Financial inclusion and bank stability: Evidence from the Indian banking system

Nikhil Srivastava, Praveen Kumar Mohanty and Nidhi Kesari

Economics Letters, 2025, vol. 250, issue C

Abstract: This paper focuses on the effects of financial inclusion on bank stability in the Indian context, using the new Indian government financial inclusion policy, Pradhan Mantri Jan Dhan Yojana (PMJDY), as a quasi-experiment. We document a direct relationship between inclusion and bank stability. These results remain robust to using alternative measures of financial inclusion (rural, urban, and combined beneficiaries), and across different dimensions of bank stability, such as Z-score, CASA, and provision for non-performing assets. Our findings suggest that financial inclusion has an especially positive effect on bank stability when focused on rural areas.

Keywords: Financial inclusion; Financial development; Financial stability; Banks (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001405

DOI: 10.1016/j.econlet.2025.112303

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