Banking Dynamics and Economic Growth in India: Unveiling the Interplay of Key Performance Indicators

Title

Banking Dynamics and Economic Growth in India: Unveiling the Interplay of Key Performance Indicators

Creator

Naveenan, R.V.; Viswanathan, T.

Description

Purpose: This study aimed to analyze the influence of bank performance on economic growth. We proposed a framework of banking variables to gain a holistic picture. Design/Methodology/Approach: To identify the causal relationship, we ran cointegration tests and vector autoregression (VAR). In addition, we used the impulse response function test. This helped in analyzing the response of GDP growth to banking shocks. Findings: We identified that banking variables like domestic credit (DC), return on equity, and capital adequacy ratio can stimulate economic growth. Long-term and short-term influence of banking performance on economic growth. Improved performance of banks can translate to economic growth. Our results also indicated that well-capitalized banking, high return on equity, and increased credit access were critical drivers of GDP growth. Practical Implications: This research offered important insights into the role of banking performance in influencing economic growth. We recommended that policymakers implement measures to improve capital adequacy, enhance profitability, and increase credit flow for sustained economic success and development. Originality/Value: This study added to existing research by examining how banking performance influenced economic growth in a developing context. Unlike prior studies that focused mainly on advanced economies, our analysis centered on India, offering evidence from an emerging financial system and providing context-specific insights. 2025, Associated Management Consultants Pvt. Ltd. All rights reserved.

Source

Indian Journal of Finance;Volume;19;Issue;11;pp.25-40

Date

01-01-2025

Publisher

Associated Management Consultants Pvt. Ltd.

Subject

bank performance; dynamic interaction; economic output; vector autoregression

Coverage

Naveenan R.V., School of Business and Management, Christ University, Karnataka, Bengaluru, 560 029, India; Viswanathan T., Prin. L. N. Welingkar Institute of Management Development and Research, Karnataka, Bengaluru, India

Rights

Restricted Access; Hardcopy may be available in the library

Relation

ISSN: 9738711;

Format

online

Language

English

Type

Article

Identifier

https://doi.org/10.17010/ijf/2025/v19i11/174492

https://www.scopus.com/pages/publications/105030700580?origin=resultslist