Shadow Banks on the Rise: Evidence Across Market Segments

82 Pages Posted: 6 Dec 2024 Last revised: 14 Jan 2025

See all articles by Kim Fe Cramer

Kim Fe Cramer

LSE Finance Department

Pulak Ghosh

Indian Institute of Management Bangalore

Nirupama Kulkarni

CAFRAL

Nishant Vats

Washington University in Saint Louis, John M. Olin Business School

Date Written: November 30, 2024

Abstract

This paper uses credit bureau data on 648 million retail loans in India to examine the comparative advantages of shadow banks across market segments. Using weather shocks as a proxy for credit demand, we show that Fintechs respond more in uncollateralized markets. In contrast, non-Fintech shadow banks exhibit stronger responsiveness in collateralized markets. Exploiting geographic heterogeneity in the adoption of digital payments, we identify technology as the key advantage for Fintechs. Leveraging four natural experiments, we document the significance of lower regulation for non-Fintech shadow banks. Our results suggest that the comparative advantage of shadow banks differs across market segments.

Keywords: shadow banks, Fintech, technology, regulation, comparative advantage, digital transactions, climate

Suggested Citation

Cramer, Kim Fe and Ghosh, Pulak and Kulkarni, Nirupama and Vats, Nishant, Shadow Banks on the Rise: Evidence Across Market Segments (November 30, 2024). Olin Business School Center for Finance & Accounting Research Paper No. 2024/18, Available at SSRN: https://ssrn.com/abstract=5045693 or http://dx.doi.org/10.2139/ssrn.5045693

Kim Fe Cramer

LSE Finance Department ( email )

MAR 7.35
Houghton Street
London, London WC2A2AE
United Kingdom

HOME PAGE: http://www.kimfecramer.com

Pulak Ghosh

Indian Institute of Management Bangalore ( email )

Nishant Vats (Contact Author)

Washington University in Saint Louis, John M. Olin Business School ( email )

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