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Banks’ Performance and Economic Growth in India: A Panel Cointegration Analysis

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Department of Finance and Economics, College of Commerce and Business Administration, Dhofar University, Salalah 211, Oman
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Department of Economics and Finance, College of Business Administration, University of Bahrain, Zallaq 32038, Bahrain
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College of Business Administration, Prince Sattam Bin Abdulaziz University, Al-kharj 165, Saudi Arabia
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Department of Finance and Accounting, College of Business Administration Kingdom University, Rifa 40434, Bahrain
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Authors to whom correspondence should be addressed.
Economies 2021, 9(1), 38; https://doi.org/10.3390/economies9010038
Received: 28 December 2020 / Revised: 28 February 2021 / Accepted: 4 March 2021 / Published: 14 March 2021
The banking sector plays a crucial role in the economic growth of a nation. The purpose of this study is to examine the long-term association between banks’ performance and the economic growth of a developing economy: India. The study used a panel of data of 20 public sector banks for the period 2009 to 2019. It applied the Pedroni and Kao test of co-integration, panel vector error correction model (VECM) dynamic, panel fully-modified ordinary least squires OLS (FMOLS), and dynamic OLS (DOLS) to estimate the relationship of interest margin return on assets, bank investment, and lending capacity of the bank with gross domestic product (GDP) of the country. The identification and incorporation of these bank-related variables are the innovations of this study. The results indicate that the bank-related variables are co-integrated with economic growth. Further analysis indicates a significant relationship between interest margin and return on assets with economic growth. In addition, lending capacity and investment activities are not significantly associated with economic growth, leading to the policy recommendation to improve upon these two factors in order to achieve higher growth rates. View Full-Text
Keywords: bank performance; economic growth; return on assets; bank investment; panel cointegration; India bank performance; economic growth; return on assets; bank investment; panel cointegration; India
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MDPI and ACS Style

Alam, M.S.; Rabbani, M.R.; Tausif, M.R.; Abey, J. Banks’ Performance and Economic Growth in India: A Panel Cointegration Analysis. Economies 2021, 9, 38. https://doi.org/10.3390/economies9010038

AMA Style

Alam MS, Rabbani MR, Tausif MR, Abey J. Banks’ Performance and Economic Growth in India: A Panel Cointegration Analysis. Economies. 2021; 9(1):38. https://doi.org/10.3390/economies9010038

Chicago/Turabian Style

Alam, Md. S., Mustafa R. Rabbani, Mohammad R. Tausif, and Joji Abey. 2021. "Banks’ Performance and Economic Growth in India: A Panel Cointegration Analysis" Economies 9, no. 1: 38. https://doi.org/10.3390/economies9010038

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