NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Relationship Dilemma: Organizational Culture and the Adoption of Credit Scoring Technology in Indian Banking

Prachi Mishra, Nagpurnanand R. Prabhala, Raghuram G. Rajan

NBER Working Paper No. 25694
Issued in March 2019
NBER Program(s):Corporate Finance Program, Development Economics Program, Industrial Organization Program

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.

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Document Object Identifier (DOI): 10.3386/w25694

 
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