Assessing the Impact of Black Swan Events on Indian Banking Resilience

This study investigates the financial soundness of commercial banks in India during the period 2005–2024, which was marked by extreme economic turmoil owing to Black Swan events, such as the Global Financial Crisis of 2008, demonetisation in 2016, and the worldwide lockdown due to the COVID-19 pandemic. Bank-specific ratio indicators and macroeconomic variables have been used in the paper, and long-run industry effects have been captured using a dynamic two-step Generalised Method of Moments (GMM) estimation. The results point to a strong endurance in bank profitability, driven by internal balance-sheet fundamentals. Asset quality has a consistently negative impact across all ownership groups, while managerial efficiency emerges as the most positive. Public sector banks are primarily stabilised by capital and liquidity buffers, reflecting their greater reliance on regulatory safety nets. The sector’s post-2008 crisis resilience is highlighted by the relative insignificance of macroeconomic factors and the impact of the demonetisation shock. COVID-19 had a neutral or positive effect, mainly due to the extensive support measures implemented by the Reserve Bank of India (RBI). In contrast, the 2008 crisis had a negative impact, primarily because of the limited effectiveness of the policies in place. Robustness checks using alternative profit indicators confirm the consistency of the results. Therefore, this study provides empirical evidence for the long-term stability and financial resilience of the Indian banking system. JEL Codes: G21, E44, E52, C26