Indian Economy and Bank Performance: A Cause-effect Relationship

This paper makes an attempt to examine the impact of growth of Indian economy on the performance of public and private sector banks of the country. GDP and Profit after Tax (PAT) have been taken as indicators of Indian economy and bank perfromance respectively. The regression models developed suggest that the growth of Indian economy is significant in explaining the performance of public and private sector banks. This result corroborates with the ‘demand-following’ hypothesis. Thus, the implication is that the planners and policy makers ought to architect prudential norms in line with international standards and best practices to make certain sustainable progress of the Indian banking system.