Impact of Green Banking Practices in Enhancing Customer Loyalty: Insights from Banking Sector Customers

Green banking practices have emerged as a pivotal strategy in fostering sustainability within the financial sector. This study examines the influence of green banking practices on customer loyalty in Nepal's banking industry, emphasizing key determinants that shape environmentally responsible consumer behavior. Grounded in the literature, the study conceptualizes green banking practices through three primary dimensions: electronic banking, green investment, and sustainable (green) product development. Their impact on green loyalty is assessed alongside the mediating effects of green image and green trust. A structured questionnaire was administered to 393 banking customers, employing a descriptive and explanatory research design. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) via SmartPLS 4. The findings reveal that green banking practices significantly enhance green image, which, in turn, strengthens green loyalty. Although green banking practices also foster green trust, green trust does not exhibit a direct effect on green loyalty. Mediation analysis confirms that green image mediates the relationship between green banking practices and green loyalty, whereas green trust does not serve as a significant mediator. These insights highlight the critical role of sustainability-oriented banking strategies in shaping customer preferences and fostering long-term loyalty. The findings offer valuable implications for policymakers, financial institutions, and researchers seeking to advance green banking initiatives and drive sustainable consumer engagement in the financial sector.