Credit Reallocation by Indian Banks in the Aftermath of the Global Financial Crisis

The international economy was greatly impacted by the most severe financial crisis, which started in the United States in September 2008, with the collapse of Lehman Brothers. This marked the beginning of the global financial crisis (GFC) and evolved as the greatest crisis since the Great Depression in the 1930s. The GFC exposed the fundamental weakness of the financial systems, particularly in the banking sectors, across the economies. Amplification of the crisis was observed in terms of both scale and severity, affecting the key macroeconomic indicators and eventually leading one after another country towards recession. As the crisis progressed, the banking sector's fragilities were revealed. While examining the role of financial institutions contributing to the crisis, it became apparent that commercial banks disbursed substantial credit towards temporarily inflated asset values without paying much attention to the creditworthiness of the borrowers (Makin, 2019).