Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Rohini Pande
Authors registered in the RePEc Author Service: Robin Burgess

No 4211, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Lack of access to finance is often cited as a key reason for why poor people remain poor. This Paper uses data on the Indian rural branch expansion programme to provide empirical evidence on this issue. Between 1977 and 1990, the Indian central bank mandated that a commercial bank could open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches. We show that, between 1977 and 1990, this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse was true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion programme significantly lowered rural poverty, and increased non-agricultural output.

Keywords: O00; Finance and development; Rural banking; Bank licensing; Credit constraints; Structural change; Diversification; Redistribution; Poverty; Growth (search for similar items in EconPapers)
JEL-codes: E50 G20 H10 H40 I30 N20 O10 O20 O30 O40 (search for similar items in EconPapers)
Date: 2004-01
New Economics Papers: this item is included in nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Related works:
Journal Article: Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment (2005)
Working Paper: Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment (2004)
Working Paper: Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment (2003)
Working Paper: Do rural banks matter? Evidence from the Indian social banking experiment (2003)
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