Caste and Credit: Discrimination in India’s Credit Sector

Navjot Sangwan and Bibhas Saha
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Navjot Sangwan: Navjot Sangwan is the corresponding author (n.sangwan@gre.ac.uk) and is affiliated with the School of Accounting, Finance and Economics, University of Greenwich, London, UK.
Bibhas Saha: Bibhas Saha is affiliated with Durham University Business School, Durham University, Durham, UK.

Progress in Development Studies, 2026, vol. 26, issue 1, 27-46

Abstract: This article examines how caste shapes access to credit in India’s formal and informal lending markets. Using nationally representative data from the India Human Development Survey (2011–2012), we analyse loan application rates and loan amounts and compare outcomes between General Castes (GC) and three lower-caste groups: Other Backward Castes (OBC), Scheduled Castes (SC) and Scheduled Tribes (ST). We find that GC households are more likely to apply for and receive larger loans from formal banks, while lower-caste households rely more heavily on informal moneylenders. A substantial share of these credit gaps—particularly in bank lending—remains unexplained by observable characteristics, pointing to potential caste-based discrimination. In contrast, moneylenders do not appear to penalize lower-caste borrowers to the same extent and, in some cases, lend more than expected to OBC households. These findings suggest that entrenched caste hierarchies continue to influence credit access in India, with formal institutions reinforcing rather than correcting social inequalities.

Keywords: Caste discrimination; credit; Blinder–Oaxaca decomposition; quantile decomposition; India (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:sae:prodev:v:26:y:2026:i:1:p:27-46

DOI: 10.1177/14649934251411694

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