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 at the Indian School of Business (ISB) and Executive Director of the Centre for Analytical Finance (CAF). He previously served as an Independent Director and Chair of the Audit and CSR Committees on the Board of Power Finance Corporation Limited, Government of India.

His research focuses on banking, financial inclusion, and the political economy of finance, with publications in leading journals including the Review of Financial Studies, Review of Finance, Journal of Accounting and Economics, Journal of Accounting Research, Management Science, and Journal of Financial and Quantitative Analysis. He has presented his research at premier academic forums and has received several competitive research grants and teaching awards.

Prasanna’s work has been widely cited in policy and media, including The Economist, Bloomberg, Mint, and The Economic Times, and has been referenced in the Union Budget, the Economic Survey of India, and RBI reports. He has advised and presented his work to the Prime Minister’s Office, Ministry of Finance, RBI, and several central and state government bodies. He also headed the group entrusted by the Government of Telangana with drafting the Telangana Vision 2047 document, contributing to the development of the state’s long-term vision and strategic roadmap. Over the years, he has also contributed to several high-level advisory and expert bodies, including the Technical Advisory Committee under DMEO, NITI Aayog, and expert groups constituted by the National Stock Exchange and SEBI. These engagements reflect his broader contribution to translating rigorous academic research into policy and regulatory practice.

Prasanna Tantri
Prasanna Tantri