Deposit and Credit Reallocation in a Banking Panic: The Role of State-Owned Banks

Viral Acharya, Abhiman Das, Nirupama Kulkarni, Prachi Mishra and Nagpurnanand R. Prabhala

No 30557, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a bank run in India in which private bank branches experience sudden and considerable loss of deposits, which migrate to state-owned public sector banks (PSBs) that serve as safe havens. We trace the consequences of the deposit reallocation using bank branch-level balance sheet and firm-bank lending data. The flight to safety is not a flight to quality. Lending shrinks and credit quality improves in run banks, but worsens in PSBs receiving the flight-to-safety flows. The reallocation of resources is not efficient in the aggregate.

JEL-codes: G23 G28 G33 O43 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-ban and nep-fdg
Note: CF EFG
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