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Financial inclusion and bank stability: Evidence from the Indian banking system

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  • Srivastava, Nikhil
  • Mohanty, Praveen Kumar
  • Kesari, Nidhi

Abstract

This paper focuses on the effects of financial inclusion on bank stability in the Indian context, using the new Indian government financial inclusion policy, Pradhan Mantri Jan Dhan Yojana (PMJDY), as a quasi-experiment. We document a direct relationship between inclusion and bank stability. These results remain robust to using alternative measures of financial inclusion (rural, urban, and combined beneficiaries), and across different dimensions of bank stability, such as Z-score, CASA, and provision for non-performing assets. Our findings suggest that financial inclusion has an especially positive effect on bank stability when focused on rural areas.

Suggested Citation

  • Srivastava, Nikhil & Mohanty, Praveen Kumar & Kesari, Nidhi, 2025. "Financial inclusion and bank stability: Evidence from the Indian banking system," Economics Letters, Elsevier, vol. 250(C).
    • Handle: RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001405
    DOI: 10.1016/j.econlet.2025.112303
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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