This study examines the role of banks in advancing sustainable finance and supporting circular economy (CE) development. It explores how green financial instruments, credit policy reforms, and the integration of environmental, social, and governance (ESG) principles can enhance resource efficiency, reduce waste, and promote low-carbon growth. The chapter highlights innovative financing tools such as green bonds, sustainability-linked loans, and blended finance mechanisms. It underscores that achieving CE objectives requires banks to embed ESG criteria into lending practices, strengthen risk assessment frameworks, and develop specialized products that incentivize sustainable business models. The study offers targeted recommendations for policymakers, regulators, and financial institutions to foster innovation, improve environmental accountability, and expand financing for CE initiatives. Ultimately, it advocates for a coordinated approach that integrates ESG considerations into core banking operations to drive inclusive, resilient, and sustainable economic growth.