This dissertation bases its hypothesis on the existence of deformities and imbalances in the Croatian economy, which are generated and/or maintained in interactions between banking and real sectors. The research aims at expanding knowledge on limitations of the efficient banking economic impact on the Croatian economy by identifying deformities and imbalances as well as potential causes of their occurrence and continuation and the possibilities of their elimination. For the purpose of meeting this objective, theoretical and empirical bases of financial-growth interconnection have been studies and quantitative research of monetary and real trend indicators in Croatia in comparison to selected neighbouring and wider region countries conducted. Companies and banks in Croatia have been compared in terms of their financial results and economic situation. In line with the set conceptual framework and initial research findings, deformities and/or imbalances generated and/or maintained in interactions between banking and real sectors in Croatia have been identified. These deformities and/or imbalances regard the following: sector changes in the Croatian economy and connected unused resources, economic model based on debt funded consumption, high unemployment and low employment, the issue of selected exchange rate policy, inappropriate sector allocation of bank loans, euroization of the Croatian economy, level of bank loans interest rate, insolvency of the Croatian economy, disproportions in delivering financial results and economic position of companies and banks, disproportions in export-import activities, internal and external imbalance i.e. the issue of double deficit and related issue of public and foreign debt, as well as procyclicality of banking risk provisions. The connection between these deformities and/or imbalances and potential causes has been researched including: monetary policy, market and financial discipline, risk management, financial markets and institutions as well as regulation-structure-concentration-competition of the banking sector. Based on the research conducted, the findings have been synthesized, the initial hypothesis confirmed and possibilities of eliminating identified deformities and/or imbalances set forth.