"Sustainability in Indian Banking Sector: Moving Towards ESG Framework"
DOI:
https://doi.org/10.63278/mme.vi.1667Keywords:
ESG practices, financial performance, Indian banking sector, sustainable finance, GMM estimation.Abstract
This study investigates the relationship between Environmental, Social, and Governance (ESG) practices and the financial performance of Indian commercial banks. While prior research has extensively examined ESG impacts in developed economies and Southeast Asia, empirical evidence from India—a fast-growing economy with a distinct banking architecture—remains sparse. Utilizing panel data spanning from 2015 to 2024, the study analyzes ESG disclosures from 30 leading Indian banks and examines their effect on key financial performance indicators, including Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q. By applying the dynamic panel data approach using the Arellano and Bond (1991) Generalized Method of Moments (GMM) estimator, the findings reveal a significant positive relationship between ESG practices and financial performance. Among the three ESG dimensions, governance (G) demonstrates the strongest influence. These results resonate with prior studies from the UK and Malaysia, reinforcing the notion that proactive ESG integration boosts investor trust and operational effectiveness. The study makes a vital contribution to the sustainable finance literature by delivering India-centric empirical insights, which can inform both policy formulation and strategic decision-making in the banking sector.
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