Banking the Unbanked: What Do 255 Million New Bank Accounts Reveal about Financial Access?

Using administrative account level data, we study the largest financial inclusion program in India that led to 255 million new bank account openings. About 77% of these accounts maintain a positive balance. While the initial usage remains quite infrequent, it gradually converges to that of banked households with similar demographics. Exploiting regional variation in ex-ante financial access, we find that regions more exposed to the program saw an increase in lending and defaults on new loans. These results are consistent with banks catering to the new demand for formal credit by previously unbanked households. We also find some evidence of increased borrowing and spending for health related reasons in regions more exposed to the program.

Keywords: Banking, Financial Inclusion, Financial Literacy, Big Data, Financial Access, Savings, Spending, Debit Card, Consumer Finance, Household Finance

JEL Classification: C93, D14, G21, O16, O12

Suggested Citation: Suggested Citation

Agarwal, Sumit and Alok, Shashwat and Ghosh, Pulak and Ghosh, Soumya and Piskorski, Tomasz and Seru, Amit, Banking the Unbanked: What Do 255 Million New Bank Accounts Reveal about Financial Access? (October 26, 2017). Columbia Business School Research Paper No. 17-12; Georgetown McDonough School of Business Research Paper No. 2906523; HKUST Finance Symposium 2017; Indian School of Business WP 2906523. Available at SSRN: https://ssrn.com/abstract=2906523 or http://dx.doi.org/10.2139/ssrn.2906523