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Transaction Cost and Asymmetry of Information -The Twin Odds of Indian Commercial Banks in Rural Credit Market: Theoretical Fragility

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  • Choudhury, Saswati

Abstract

This paper delves into the issues of transaction cost and asymmetry of information in the rural credit market. The first two sections deal with theoretical postulation of bank intermediation. The third section discusses the policy and administrative interventions in the rural credit market in India. The fourth section discusses the problem of asymmetry of information and high transaction cost the faced by the commercial banks in the rural credit market in India. The fifth section analyses the interrelation between the role of trust and transaction cost and examines the role of SHGs in bridging information asymmetry, fostering trust between bankers and the rural borrowers and thereby reduce the transaction cost.

Suggested Citation

  • Choudhury, Saswati, 2004. "Transaction Cost and Asymmetry of Information -The Twin Odds of Indian Commercial Banks in Rural Credit Market: Theoretical Fragility," MPRA Paper 34951, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:34951
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    References listed on IDEAS

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    1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    2. Eggertsson,Thrainn, 1990. "Economic Behavior and Institutions," Cambridge Books, Cambridge University Press, number 9780521348911, January.
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    Cited by:

    1. Choudhury, Saswati, 2004. "Bane of rural credit market: presence of money lender or absence of structural synchronicity," MPRA Paper 34992, University Library of Munich, Germany, revised Jan 2005.
    2. Verma, Rahul & Chatterjee, Devlina, 2025. "Relative impact of digital and traditional financial inclusion on financial resilience: Evidence from 13 emerging countries," Journal of Economics and Business, Elsevier, vol. 133(C).

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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