Information Asymmetry and Customer Satisfaction: Insights from Bank Borrowers in Rural India

Information asymmetry limits the potential of rural banking system in India. We are currently in a situation where banks are equipped with better access to the borrower's profile which includes details of land titles, assets, trade-credit linkages, fellow guarantees and history of transactions and default. The borrowers, on the other hand, are generally less endowed with vital information like awareness about their credit limit, clarity on loan eligibility criteria, benefits of timely repayments, and ways and means to tide over difficult times. The paper, based on small borrower's responses from household survey, shows that bank branches which reduced these information asymmetry generally have greater likelihood of satisfied customers. One major policy implication of the findings of this paper is that information diffusion may have a critical role in unleashing the full potential of our banking system.