2025, Vol. 6, Issue 2, Part H
India’s banking sector and economic development: A dynamic analysis
Author(s): Lalita Babulal Malusare
Abstract: This paper examines the dynamic and bidirectional relationship between banking system stability and economic growth in India. Employing time-series econometric techniques such as Vector Error Correction Models (VECM) and Granger causality analysis, the study utilizes macroeconomic and financial data from 1991 to 2023 to explore how banking sector indicators-namely non-performing assets (NPAs), capital adequacy ratio (CAR), credit-to-GDP ratio, and interest rate spreads-influence real GDP growth. The empirical findings suggest a long-term equilibrium relationship between banking stability and economic growth, with evidence of both short-term fluctuations and long-term causality running from banking stability to economic output. The results underscore the role of a sound, resilient banking sector in facilitating credit allocation, enhancing investor confidence, and promoting macroeconomic stability. The study concludes with policy recommendations aimed at strengthening regulatory oversight, improving asset quality, and ensuring proactive crisis management to safeguard financial stability and foster sustainable economic development in India.
DOI: 10.22271/27084515.2025.v6.i2h.742
Pages: 732-738 | Views: 322 | Downloads: 52
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How to cite this article:
Lalita Babulal Malusare. India’s banking sector and economic development: A dynamic analysis. Asian J Manage Commerce 2025;6(2):732-738. DOI: 10.22271/27084515.2025.v6.i2h.742
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