Investigating the impact of financial institutions on economic growth and development: Evidence of India

Abstract

This paper aims to examine the impact of financial institutions on the economic growth and development of India from 2000 to 2024. Additionally, the current analysis examines the impact of non-banking financial companies (NBFC), commercial banks (Banks), and urban cooperative banks (UCB) on economic growth and development indicators such as GDP growth, human development index (HDI), and per capita income (PCI) in India. The empirical outcome reveals that financial institutions such as NBFC, UCB, and commercial banks (BANK) do not have any significant impact on GDP growth. On the other hand, the present investigation shows that NBFC and commercial banks (BANK) do not have any impact on the human development index (HDI), while UCB seems to have a positive impact. This demonstrates the implications of UCB from a development perspective. Ultimately, the relevant findings suggest that commercial banks (BANK) contribute positively to the country's per capita income growth, whereas NBFC and UCB have a slight negative influence. Therefore, we can conclude that commercial banks significantly contribute to India's per capita income growth.