Keywords
NPAs
NIFTY Bank
Asset Quality
COVID-19
Post-Global Financial Crisis
How to Cite
Abstract
The banking sector plays a pivotal role in the economic development of a country by facilitating financial intermediation and providing essential services such as loans to individuals and businesses. Loan growth is a critical indicator of a bank's health and ability to support economic activities. Understanding the factors that influence loan growth is essential for policymakers, regulators, and financial institutions as they strive to foster a stable and robust banking environment. This study investigates the factors that influenced Indian banks’ credit expansion during the post-global Financial Crisis period. This study investigates the determinants of loan growth in Indian banks listed on the Nifty Bank index during 2013-2023, encompassing the post-global Financial Crisis and the COVID-19 pandemic. Using a panel regression analysis with three model specifications, we examine the impact of bank-specific factors, particularly non-performing assets (NPAs), on loan growth. The robust random panel regression results reveal that NPAs, and Asset Quality Review (AQR) dummy variables significantly negatively impact loan growth rates at the 5% significance level. Additionally, while the COVID-19 pandemic showed a positive but statistically insignificant effect on loan growth, the primary factors constraining credit expansion were elevated NPAs and the RBI's asset quality review exercise. These findings have important implications for banking regulation and risk management in emerging markets.
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