A healthy, robust, and sustainable banking system is the key to achieving inclusive growth in the Indian economy. The Indian banking industry has responded relatively slowly to sustainability issues. The public sector banks are more involved in addressing the social dimensions of sustainability through various microfinance schemes, gender-specific loan schemes, community development programme, etc., whereas the private sector banks in India have adopted relatively more comprehensive approach in addressing environmental care dimension like green building, ISO 14000 certification, innovative products and services, etc. They are more active in subscribing to the voluntary international guidelines and frameworks on sustainable development, like UNEP FI, EPs, GRI, CDP, etc. For integrating sustainable banking, the Indian banking industry has to be more proactive in its approach and should adopt at least the established sustainable banking code of conduct (K. Kumar & Prakash, 2020). Green finance has become essential for the attainment of sustainable development by using economic incentives to boost environmental sustainability and economic growth. Considering climate change urgency emphasized by the Paris Agreement and the Rio Earth Summit, green finance has evolved to include tools such as green bonds, fintech applications, and sustainable banking.(Srivastava et al., 2025). The main objective of this paper is to investigate the relationship between sustainable practices and bank stability. More specifically, the aim is to research the 1) assess the relation between sustainability practices and bank stability  & 2) to study the impact of sustainability practices on banking stability varies among banks of different sizes &  with their type. (Saif-Alyousfi & Alshammari, 2025).To find the importance of sustainable financing and green banking concepts in the Turkish banking sector and to put forward suggestions for the further development of these concepts in the Indian Banking system. By incorporating green-banking practices, which blend traditional financial services with environmental, social, and economic considerations, banks can foster sustainable development while reaping financial benefits. Sustainability practices in financial institutions are a growing area of research, yet their integration within African Islamic banking institutions (AIBIs) remains underdeveloped. This systematic literature review (SLR) examines sustainability awareness, key drivers, barriers, ESG integration, and sustainability impact in the sector.

Sustainable development is a key goal for banks' future development. 

Sustainability practices in banking institutions have gained significant attention due to increasing environmental concerns, regulatory pressures, and stakeholder expectations. Indian banks have gradually incorporated sustainability initiatives, including green financing, corporate social responsibility (CSR), and environmental risk management. This literature review examines the evolution, implementation, and challenges of sustainability practices in Indian banking institutions. Sustainability has recently gained momentum in banking systems. While executing responsible banking for the ESG dimensions, banks have contributed to meeting societal goals and several global challenges by explicitly promoting job opportunities, providing affordable livelihoods and healthcare facilities. Financial institutions have paved the way for adopting environmentally friendly practices and facilitating recovery by pivoting finances to climate-sensitive sectors. There are seven factors affecting the sustainable development of commercial banks in Vietnam, with a five percent significance level. Seven factors include: (1) Economic growth, (2) Inflation, (3) Interest rate, (4) Exchange rate, (5) Monetary and fiscal policy, (6) Financial capacity, and (7) Digital transformation. The commercial banking system must combine digital technology application solutions to optimise financial policies. (1) Commercial banks should invest in digital banking, AI, and blockchain technology to improve efficiency, cut costs, and improve customer experience. This will boost digital transformation, which affects corporate strategy. Fintech collaboration and cybersecurity policies should also be created. (2) Banks should manage risk to avoid inflation. Long-term sustainability requires better financial planning models and loan rate adjustments to inflation. (3) Commercial banks can manage exchange rate volatility with currency diversity and hedging tools. Regulatory actions that stabilize currency rates must be supported. (4) Closer ooperation between policymakers and banks can coordinate monetary and fiscal policies, helping banks meet the nation's economic goals. Banks should promote particular actions to stabilize the financial system, raise capital adequacy, and boost economic growth. (5) Financial institutions implement flexible and market-responsive interest rate systems through interest rate optimization. Better forecasting models are needed to provide competitive loan offerings and eliminate rate modification risks. (6) Taking advantage of GDP growth: Financial institutions should invest in GDP-boosting industries. Green banking and SME finance can boost economic sustainability. (7) Any endeavor to expand financial services should focus on microfinance, customer-centric solutions, and digital banking. Regulators should promote inclusive banking for marginalized populations.(Pham & Nha, 2025).The banks participate in green banking directly through active green and operational roles such as lending and green products, or indirectly through enabling conditions and sustainable green banking initiatives such as eliminating paperwork, digital innovations that promote mobile and Internet banking, etc .The digital banking was the most prevalent green banking activity, the second being the offering of green products such as green loans or sukuks, the third the financing of green services, and the fourth the investment in green infrastructure.The three major green banking opportunities include green banking practices as a major source of strategic competitive advantage, an emerging and growing market niche for green products, and the capacity to manage long-term climate risks.(Muchiri et al., 2025).The economic, environmental, and social performance of banks are collectively responsible for the overall sustainability performance of banks. The banks which are adopting Green financing practices are contributing majorly and positively to the performance of their banks and vice-versa for the banks that are not. It is highly suitable and recommended for the banking sector to adopt the Green financing practices in their banks to have a higher sustainability performance (M. Kumar et al., 2025).

