Template-Type: ReDIF-Paper 1.0
Author-Name: Nirupama Kulkarni
Author-Name-First: Nirupama
Author-Name-Last: Kulkarni
Author-Email: nirupama.kulkarni@cafral.org.in
Author-Workplace-Name: Centre for Advanced Financial Research and Learning
Author-Name: Kanika Mahajan
Author-Name-First: Kanika
Author-Name-Last: Mahajan
Author-Email: kanika.mahajan@ashoka.edu.in
Author-Workplace-Name: Ashoka University
Author-Name: S.K.  Ritadhi
Author-Name-First: S.K. 
Author-Name-Last: Ritadhi
Author-Email: sk.ritadhi@ashoka.edu.in
Author-Workplace-Name: Ashoka University
Title: Banking the Underbanked: Capital Investment and Credit-Constrained Firms
Abstract: Inadequate banking infrastructure can exacerbate inequalities across firms. We exploit a place-based policy at scale – India’s nationwide bank expansion policy in 2005 that incentivized banks to open branches in “underbanked” districts – and employing a regression discontinuity design identify substantial increases in capital expenditures and credit growth of manufacturing establishments post-intervention. We find that establishments most likely to be credit constrained i.e., small, young and those not publicly listed drive these effects. Using novel regulatory data we find evidence in support of two mechanisms – increased hiring of bank officers and physical proximity of lenders to small, informationally opaque borrowers that explain the uptick in capital spending by small firms.
length: 80
Creation-Date: 20230201
Revision-Date: 20241226
Publication-Status: 
File-URL: https://dp.ashoka.edu.in/ash/wpaper/paper93_0.pdf
File-Format: Application/pdf 
Number: 93
Keywords: Bank Branch Expansions
Keywords: Credit Constraints
Keywords: Small and Micro Enterprises
Handle: RePEc:ash:wpaper:93