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The Relationship Dilemma: Organizational Culture and the Adoption of Credit Scoring Technology in Indian Banking

Prachi Mishra, Nagpurnanand R. Prabhala and Raghuram Rajan

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

Abstract: Credit scoring was introduced in India in 2007. We study the pace of its adoption by new private banks (NPBs) and state-owned or public sector banks (PSBs). NPBs adopt scoring quickly for all borrowers. PSBs adopt scoring quickly for new borrowers but not for existing borrowers. Instrumental Variable (IV) estimates and counterfactuals using scores available to but not used by PSBs indicate that universal adoption would reduce loan delinquencies significantly. Evidence from old private banks suggests that neither bank size nor government ownership fully explains adoption patterns. Organizational culture, possibly from formative experiences in sheltered markets, explains the patterns of technology adoption.

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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