Evolution of sustainability practices in the Banking system

Sustainable banking practices have evolved significantly over the years, reflecting changing societal expectations, regulatory frameworks, and market dynamics. (Durre & Kulmie, 2025)The journey of sustainability integration in Indian banking has been gradual, influenced by both global trends and domestic pressures. Early initiatives were often characterized by philanthropic activities or compliance with basic environmental regulations. However, research indicates a more strategic shift in recent years. For instance, Sharma and Singh (2018) trace the evolution from Corporate Social Responsibility (CSR) as a separate function to a more integrated approach where environmental, social, and governance (ESG) factors are considered in lending and investment decisions. The Reserve Bank of India (RBI) and government policies have also played a significant role in nudging banks towards green financing and sustainable practices, as highlighted by Kumar and Gupta (2020). This study contributes to the literature on sustainable banking by focusing on ESP in the Indian banking sector, including often-overlooked institutions like regional rural banks and small finance banks. It uniquely integrates GBPs, GF and CSR practices to assess their combined impact on ESP. Additionally, the research extends legitimacy theory to explore how banks align with societal expectations through sustainability efforts. By analyzing both direct and indirect effects, it offers practical insights for policymakers and managers to enhance sustainability performance in banking..(Gidage & Bhide, 2025).In India, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have mandated ESG disclosures, pushing banks toward sustainable finance (RBI, 2021). Green banking plays a pivotal role in fostering sustainable development in India by aligning financial practices with environmental concerns. Environmental stewardship, responsible resource allocation, and other green banking practices can immensely contribute to sustainable development goals, fostering economic growth while minimizing environmental impact on current and future generations.(Sahi et al., 2025). The organizations should effectively utilize green banking practices to improve their employees’ skills in terms of environmental management, as these results reveal the importance of such practices. This approach will assist managers in refining their business strategies by emphasizing environmental initiatives that influence the pillars of sustainability. The bank managers can develop rewards and recognition as green motivational strategies to encourage employees to participate in environmentally beneficial activities.(Chowdhury et al., 2025).For both the banking sector and government, underscoring the crucial role of green banking in enhancing consumer happiness. As environmental consciousness continues to increase, this might potentially result in heightened customer satisfaction and eventually contribute to improved customer retention for banks.(Mir et al., 2025). There is a  significant positive correlation between environmentally focused corporate policies and employee motivation. Additionally, factors like training, reward systems, and employee empowerment contribute significantly to promoting such behavior. These results underscore the need for an inclusive method to effectively promote sustainability within organizations.(Farzana et al., 2025). The impact of Strategic management on sustainable practices and for banking industry officials to determine sustained outcomes and to develop sustainable and strategic based management practices for Sustainable practices.(Rao & Shukla, 2025).

Key sustainable Practices:

The inclusion of MCDM techniques prioritizes the significance of sustainability indicators and benchmarks the performance of leading banks to achieve better profits and more substantial growth (R. Kumar et al., 2024). Green banking practices substantially improves banks' environmental performance, and the Source of green finance also SGF mediates the association between BEP and GBP. And incorporating GBP improves environmental performance, increases profitability, and boosts employee performance.(Thapliyal et al., 2025).Green corporate social responsibility has emerged as an essential cornerstone in these banking efforts, driving environmental commitment at an organizational level. The results indicate that the banks are adopting eco-friendly financial products and services within their operations, and these adoption activities have been established to be associated with positive impacts upon customer perceptions that lead to enhanced green brand trust and brand image. (Li, 2025).IDFC bank is the only entity that started implementing EP practices, and Yes bank also is doing a wonderful implementation of the green policies and is the signatory to UNEP FI. (Li, 2025).The significance of the “governance approach” which emerged as one of the key areas connecting practices of sustainability, economic growth, and institutions.

