The Relationship Dilemma: Organizational Culture and the Adoption of Credit Scoring Technology in Indian Banking
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.
We thank Nishant Vats and Khushboo Khandelwal for excellent research assistance, Sumit Agarwal, Gurdip Bakshi, Federico Bandi, Akash Deep, Paul Ferraro, Laurent Fresard, Divya Kirti, Deep Mukherjee, Satish Pillai, Kejal Sanghavi, Anand Srinivasan, Krishnamurthy Subramanian, Sheng-Jin Xu, and seminar participants at ABFER, IMF, Johns Hopkins University, Bank of Canada, University of Connecticut, University of Maryland, the ISB CAF conference, and the UBC Summer Research Conference for helpful feedback. The views set out herein are those of the authors. Unless explicitly stated, they do not necessarily reflect the views of Goldman Sachs or any other institutions Dr. Mishra or the other authors are or were affiliated with. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.