Financial policies are the core of a strong economy, as they allow a country to ensure long-term positive economic performance. However, implementing financial policies may include factors that may harm the environment or create a negative social impact. Since India is at a stage where there is a greater push for sustainable policies, financial policies are also being sustainably considered for implementation.
Now, the Indian government is considering a structured approach to implementing financial policies that will increase financial inclusion and ensure long-term financial growth through sustainable measures. As India aims to increase financial inclusion, it is essential to understand how financial policies can be implemented sustainably.
Key principles of sustainable financial policies
Financial inclusion is a critical part of sustainability. Financial policies should aim to increase access to banking services, credit, and insurance for underserved populations, fostering economic equity and reducing poverty. Furthermore, all the financial policies being considered for implementation must provide accountability and transparency.
Previously, the main aim of financial policies was to provide financial assistance and ensure the long-term economic growth of India. There was no focus on sustainability, even if the resulting effects were not environmentally or socially friendly. However, with time, India has started focussing on sustainability and is now ensuring that its financial policies are sustainable and do not create any negative environmental and social consequences.
Since the Indian market has both public and private sectors, the successful implementation of sustainable financial policies depends on how well both sectors work together and create policies and schemes to focus on sustainable financial policies.
Strategies for Implementing sustainable financial policies
Here are some strategies to implement sustainable financial policies in India:
Strengthening regulatory frameworks
Governmental regulatory bodies should establish clear and stringent sustainability requirements for public and private financial institutions. This covers rules for responsible lending, ethical investing, and the operational framework. Regulations should also mandate that public and private financial institutions disclose their ESG levels to enhance transparency and encourage accountability. Furthermore, institutions must be required to report their sustainability initiatives, and financial institutions should assess risks related to environmental and social factors.
Promoting financial inclusion
One main aspect of implementing sustainable financial policies is expanding financial inclusion to rural areas or financially disadvantaged groups. One way to do this is to promote digital banking and systems such as UPI to ensure that a majority of the population has access to financial and banking services. Public and private financial institutions can create various campaigns to raise public awareness of sustainable finance and ensure that people know how to use its features and policies. The government can create financial literacy programs to provide information about sustainable financial policies. For example, a new chapter can be added in Economics explaining the concept of sustainable financial policies and their positive effects on the environment and society.
Leveraging technology
India is witnessing a heavy rise in fintech companies, which are revolutionising the banking sector using advanced technologies. Fintech innovations that leverage technology can provide efficient solutions for safer financial transactions and better risk assessment, increasing ethical and sustainable banking services. By comprehending the demographics and individual requirements of clients, big data or artificial intelligence (AI) analysis of data trends can aid in the development of more sustainable financial policies.
Challenges of implementing sustainable financial policies
Traditional financial institutions’ opposition is one of the biggest obstacles to putting sustainable financial policies into practice. As they already have their banking software and policies in place, they feel it will be difficult to create new policies for sustainability. Furthermore, new fintech companies are being established at a high rate, and there is no data to compare their products or services based on past performance.
Moreover, there are no strict regulations about sustainable financial policies at present. Hence, it becomes difficult to monitor or regulate the implementation of sustainable financial policies.
Many banks and financial institutions feel that the cost of implementing sustainable financial policies is very high, which can lead to increased expenses and lower profits. Hence, they hesitate to implement sustainable financial policies. Moreover, the general public is unaware of the concept of sustainable financial policies and how they can socially help them in better financial inclusion and transparency.
Conclusion
For India to maintain long-term economic stability and environmental preservation, sustainable financial policies must be put into place. India can use technology, improve financial inclusion, enhance laws, and encourage green financing to build a robust and inclusive financial system. One of the most important aspects of sustainable financial policies is collaboration between the government and private sector institutions such as NBFCs. As private financial institutions offer banking and financial services through their online marketplaces or platforms, they must follow the government’s sustainable financial policies. Working together, businesses, financial institutions, and the government can achieve a sustainable future.