Borrowing Culture and Debt Relief: Evidence from a Policy Experiment

40 Pages Posted: 3 Apr 2013 Last revised: 21 Aug 2017

See all articles by Sankar De

Sankar De


Prasanna L. Tantri

Indian School of Business

Date Written: December 18, 2016


We investigate the effects of a large government-initiated debt relief program on ex-ante and ex post credit market efficiency. We use loan accounts data for a large sample of borrowers before and after a nation-wide debt relief program in India. Employing robust regression discontinuity design, we find that unconditional debt waiver leads to significant credit rationing in intensive as well as extensive margins. Further, following the program we do not find any improvement in delinquency rates among the waiver beneficiaries. In order to disentangle demand and supply effects of the program, we use unique loan officer level data and exploit mandatory loan officer rotation policy.

Keywords: bank credit, borrowing culture, debt relief, policy experiment

JEL Classification: G21, O2, Q14

Suggested Citation

De, Sankar and Tantri, Prasanna L., Borrowing Culture and Debt Relief: Evidence from a Policy Experiment (December 18, 2016). Indian School of Business WP 2242390, Available at SSRN: or

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