The Relationship Dilemma: Organizational Culture and the Adoption of Credit Scoring Technology in Indian Banking

Credit bureaus and scoring were introduced in India in late 2007. We study the adoption of this technology in retail lending by private banks and state-owned public sector banks (PSBs). Both banks adopt scoring for new borrowers but PSBs significantly lag in adopting scoring for existing bank borrowers, to whom they often lend without credit checks. We quantify the information left on the table using score data available to but ignored by PSBs. Neither ownership nor bank characteristics such as size or profits explain PSB adoption patterns, which, instead, likely reflect the long-run imprints of organizational experiences in formative years that are slowly erased by learning and competitive forces. We discuss the implications of our results for other areas of economics including the adoption of technology and state-owned banks.