roman Empire lenders based in temples various bad effects of innovations. It is made loans but also accepted deposits and high time for us to enliven consciousness changing money.

4 Of our society about the blind The word Bank came from French word industrialization and enhance quality of banque, from Old Italian banca, from Old life. High German banc. It is said that benches In the above context, we need to indentify were used as desks or exchange counters a common factor that can be an during the Renaissance by Florentine independent entity. A Bank is one of the bankers, who used to make their most common factor among human transactions with the help of desks covered beings, societies, industries, and countries. by green tablecloths We all are related to Banks directly or According to Trivedi, Chaudhary and indirectly. There is direct role of banks in Kumar (2010) the emergence of modern IJER | SEPTEMBER - OCTOBER 2011 49. Available , , Int. J. Eco. Res., 2011 2(5), 49-57 ISSN: 2229-6158. banks are considered from 1157 when A bank is a financial establishment which Bank of Venus' was set up in Italy.

5 Later uses money deposited by customers for on, Bank of Barsilona' in 1401 and Bank investment, pays it out when required, of Geneva' in 1407 were set up. Bank of makes loans at interest Oxford Amsterdam' and Bank of England' were Dictionary (2008). set up in 1694. It is considered one of the oldest unit of Modern BANKING System. " BANKING means the accepting, for the Joint stock companies entered the BANKING purpose of lending or investment, of sector in 18th century. deposits of money from the public, During the 20th century, developments in repayable on demand or otherwise, and information and communication withdrawable by cheque, draft, order or technology allowed banks to dramatically otherwise According to Section 5(b) of increase in their size and geographic BANKING Regulation Act, 1949. network. The recent financial crisis saw "A bank is an establishment which makes significant number of bank failures, to individuals such advances of money as including some of the world's largest may be required and safely made, and to banks and much debate took place around which individuals entrust money when not the world about bank regulation.

6 Required by them for use According to Professor Kinley. Conceptual Framework "Bank is that institution which performs Conceptually a bank is known as a functions of BANKING According to Sir financial institution, which serves as a John Paget. financial intermediary among various On the basis of above definitions we can components of our society. The primary say bank is a institution, which deals in task of a bank is to accept deposits and money, thus each bank performs various provide credits either by lending or functions like money lending, accepting through capital market. Several definitions deposits, transferring of money and of banks are put forwarded by various management of foreign exchange. In this dictionaries, laws, and researchers. Some scenario, it is necessary to understand of them are as follows: various functions of banks. Functions of Banks Primary or Traditional Agency Functions General Utility Functions Functions Accepting Advancing Deposits of Loans 1.

7 Payment of cheques, bills and letters of credit. 1. Security of Wealth and Assets 1. Fixed Deposits 1. Cash 2. Receiving Payment for 2. Arrangement of Travellers Account Credit customers cheques and letter of credit IJER | SEPTEMBER - OCTOBER 2011 50. Available , , Int. J. Eco. Res., 2011 2(5), 49-57 ISSN: 2229-6158. 2. Current 2. Loans and 3. Payment on behalf of 3. Information relating to Account Advances customers Economic Position 3. Saving Account 3. Overdraft 4. Transfer of money 4. Financial Adviser 4. Home 4. Safe Discounting and sale Account of Bills of shares of securities 5. Publication of Information 5. Indefinite 6. Function of manager, Period Trustee and Executor 6. Accepting of Bills 6. Deposits Account 7. Underwriting Functions 7. Security of loans 7. Other Deposits Account 8. Other Functions 8. Personal credit 9. Management of Public Debt 10. Share market function 11.

8 Management of Foreign Exchange Source: - , Chaudhary their actions. A company's record and the and Kumar (2010) INDIAN perception of its ethics affect its reputation BANKING SYSTEM. Jaipur: Ramesh Book and ensure long-term success or failure. Depot. p. Further, he concluded that as we face After understanding the traditional roles increasingly complex and conflicting and functions of a bank, it becomes the ISSUES , our commitment to ETHICAL behavior topic of research that a bank is such a would be tested. common factor among all of us, therefore Hitt, Keats and DeMarie (1998) identified the responsibility of Banks should be strategic challenges and discontinuities increased significantly. Banks can really encountered by firms in 21st century. They play a role to prevent our society from analyzed that to build and maintain blind and rapid industrialization and its competitive advantage, requires a new hazardous effects.

9 Types of organization, leaders for survival We are about to STUDY the emerging ISSUES , and global market leadership. It was additional roles and responsibilities of concluded that success in 21st century banks that can be of utmost importance organization would depend on building from the point of view of global problems strategic flexibility like exercising strategic in 21st century. leadership, building dynamic core competencies, focusing and developing Literature Review human capital, effectively using new Green (1989) revealed that a bank's manufacturing technologies and responsibility extends to Government, implementing new organization structures customers, shareholders, staff, and the and culture. Therefore, the responsibility community. Companies do have ETHICAL of banks in this scenario should be responsibility, but it is not protected by reviewed so that changes of 21st century limited liability from the consequences of can be effectively controlled.

10 IJER | SEPTEMBER - OCTOBER 2011 51. Available , , Int. J. Eco. Res., 2011 2(5), 49-57 ISSN: 2229-6158. There is a strong need for re-inventing the bottles' will continue to supply affluence role of banks as Jeucken (2001) has rather than feed the world' and sustain its compared three world regions Europe (24 agricultures, especially at a time when land banks), North America (6 banks) and is being commandeered for luxury foods Oceania (Japan and Australia; 4 banks) for ( the livestock complex, all-season the period of 1998 to 2000. He analyzed vegetables and fruits) and bio-fuels, and focused some important differences neither of which feed the poor. Ironically, between regions, countries, and banks with the reproduction of poverty remains the regard to sustainable BANKING . The Bank's main source of legitimacy. methodology was entirely based on Goyal and Joshi (2011) studied a sample studying environmental and annual reports of 19 bank mergers (post liberalization).