Research / BFI Working PaperJun 05, 2024

Banking on Trust: Supervisory Transparency and Depositors’ Actions

Abhiman Das, Tanmoy Majilla, Rimmy Tomy

We explore the role of institutional trust in influencing depositors’ reactions to bank super-visory actions in India. Utilizing a unique event that led to unexpected penalties on banks and the quasi-random nature of branch locations, we find news of penalties on some banks leading to deposit withdrawals from offending and neighboring nonoffending branches. Such withdrawals are more pronounced in regions with lower trust in public institutions, including trust in courts and banks. Trust is associated with information access and the quality of local services. We find limited evidence that credit and economic activity also decline in regions with deposit withdrawals.

More Research From These Scholars

BFI Working Paper Sep 29, 2021

Community Membership and Reciprocity in Lending: Evidence from Informal Markets

Rimmy Tomy, Regina Wittenberg-Moerman
Topics:  Financial Markets
BFI Working Paper Jan 23, 2023

Access to Credit in Informal Economies: Does Financial Information Matter?

Rimmy Tomy, Regina Wittenberg-Moerman
Topics:  Financial Markets
BFI Working Paper Feb 8, 2023

Bank Supervision and Managerial Control Systems: The Case of Minority Lending

Byeongchan An, Robert Bushman, Anya Kleymenova, Rimmy Tomy
Topics:  Financial Markets