Impact of Bank Lending on Economic Growth – An Empirical Study in the Indian Context

Abstract

: Background : In any country's growing economy, its banking system would play a crucial role in boosting GDP. The present study analyzed the effect of Indian banking borrowing on Indian economic growth. Purpose : The present study analyzed the effect of Indian banking borrowing on Indian economic growth. The study framed the exploratory research with secondary data from 2005 to 2020. The growth of any country's economy will depend on its banking system. The banking growth will depend on the lending system; the more robust the lending, the higher the country's economic growth. Research Design and Methodology : The study framed the exploratory research with secondary data from 2005 to 2020. The study classified it into two segments; food and non-food credits of the Indian banking lending. In the study, food and non-food credit are bank loans. The vector error correction model calculates the analysis of the relationship of banking borrowing to economic growth. The result showed that food credit and non-food credit had a short-term relationship with Indian GDP. The ordinary least square method was applied, and the result showed that food credit had a negative impact, but non-food credit had a negative impact. Findings : The result showed that food credit and non-food credit had a short-term relationship with Indian GDP. The ordinary least square method was applied, and the result showed that food credit had a negative impact, but non-food credit had a negative impact. This study is helpful for bankers, regulators, and various government stakehold-ers.