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Do rural banks matter? evidence from the Indian social banking experiment

Burgess, Robin and Pande, Rohini (2003) Do rural banks matter? evidence from the Indian social banking experiment. Development Economics discussion paper; DEDPS 40, DEDPS/40. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London.

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Abstract

Lack of access to finance is often cited as a key reason why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirial evidence on this issue. Between 1977 and 1990, the Indian Central Bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches. We show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse is true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2003 the authors
Library of Congress subject classification: H Social Sciences > HN Social history and conditions. Social problems. Social reform
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: N - Economic History > N2 - Financial Markets and Institutions
O - Economic Development, Technological Change, and Growth > O1 - Economic Development
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
I - Health, Education, and Welfare > I3 - Welfare and Poverty
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
H - Public Economics > H1 - Structure and Scope of Government
H - Public Economics > H4 - Publicly Provided Goods
G - Financial Economics > G2 - Financial Institutions and Services
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: DEDPS/40
Date Deposited: 27 Apr 2007
URL: http://eprints.lse.ac.uk/2244/

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