25 September 2026
When Banking Reaches the Marginalised, Can It Narrow the Caste Gap?
For communities that have historically faced barriers to economic opportunity, access to formal finance can mean more than a bank account: it can enable households to borrow, invest, insure against shocks, and participate more fully in the economy.
A new study by Professor Rikhia Bhukta at Amrut Mody School of Management at Ahmedabad University asks a fundamental question: can expanding access to formal banking reduce some of the economic and social disadvantages associated with caste?
The researchers examine a 2005 Reserve Bank of India policy that encouraged commercial banks to open branches in districts underserved by formal banking. The study identifies many pathways behind these gains, whose effects were not confined to recipients of bank loans. Financial access changed the economic opportunities around them.
Greater competition from formal banks pushed informal lenders to lower interest rates for SC borrowers. Agricultural credit supported mechanisation, thereby increasing farm productivity and reducing agricultural labour hours. Rising demand from local businesses also contributed to higher SC wages and more non-farm employment.
These findings carry a broader lesson for policymakers: tackling inequality may require not only addressing overt discrimination, but also reforming the economic structures and opportunities that reinforce its effects.