The Real Effects of Bank Branching: Evidence from India

51 Pages Posted: 17 Mar 2021

See all articles by Indraneel Chakraborty

Indraneel Chakraborty

University of Miami

Apoorva Javadekar

Indian School of Business

Rodney Ramcharan

University of Southern California, Marshall School of Business

Date Written: March 15, 2021

Abstract

We study the impact of regulations expanding bank branching in India. We find that public sector banks (PSBs) reduce their lending to poorly performing firms when branching expands in a district. Non-performing loans at PSBs also increase when branching expands. Also, inefficient firms that depend on PSBs deleverage and are more likely to exit after branching expands in a district. At the plant level, exposure to branching is associated with an expansion in size and employment. These results suggest that greater credit market competition can lead to more efficient lending and increased economic activity in economies with protected credit markets.

Keywords: Capital misallocation, bank branching, competition, India

JEL Classification: G21, G28, O16, O47

Suggested Citation

Chakraborty, Indraneel and Javadekar, Apoorva and Ramcharan, Rodney, The Real Effects of Bank Branching: Evidence from India (March 15, 2021). University of Miami Business School Research Paper No. 3805031, Available at SSRN: https://ssrn.com/abstract=3805031 or http://dx.doi.org/10.2139/ssrn.3805031

Indraneel Chakraborty

University of Miami ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
312-208-1283 (Phone)

HOME PAGE: http://sites.google.com/site/chakraborty/

Apoorva Javadekar

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
194
Abstract Views
1,171
rank
212,413
PlumX Metrics