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Abstract
In the growth of economic development, the function of banking sector has always been commendable. It is the potency and input of the banking system can have far-reaching implications on the development of the whole economy. The link between the financial sector and economic growth has been the subject of a large literature. Many researchers have studied that there is strong empirical evidence today of that robust financial markets support economic growth. This is particularly relevant at the present time also when there is a lot of stress in the financial markets globally and consequently a slowdown in the momentum of economic growth. Keeping in view the essence of the banking system, policies are designed for proper regulation of banks. In India, after the nationalization of banks in 1969, the geographical presence of the banking system increased considerably but the profitability and economic viability of various branches were negatively impacted due to increased cost of maintenance and lending to masses at reasonable cost considering the social objective of banking sector in the growth of economy. Despite utmost care taken by Government and banking regulations, many assets or loans of the bank get converted into bad debts and stop generating any income for the bank.