Barriers to sustainability adoption include regulatory inconsistencies, lack of standardized ESG reporting, limited financial incentives, and lack of structured ESG frameworks. Additionally, the shortage of ESG-trained professionals and weak enforcement mechanisms hinder progress. (Durre & Kulmie, 2025).The green banking challenges highlighted include weak investor confidence, greenwashing concerns, regulatory hurdles, especially for less-developed regions, socioeconomic and cultural resistance, transition risk, and the high cost of compliance.(Muchiri et al., 2025).The emergence of green banking presents a promising sustainable financing strategy for a greener future in ASEAN. Several ASEAN countries face significant challenges related to the lack of clear and consistent regulations and standardization, limited policy support and incentives, limited scope, lack of enforcement, and conflicting interests.(Hermawan & Khoirunisa, 2024).The sustainability issues which are of the highest priority for the banks are directly related to their business operations such as financial inclusion, financial literacy and energy efficiency, and banks are more focussed on addressing social dimension of sustainability in banking rather than important dimensions of sustainable banking, namely, environmental management, development of green products and services and sustainability reporting.(K. Kumar & Prakash, 2019).Legal and environmental compliance is determined as the key factor that drives the other factors of sustainable banking. It will surely going to pose a challenge for business concerns to initiate various sustainable steps that will be a motivational factor for generating business opportunities and sustainable collaboration. (Shamshad et al., 2018). Developing countries face unique challenges in adopting sustainable banking practices, such as weak institutional frameworks, limited access to technology, and policy inconsistencies.(Ozbek et al., 2025).

Solution:

To address these gaps, harmonized ESG regulations, standardized sustainability reporting frameworks, and enhanced capacity-building programs are necessary. (Durre & Kulmie, 2025). The transition finance and green technology innovation are key and decisive for corporate-level sustainability, as they both help to attract investment in decarbonization, sustainable projects, and activities or propose solutions aligned with pressing environmental challenges. (Khan et al., 2025).The financial institutions and policymakers to foster the adoption of green finance through supportive regulations, transparent reporting, and innovative financial products.The transformative potential of g-g-banking in the digital age drives positive environmental, social, and economic outcomes. By harnessing the power of digital innovation, financial institutions can lead the transition to a more sustainable and resilient global economy, ensuring a prosperous future for generations to come.The transformational potential of green finance contributes to the debate on sustainable development and provides a practical approach for incorporating environmental goals into business structures.(Pasupuleti et al., 2025).Conversely, CO2 emissions, GDP, and CPI are found to have detrimental effects on sustainability, highlighting the necessity for balanced economic growth and environmental stewardship. In contrast, variables such as the official exchange rate and an educated populace emerge as pivotal drivers of sustainability, underscoring the importance of policy interventions and educational initiatives in fostering environmental responsibility. The practical policy recommendations to enhance sustainability in the industrial and agricultural sectors. Policymakers should prioritize allocating resources to green finance initiatives that support the adoption of eco-friendly technologies and practices in these areas.(Shi & Yang, 2025).The bank financing plays a moderating role in the relationship of bank sustainability and investment sensitivity.  Green finance acts as a mediator, reducing investment sensitivity by channeling resources toward sustainable investment initiatives, particularly in high-sensitivity firms. (Habib & Khan, 2025).Banks play a pivotal role in promoting environmental sustainability by directing capital flows towards green projects through instruments such as green bonds and sustainability-linked loans.Banks that integrate ESG criteria, green finance, and sustainability-linked instruments tend to achieve more stable profitability over time by aligning with global sustainability expectations.Sustainable banking is not merely a regulatory compliance requirement but a strategic necessity in modern economies. Integrating environmental responsibility into banking strategies enhances resilience, competitive positioning, and long-term profitability while supporting global sustainability goals.(Kirer Silva Lecuna & Çalişkan, 2024).To achieve this, various central themes will be developed, organized into subsections, allowing students to discover why sustainable finance is an essential driving force for change.(García, 2025).some green banking practices, such as digital banking and green lending are highly prevalent across different regions; the nature of their implementation and the levels of engagement by the banks are largely influenced by the socioeconomic, cultural, and regulatory contexts. Secondly, while green banking challenges cut across all regions, some are more prevalent for certain regions depending on the level of market readiness, maturity, and stability, thus emphasizing the need for localized green banking practices. Previous studies have identified that banks across all regions have explored the opportunities that green banking practices present, emphasizing the great financial and strategic potential of sustainable banking practices.(Muchiri et al., 2025). Providing incentives for sustainable practices is critical in employing green banking to mitigate deforestation. By offering financial and non-financial incentives, providing technical assistance, and promoting supportive policies, green banking can be used to encourage individuals and businesses to adopt sustainable practices that help conserve forests and promote sustainable economic development.(Hermawan & Khoirunisa, 2024).The policymakers and societies develop robust green banking regulations with clear, objective, and precise content and definitive outcomes or impacts. They can do so by promoting finance sustainable forest management, encouraging sustainable agricultural practices, supporting community forestry initiatives, introducing green financial products, and providing incentives for sustainable practices. By addressing these challenges, green banking can help to reduce deforestation and promote sustainable economic development in the region.(Hermawan & Khoirunisa, 2024).There is a need for banks to see sustainability from a marketing point of view and adopt sustainable practices to create additional value that will improve their brand image and enhance their competitiveness.

