Legal Reform and Loan Repayment: The Microeconomic Impact of Debt Recovery Tribunals in India
- (pp. 59-81)
Abstract
In 1993, the Indian government introduced debt recovery tribunals to speed up the resolution of debt recovery claims larger than a threshold. This paper exploits the staggered introduction of tribunals across states and the link between overdues and claim size to implement a differences-in-differences strategy on project loan data. It finds that the tribunals reduced delinquency for the average loan by 28 percent. They also lowered the interest rates charged on larger loans, holding constant borrower quality. This suggests that the speedier processing of debt recovery suits can lower the cost of credit. (JEL G21, K41, O16, O17)Citation
Visaria, Sujata. 2009. "Legal Reform and Loan Repayment: The Microeconomic Impact of Debt Recovery Tribunals in India." American Economic Journal: Applied Economics, 1 (3): 59-81. DOI: 10.1257/app.1.3.59Additional Materials
JEL Classification
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- K41 Litigation Process
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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