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Indian Journal of Finance

ISSN: 0973-8711 Frequency: Monthly Peer Review: Double-blind Published since: 2007 Language: English
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Original Article

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

R. V. Naveenan1,  T. Viswanathan2

1 Associate Professor , School of Business and Management, Christ University, Bengaluru - 560 029, Karnataka.

2 Associate Professor, Prin. L. N. Welingkar Institute of Management Development and Research, Bengaluru, Karnataka.

Volume 19
Issue 11
Pages 25–40
Year 2025
Received: Oct. 20, 2024 Accepted: Aug. 20, 2025 Published: Nov. 15, 2025
Abstract

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.

Keywords bank performance economic output dynamic interaction vector autoregression
How to Cite

R. V. Naveenan, T. Viswanathan (2025). Banking Dynamics and Economic Growth in India : Unveiling the Interplay of Key Performance Indicators. Indian Journal of Finance, 19(11), 25–40. https://doi.org/10.17010/ijf/2025/v19i11/174492

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