ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Gender Gap in Credit in India

Are women less risky in terms of loan repayment as compared with men? Using data on public sector Indian banks, we present evidence to this effect. The key insights emanating from the analysis are the following. First, non-performing loans arising out of credit extended to women decline by 7.5% on average, after controlling for bank-level and macroeconomic factors. Second, the decline in NPLs out of the credit extended is primarily with regard to priority sector credit and less so with respect to non-priority credit. We view this as one of the early exercises in the Indian context to examine the linkage between gender credit gap and the resultant NPLs.

Identifying Zombie Banks

A measure of zombieness for state-owned Indian banks is computed. Using data for 2011–20, the evidence shows that these banks account for 16% of state-owned banks’ equity, 23% of non-performing loans and 18% of their lending portfolio within the country. Multivariate regressions highlight the differential lending behaviour of zombies, after accounting for bank-specific controls and year effects.

The Growth of Unicorns

Using a novel database, the article examines the characteristics of Indian unicorns in a global perspective. The total valuation of unicorns currently approximates $3.4 trillion. Multivariate regressions highlight the importance of city start-up environment, finance and cost as key drivers. India does not appear to exhibit a significantly different valuation from its global peers, although when looked at with respect to the gross domestic product, its valuation is 10% higher, on average.

COVID-19 and Bank Behaviour

The article analyses the impact of the pandemic on the banking sector in India. Utilising data on Indian banks, it addresses two questions: fi rst, what was the magnitude of the impact on bank lending across ownership? Second, what was the impact on their costs and returns? This article is one of the early exercises to examine the impact on banks’ balance sheets in the Indian context.

Bailout Barometer for the State-owned Indian Banks

Using the disaggregated data covering 2007–20, the study estimates the bailout barometer for state-owned banks in India. The findings show that the magnitude of the bailout barometer, in 2020, was $400 billion or around 18% of the total liabilities at the upper end of the scale. The classifications by separate categories such as size, systemic importance, and interconnectedness show that the former two categories appear to exert the most perceptible impact in terms of bailout magnitude.


Financial Misconduct, Fear of Prosecution and Bank Lending

The issue and relevance of financial misconduct and fear of prosecution on the lending behaviour of Indian banks is investigated by combining bank-level financial and prudential variables during 2008–18 with a unique hand-collected data set on financial misconduct and fear of prosecution. The findings indicate that, in the presence of financial misconduct, state-owned banks typically cut back on credit creation and instead increase their quantum of risk-free investment. In terms of magnitude, a 10% increase in financial misconduct lowers lending by 0.2% along with a roughly commensurate increase in investment. In terms of the channels, it is found that private banks increase provisioning to maintain their credit growth, although the evidence for state-owned banks is less persuasive.

Financial Literacy and Financial Inclusion

Using district-level data, the effect of financial literacy centres on financial inclusion in India is investigated. There is evidence of an improvement in the use of bank accounts over time. Robustness tests suggest that banks with a strong capital position and asset quality are more inclusive through their financial literacy centres, and the traditional bank agents continue playing an important role in this process despite non-traditional channels like mobile telephony. Yet, the findings show that the overall impact of financial literacy on bank account ownership is still limited. The analysis raises useful policy pointers to address those impediments that plague the process.

Deciphering Financial Literacy in India

Utilising a nationally representative data set, an index of financial literacy consisting of financial knowledge, behaviour, and attitude is constructed. The findings suggest significant variation in financial literacy across states with an over 60 percentage point difference between the state with the highest financial literacy and that with the lowest. Multivariate regressions show that there exist large and statistically significant gender-, location-, employment-, education-, technology-, and debt-driven differences in financial literacy. Much of the observed regional divergence persists even after we control for cohort effects.

Did MGNREGS Improve Financial Inclusion?

Utilising household-level data, this paper investigates the impact of Mahatma Gandhi National Rural Employment Guarantee Scheme on financial inclusion. Exploiting the staggered timing of the roll-out of the programme across districts, while controlling for its non-random implementation, it is found that MGNREGS improves financial access. This is confirmed in simple univariate tests as well as in multivariate regressions that take into account several district- and household-level controls. The evidence, however, is less compelling when the use of finance is examined, although there is a differential impact for districts with higher proportion of women. The magnitudes in most cases are quite large and suggest that public works programme can positively influence financial inclusion.

Furthering the Financial Inclusion Agenda in India

Exploiting household level survey data, this paper analyses the interface between gender and financial inclusion. The multivariate regressions that take on board several household and state-level controls suggest significant disparities in both the access to as well as the use of finance. More specifically, female-headed households are 10% less likely to access formal finance as compared to households that are headed by males. Similar evidence carries over to the use of finance as well. From a policy standpoint, the paper highlights several policy interventions which can serve the cause of greater financial inclusion of women in the country.


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