Evaluating the Effect of CSR on Financial Performance: An Analysis of the Indian Banking Industry

Abstract

The purpose of this study is to ascertain how Corporate Social Responsibility (CSR) affects the financial performance of Indian banks. As CSR increasingly becomes a vital component of corporate strategy, the research focuses on understanding how CSR activities influence key financial metrics such as Return on Assets (ROA), Return on Equity (ROE), and net profit margin. Using a mixed-methods approach, the study combines thematic content analysis and qualitative insights from interviews with quantitative data analysis. The quantitative analysis reveals a positive correlation between CSR expenditure and financial performance, with CSR activities contributing significantly to enhanced profitability and operational efficiencies. However, the study also identifies diminishing returns on financial performance beyond a certain level of CSR investment, suggesting an optimal CSR expenditure threshold. Qualitative findings highlight the importance of strategically integrating CSR into core business strategies and involving stakeholders to maximize financial and non-financial benefits. This comprehensive analysis provides valuable insights for policymakers, banking executives, and stakeholders, demonstrating that well-executed CSR initiatives can serve as a strategic asset, fostering sustainable growth and enhanced public trust in the banking sector. The report also makes recommendations for future research, such as the creation of standardized standards for CSR measurement and a more comprehensive sectoral analysis.