Scholarlink

<p>Commercial banks, given their pivotal position in emerging economies, face both opportunities and challenges as they strategically transition from traditional operating models to sustainability-focused approaches. This study investigates the effect of ESG investments of banks on their non-performing assets/ loans (NPA/ NPL) levels. Subsequently, we use Propensity Score Matching (PSM) to estimate the impact of ESG interventions through regulations on NPA reduction or increase by matching banks that have implemented the regulation Business Responsibility and Sustainability Reporting (BRSR) disclosure norms by the regulator Securities Exchange Board of India (SEBI) with those that have not. Our findings indicate that banks’ sustainability preferences and related ESG investments contribute to reducing NPA/NPL. Specifically, the environmental and governance aspects play a significant role in lowering NPL, whereas the social dimension appears to have the opposite effect, leading to a reverse mechanism. PSM analysis indicates that the ESG performance of banks adopting BRSR has a negative correlation with NPA, potentially leading to a reduction in NPL. The findings unveiled a nuanced landscape in banking sectors’ future policy decisions that must focus on the initiative of ESG investments, which impacts the substantial reduction in NPA.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Effect of ESG engagement on loan quality of banks: analysing non-performing loans in emerging economy banks

  • 期刊论文

  • 发表日期：

    2026年7月21日

查看全文
  • Biju Ajithakumari Vijayappan Nair,
  • Aghila Sasidharan,
  • Arathy Chandralekha,
  • Krishna Reddy

摘要

Commercial banks, given their pivotal position in emerging economies, face both opportunities and challenges as they strategically transition from traditional operating models to sustainability-focused approaches. This study investigates the effect of ESG investments of banks on their non-performing assets/ loans (NPA/ NPL) levels. Subsequently, we use Propensity Score Matching (PSM) to estimate the impact of ESG interventions through regulations on NPA reduction or increase by matching banks that have implemented the regulation Business Responsibility and Sustainability Reporting (BRSR) disclosure norms by the regulator Securities Exchange Board of India (SEBI) with those that have not. Our findings indicate that banks’ sustainability preferences and related ESG investments contribute to reducing NPA/NPL. Specifically, the environmental and governance aspects play a significant role in lowering NPL, whereas the social dimension appears to have the opposite effect, leading to a reverse mechanism. PSM analysis indicates that the ESG performance of banks adopting BRSR has a negative correlation with NPA, potentially leading to a reduction in NPL. The findings unveiled a nuanced landscape in banking sectors’ future policy decisions that must focus on the initiative of ESG investments, which impacts the substantial reduction in NPA.