This bibliometric analysis provides comprehensive insights into Indian banks, although initially lagging in embracing sustainability initiatives, have made considerable progress in incorporating environmental, social, and governance considerations into their activities. Public sector banks have emphasized the social aspects through microfinance and community development schemes, whereas private sector banks have a more holistic on their approach with the adoption of global models such as UNEP FI and investment in green infrastructure, digital banking, and innovative products such as green bonds. Despite these developments, the uptake of sustainable practices is hampered by significant challenges such as inconsistencies in regulation, the absence of standard ESG reporting, scarce financial incentives, and a shortage of suitably qualified professionals. Also, barriers such as inconsistencies in regulation, absence of standard ESG reporting, sparse financial incentives, and a shortage of suitably qualified professionals. Also, barriers such as greenwashing, excessive compliance costs, and socio-cultural resistance complicate the process.These obstacles make it imperative to have harmonized policies, strong regulatory regimes, and capacity-building programs to spur the uptake of sustainable banking practices. The literature highlights that interventions like transition finance, green technology innovation, and enabling regulatory interventions can fill these gaps. Policy makers and financial institutions should come together to establish transparent reporting norms, promote green investments, and drive digital transformation. The potential for transformation with green finance derives from its potential to harmonize financial strategies with global sustainability objectives, making banks long-term resilient and profitable while advancing the cause of environmental stewardship.

Finally, sustainable banking is more than a regulatory requirement but an imperative strategy for Indian banking institutions. By adopting green finance, improving stakeholder education, and applying new technologies, banks can become a key driver for India's shift toward a sustainable economy. Future research must emphasize localized initiatives, scalability of the model of green banking, and the far-reaching effects of such practices for financial stability and inclusive growth. The process towards sustainability continues, and collective efforts from everyone involved will be necessary to have an equitable, resilient, and inclusive financial system.

Limitation

This research is based on publications from Scopus and ResearchGate. The use of these databases may lack in covering other published resources, irrelevant research from other databases, or unpublished works, which could limit the thoroughness of the review. The bibliometric method captures overarching trends, it can miss the qualitative details or the unique challenges associated with implementing sustainability strategies in specific situations. Some of the cited studies are from 2018-2019, and the fast-changing nature of sustainable finance may make some findings less pertinent to current practices.

Recommendation:

The future studies should utilize a broader set of databases (e.g., Web of Science, JSTOR) and grey literature to strengthen findings. They should test the long-term consequences of sustainability practices on bank stability and profitability to determine their lasting influence. They should examine the impact of customer, employee, and investor viewpoints in shaping the adoption of green banking practices using surveys or interviews. They should evaluate the capacity of future technologies (e.g., AI, blockchain) in scaling up green finance solutions and addressing implementation hurdles.

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