Non-Banks and Monetary Policy Transmission in India: An Exploration

Non-Banks and Monetary Policy Transmission in India: An Exploration | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Non-Banks and Monetary Policy Transmission in India: An Exploration Neelima K. M., Pallavi Chavan, Nandini Jayakumar This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8803586/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper analyses the role of non-banking financial companies (NBFCs) - an increasingly important credit intermediary in India - in monetary policy transmission. Using balance sheet data for a representative panel of NBFCs uniquely matched with retail loan-level data, the paper finds evidence of monetary transmission by these institutions. A one-percentage point increase in weighted average call money rate (WACR), the operating target for India’s monetary policy, is associated with (a) a decline in NBFC credit growth by 3 per cent over a two-quarter period under the credit channel and (b) an increase of 0.17 percentage points in the lending rate of NBFCs over a one-quarter period under the interest rate channel. There is transmission in most segments of retail credit by NBFCs. The digitally-intermediated or FinTech retail loans by NBFCs are seen to be the most rate sensitive. In contrast to the global evidence of non-banks tempering monetary transmission, the Indian NBFCs support monetary transmission given the greater sensitivity of their cost of funds to policy rates through their interconnectedness with banks and lower regulatory arbitrage. JEL Classification : E51, E52, G23, G28 Nonbanks monetary policy transmission credit channel loan-level data retail loans Full Text Additional Declarations No competing interests reported. Supplementary Files SupplementaryappendixNonbanksandmonetarytransmissionJan21.docx Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8803586","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":593663721,"identity":"53636baf-6ed2-4bdc-8b2f-22ddff626aad","order_by":0,"name":"Neelima K. 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