Research Interests

Banking and Financial Intermediation, Household Finance

Working Papers

Does Social Capital Positively Influence Loan Performance Even During a Crisis?

- with Sumit Agarwal and Prasanna Tantri


Theoretically, it is unclear whether group loans outperform individual loans in terms of delinquency, especially during a crisis. It is difficult to test the hypothesis due to differences in the types of borrowers of the group and individual loans and likely differences in their behavior between crises and normal times. We overcome the challenge by comparing simultaneous group and individual loans of the same individual before and during the Covid-19 crisis in India. We find that the delinquency rate of group loans is significantly lower. Further tests suggestively indicate that the outperformance is due to the “peer pressure” channel.


Transparency in Loan Pricing And Interest Rates

- with Prasanna Tantri


We study the impact of transparency in loan pricing on the eventual interest rates charged.  The Indian central bank asked banks to price loans using a new cost-based benchmark instead of the prime rate. We find that the above change, which made the banks’ cost structure transparent, lowers the interest rates charged. It also significantly increases debtor firms' total borrowings, and investments. We hypothesize that the revelation of costs credibly increases the bargaining space available to the borrowers, leading to a decline in interest rates and an improvement in credit market efficiency. Evidence is consistent with the above mechanism. 

Do Firms Have A Preference Order While Repaying Lenders? Relationship vs Transaction Banking 

– Nitin Vishen


Do firms prefer repaying a relationship lender over a transaction lender, or vice versa? It is unclear whether a firm that finds itself in a position to repay only one out of its two lenders will repay the relationship lender or the transaction lender? A within-firm across-lenders analysis shows that firms are more likely to default on relationship lenders compared to transaction lenders. I find that firms face a lower threat of prosecution upon default from relationship lenders. The findings are robust to alternate definitions of relationship banking, controlling for several loan terms, and endogenous firm-bank matching. Firms show a higher repayment preference towards transaction lenders, irrespective of whether the government owns the lenders or not.

Conference Presentations

Research Grants