The COVID-19 outbreak is a significant shock to the Indian economy .It has affected all the sectors at macro level across the country. In India, impact is resulting to a negative growth rate in economy. Many sectors were performing good before the pandemic but now they have been pulled down by this pandemic. The economy was already in an unstable stage before covid-19 outbreak and after the shutdown of economic activities and nationwide lockdown the economy is likely to face prolonged period of slowdown. One of the most important sector of Indian economy is banking sector which is responsible for all the financial activities going on in the country and working as a supporting hand to all of the industries in term of financing, credit, transactions, collection and payment and so on. The intensity of the economic slowdown depends upon the nature and duration of the lockdown across the country. With large number of population and more dependence on the informal labour and unsystematic banking practices has turned the economy into a disruptive situation. The current article gives an overview of the impact of COVID-19 situation on Indian economy and its banking sector. The study is the analyses of data which is secondary in nature and based upon various research article published on the COVID-19 pandemic outbreak. The research paper also analyses the various policy measures taken by Reserve Bank of India and Indian Government at centre level and state level to improve the current economic situation of the country.