An economy is characterised by a variety of macroeconomic indicators such as gross domestic product (GDP), employment, savings and investment, general prices, interest rates, taxes and government borrowing/debt, banking and finance, exports, imports, and so on. Amongst all, GDP, which captures aggregate production or output of a country, stands out as the most important barometer to measure overall economic activity. Production of goods and services in a country generates commensurate income for various stakeholders engaged in the production process and enables them to buy and consume various goods and services. Economic welfare in a country is assessed by the amount of goods and services produced and consumed by its citizens. In a rich country like the United States or Japan, with higher level of production and income generation, the citizens can afford a high level of standard of living. They enjoy access to nutritious food, quality health care, better air conditioning, automobiles and vacation, and so on. On the contrary, a sizeable number of citizens in poor or low- and middle-income countries lack access to even basic needs like food and safe drinking water, reflecting low standard of living.

The growth theories explain, inter alia, how the rich countries in the world could achieve and sustain their economic progress over a long period of time stretching more than a century, and also why many countries in Africa and Asia have not been able to do so. Particularly, proximate causes are identified in terms of accumulation of capital through mobilisation of savings, population growth supplying labour or workers, and improvement of labour productivity through innovations and technological changes. A more fundamental role is assigned to economic and political institutions.

In the aforementioned process of attaining and sustaining economic prosperity in an economy, banks play a special role. In fact, the very functioning and progress of any modern economy is inconceivable without banks and other entities of the financial system. First, banks are financial intermediaries which generate deposits from the public and utilise the mobilised deposits to provide loans and undertake investments. In this process, banks play a crucial role towards augmentation of savings and efficient allocation of resources for productive investments. Consequently, banks assume a vital role towards achieving and sustaining economic growth in a longer-term perspective.