ESG DISCLOSURE AND FINANCIAL PERFORMANCE OF PUBLIC SECTOR BANKS IN INDIA: A COMPARATIVE ANALYSIS BEFORE AND AFTER SEBI’S BRSR FRAMEWORK

Abstract

In India, the growing importance of corporate reporting and accountability has transformed the way disclosure is made, which has been further strengthened by the guidelines issued by BRSR i.e., Business Responsibility and Sustainability Reporting (BRSR). The BRSR are the vital reporting guidelines/regulations formulated by SEBI. BRSR is a significant step towards the normalisation of quantitative and standardised Environmental, Social and Governance (ESG) disclosure from listed entities such as Public Sector Banks (PSBs). This article explores the trends in ESG disclosure practices of PSBs, as well as their association with financial performance, in the preceding and following BRSR period. A ESG Disclosure Index was created using ESG data from five major PSBs which includes SBI (State Bank of India), BOB (Bank of Baroda), PNB (Punjab National Bank), CB (Canara Bank) and UBOI (Union Bank of India) for the four financial years from 2020-21 to 2023-24 from their annual reports and BRSR filing. The evaluation of financial performance was done through Return on Assets (ROA), Return on Equity (ROE), Net Interest Margin (NIM), Capital Adequacy Ratio (CRAR), and Cost-to-Income indicators. Comparative and trend analysis and descriptive analysis were employed to look into changes within the two regulatory phases. The findings reveal that there has been a clear favourable impact on disclosure of ESG information following the implementation of BRSR, with the majority of banks shifting towards more detailed and systematic reporting. The trend is also improving for a few financial performance indicators including ROA, ROE and CRAR during the post-BRSR period. The evidence across the various comparisons is largely positive, suggesting a relationship amid enhanced ESG disclosure and financial efficiency, but NO cause/effect relationship is found. The study concludes that there is no trade-off between reporting on ESG and financial performance, and that better governance, transparency and accountability structures help to improve financial results. The results highlight the increasing significance of sustainability reporting in the financial industry in India and its role in promoting sustainable growth and trust among stakeholders.