Contagious Effects of a Political Intervention in Debt Contracts: Evidence Using Loan-Level Data
By Prasanna Tantri
The Review of Financial Studies | November 2018
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academic.oup.com/rfs/article-abstract/31/11/4556/4819200?redirectedFrom=fulltext
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Tantri, Prasanna. Contagious Effects of a Political Intervention in Debt Contracts: Evidence Using Loan-Level Data The Review of Financial Studies academic.oup.com/rfs/article-abstract/31/11/4556/4819200?redirectedFrom=fulltext.
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The Review of Financial Studies, 2018
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Abstract
Using an unexpected government regulation that restricted the ability of microfinance institutions to recover loans in one Indian state, I examine whether this intervention affected bank loan performance. The bank loan delinquency rate significantly increased as a result. In response, the ex post bank credit supply declined by more than half. For identification, I compare loans from branches located in regions subject to this intervention with loans from nearby branches of the same bank located in regions not subject to the intervention. I conclude that political interventions in credit markets could have significant spillover effects.

Prasanna Tantri is an Associate Professor of Finance and the Executive Director of the Centre for Analytical Finance at the Indian School of Business (ISB). He also serves as an Independent Director and Chair of the Audit and Risk Management Committees at Power Finance Corporation. His research interests include banking, macro-finance, financial inclusion, financial contagion, and regulation. He has published his research in top journals such as the Review of Financial Studies, The Journal of Accounting and Economics, The Review of Finance, The Journal of Accounting Research, Management Science, The Journal of Financial And Quantitative Analysis, Journal of Development Economics, and others. 

He is currently heading the group entrusted by the government of Telangana with the task of drafting a vision document for the state of Telangana. He was a part of the Expert Working Group on Investor Protection at the National Stock Exchange and a Member of the Technical Group on the Social Stock Exchange, constituted by the Securities and Exchange Board of India. He was also appointed as a Member of the Technical Advisory Committee for the Evaluation of Schemes for the Promotion of Digital Payments in India, under the Development Monitoring & Evaluation Office (DMEO), NITI Aayog.

Prasanna Tantri
Prasanna Tantri