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Banking System Stability and Economic Growth in India: An Empirical Investigation (2000–2024)

Author

Listed:
  • Lalita Malusare

    (Sangamner College Sangamner)

Abstract

This study examines the relationship between banking system stability and economic growth in India from 2000 to 2024. Key indicators including non‑performing assets (NPAs), capital adequacy ratio (CAR), credit‑to‑GDP ratio, and banking sector Z‑scores were analyzed using econometric techniques such as the ARDL bounds testing approach and Granger causality analysis. Findings indicate that higher NPAs negatively affect GDP growth, while improved capital adequacy and stronger banking sector stability positively influence economic performance. The research also highlights the importance of financial regulation by the Reserve Bank of India, financial inclusion initiatives, and digital banking transformation in strengthening systemic resilience. Policy recommendations emphasize strengthening prudential regulation, improving asset quality management, and aligning financial innovation with macroeconomic stability.

Suggested Citation

  • Lalita Malusare, 2025. "Banking System Stability and Economic Growth in India: An Empirical Investigation (2000–2024)," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 6(4).
    • Handle: RePEc:cwk:ajocsk:2025-85
    DOI: 10.59413/ajocs/v6.i4.12
    as

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    References listed on IDEAS

    as
    1. Abhiman Das & Saibal Ghosh, 2006. "Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period," Review of Financial Economics, John Wiley & Sons, vol. 15(3), pages 193-221.
    2. Adolfo Barajas & Ralph Chami & Seyed Reza Yousefi, 2016. "The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(5), pages 5-38, June.
    3. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
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