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Theoretical and Applied Economics
No. 2 / 2020 (623), Summer

Banking Sector Reforms and the Goals of Nationalised Commercial Banks in India

Kubendran NARAYANASAMY
NMIMS University, India

Abstract. The main aim of the study is to analyse the role of Nationalised Commercial Bank (NCB) on economic growth and development in India during pre and post-reform periods (Restrictive and liberalised regime). The study also aims to analyse the performances and associations of nationalised commercial banks with the RBI in the same period. For this purpose, the study first uses Augmented-Dickey Fuller unit root test. After assessing stationary conditions, the study uses Engel-Granger Causality test and Trend line analysis. Based on the empirical results, the study found that the role of NCB on economic growth is higher in the post-reform period compared to the pre-reform period. But their role in poverty eradication and employment generation is less in the post-reform period even though the average GDP growth rate is high in the post-reform period. Similarly, the performances of NCBs are also declining due to the increasing trend in their NPAs. The study also found that the monetary policy is not much effective in India, especially after 2000 where fall in the interest rate failed to influence GDP. So the study strongly recommended frequent interference and instructions of RBI to enhance the performances of NCBs and the effectiveness of monetary policy to achieve macroeconomic goals.

Keywords: monetary policy, non-performing asset, money supply, granger causality, poverty, unemployment, GDP growth.

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