The Relationship Dilemma: Why Do Banks Differ in the Pace at Which They Adopt New Technology?

Prachi Mishra, Nagpurnanand R. Prabhala and Raghuram Rajan

No 25694, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: India introduced credit scoring technology in 2007. We study its adoption by the two main types of banks operating there, new private banks (NPBs) and state-owned public sector banks (PSBs). NPBs start checking the credit scores of most borrowers before lending soon after the technology is introduced. PSBs do so equally quickly for new borrowers but very slowly for prior clients, although lending without checking scores is reliably associated with more delinquencies. We show that an important factor explaining the difference in adoption is the stickiness of past bank structures and associated managerial practices. Past practices hold back better practices today.

JEL-codes: G21 O32 P5 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-ban and nep-ict
Note: CF DEV IO
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Published as Prachi Mishra & Nagpurnanand Prabhala & Raghuram G Rajan & Tarun Ramadorai, 2022. "The Relationship Dilemma: Why Do Banks Differ in the Pace at Which They Adopt New Technology?," The Review of Financial Studies, vol 35(7), pages 3418-3466.

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