The Relationship Dilemma: Why Do Banks Differ in the Pace at Which They Adopt New Technology?
95 Pages Posted: 28 Mar 2019 Last revised: 12 Aug 2021
Date Written: August 2021
India introduced credit scoring technology in 2007. We study its adoption by the two main types of banks operating there, new private banks (NPBs) and state-owned public sector banks (PSBs). NPBs start checking the credit scores of most borrowers before lending soon after the technology is introduced. PSBs do so equally quickly for new borrowers but very slowly for prior clients, although lending without checking scores is reliably associated with more delinquencies. We show that an important factor explaining the difference in adoption is the stickiness of past bank structures and associated managerial practices. Past practices hold back better practices today.
Keywords: credit bureaus, credit scoring, banking, bank relationships, state-owned banks, adoption of new management practices, technology adoption, organizational culture
JEL Classification: G21, L3, O3
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