ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Gender Gap in Credit in India

Is Credit Risk a Concern?

Are women less risky in terms of loan repayment as compared with men? Using data on public sector Indian banks, we present evidence to this effect. The key insights emanating from the analysis are the following. First, non-performing loans arising out of credit extended to women decline by 7.5% on average, after controlling for bank-level and macroeconomic factors. Second, the decline in NPLs out of the credit extended is primarily with regard to priority sector credit and less so with respect to non-priority credit. We view this as one of the early exercises in the Indian context to examine the linkage between gender credit gap and the resultant NPLs.

The views expressed and the approach pursued are strictly personal.

Do women present less credit risk? This question has, in recent times, occupied the minds of both academia and policymakers. While there is a lot of analysis and documentation regarding discrimination against women in terms of access to credit, both for advanced (Alesina et al 2013; Ongena and Popov 2016) and emerging (Armendariz and Morduch 2005) economies, it is not altogether obvious whether this could be because of differences in their repayment behaviour. Both within-country (Khandker et al 1995; Sharma and Zeller 1997) and cross-country (D’Espallier et al 2011) evidence affirms that when it comes to loan repayment rates, women typically outweigh their counterparts. Most recent international evidence for Eastern Europe and Central Asia also affirm that default rates of women borrowers are on average 7.4% lower as compared with men (Mia et al 2022). This is corro­borated in previous World Bank (2007: 124) studies wherein it observed that “repayment is higher among female borrowers, mostly due to more conservative investments and lower moral hazard risk.”

This global evidence has its echo in the Indian context. According to a TransUnion CIBIL report, women retail borrowers on average have a lower delinquency rate on consumer loans (5.2%) as compared with men at 6.9% (Transunion CIBIL 2022). Other related evidence also points to a gender credit bias. Maurya and Mohanty (2019), for example, report a gender gap in credit with regard to informal sector loans. Chavan (2020) notes that although there has been a steady rise in women’s credit share, they still lag well behind the comparable figures for BRICS economies. Ghosh (2023) provides evidence that women borrowers are more likely to be discouraged in loan application, but does not assess its implications for banks’ credit quality. Anecdotal evidence proffered by CreditMate, a digital debt-collection platform backed by Paytm, suggests that late repayments by male borrowers at 82% was nearly five times higher as compared with women at 18%.

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Updated On : 30th Nov, 2023
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