THE ESG EDGE: INNOVATING THE VALUE CHAIN FOR SUSTAINABLE BANKING IN INDIA

The transition from Banking 4.0 to Banking 5.0 necessitates integrating sustainability and innovation throughout the banking value chain. This study proposes and validates a framework to evaluate these integrations' impact on Economic, ESG (Environmental, Social, and Governance), and Sustainability metrics in the Indian banking sector. The study uses rigorous statistical analysis to validate the framework using data from 325 banking experts from ten major banks as well as secondary sources like sustainability reports. The framework includes Primary Activities (customer-centric solutions, risk assessment, digital transformation, stakeholder engagement, and continuous monitoring) and Support Activities (governance, human capital development, data analytics, risk management, and operations efficiency). The findings demonstrate strong validity and reliability across dimensions, as indicated by goodness-of-fit indices (RMSEA, CFI, IFI). Value chain integration innovation improves overall sustainability results and has a favorable impact on economic and ESG performances. The analysis indicates consistent positive connections between value chain integration, ESG performance, and economic outcomes, with high explanatory power (R-squared 0.616 to 0.953). This research provides guidance and ideas for banks navigating sustainable development, bridging the gap between Banking 4.0 and 5.0. It emphasizes the importance of banks embracing technology and sustainability in tandem in order to achieve long-term resilience and societal impact in Banking 5.0.

Keywords: Banking 5.0, Indian Banking System, Innovation, Sustainability, Value Chain