Banking the Underbanked: Capital Investment and Credit-Constrained Firms

Nirupama Kulkarni (), Kanika Mahajan and S.K. Ritadhi ()
Additional contact information
Nirupama Kulkarni: Centre for Advanced Financial Research and Learning
S.K. Ritadhi: Ashoka University

No 93, Working Papers from Ashoka University, Department of Economics

Abstract: Inadequate banking infrastructure can exacerbate inequalities across firms. We exploit a place-based policy at scale – India’s nationwide bank expansion policy in 2005 that incentivized banks to open branches in “underbanked†districts – and employing a regression discontinuity design identify substantial increases in capital expenditures and credit growth of manufacturing establishments post-intervention. We find that establishments most likely to be credit constrained i.e., small, young and those not publicly listed drive these effects. Using novel regulatory data we find evidence in support of two mechanisms – increased hiring of bank officers and physical proximity of lenders to small, informationally opaque borrowers that explain the uptick in capital spending by small firms.

Keywords: Bank; Branch; Expansions; Credit; Constraints; Small; and; Micro; Enterprises (search for similar items in EconPapers)
Pages: 80
Date: 2023-02-01, Revised 2024-12-26
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dp.ashoka.edu.in/ash/wpaper/paper93_0.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ash:wpaper:93

Access Statistics for this paper

More papers in Working Papers from Ashoka University, Department of Economics
Bibliographic data for series maintained by Ashoka University ().