Purpose This study aims to examine the mediating role of green finance in the relationship between green banking practices and the sustainability performance of banking institutions in developing economies. Design/methodology/approach The authors performed an empirical investigation by applying the “partial least squares structural equation modeling (PLS-SEM)” based on a representative sample of 414 bank employees working in the National Capital Region, India. Findings The study’s outcome confirms that employee, top-management, operation and policy related practices substantially influence green finance and banks’ sustainability performance. On the contrary, customer related practices insignificantly influence banks’ sustainability performance. Further, green finance substantially influences the sustainability performance of banking institutions. Practical implications This study shed light on green banking practices that can assist in achieving the vision of the “Clean India Mission” of the Indian government. In addition, it encourages policymakers and bank managers to fulfill their social responsibility by engaging employees and customers in cleaner operations to promote banks’ sustainability performance. Originality/value This is ground-breaking research that enriches the understanding of green banking practices and green finance by providing a novel theoretical framework concerning the sustainability performance of banking institutions. Theoretically, this paper also broadens the scope of corporate social responsibility literature by applying the resource-based view theory in finance and banking.