<p>This paper aims to explore the negative consequences of greenwashing in the banking sector, explains how greenwashing practices lards to customer dissatisfaction and service co-destruction. Specifically, the study examines the paradoxical outcome where well-intended green banking efforts, rather than enhancing customer satisfaction and co-creation, result in dissatisfaction and service co-destruction because of greenwashing. To meet the research objectives, a mixed-method approach (a sequential approach) was adopted. In the qualitative phase we conducted semi-structured interviews and subsequently analysed it using a grounded theory methodology. In the quantitative phase, data from 413 respondents was analysed using PLS-SEM to test the proposed conceptual framework. The perceived greenwashing proved to have negative impact on green trust and green value, positive effect on green risk. This research introduces a new construct that significantly influences service co-destruction in the context of green banking, developed using a comprehensive mixed-method approach. This research presents a roadmap and offers future insights not only for banking professionals but also for those involved in designing green banking practices. It emphasizes the importance of fostering service co-creation to build stronger, longer-term relationships with customers.</p>