Fintech as a Credit-Enabling Technology: Evidence from Bank Lending in India

Abstract

This study investigates how fintech adoption influences loan growth in Indian commercial banks, addressing a gap in the literature that has largely overlooked lending behavior and credit expansion. Using panel data from 24 banks over 2015–2023, fintech adoption is proxied through a text-based index derived from annual reports using TF-IDF techniques. The analysis employs fixed-effects panel regression with robust standard errors, alongside lagged specifications and dynamic panel models to address endogeneity and ensure robustness. The findings indicate a positive and statistically significant relationship between fintech adoption and loan growth, suggesting that digital transformation strengthens banks’ lending capacity. This effect operates through reduced information asymmetry, improved borrower evaluation, and enhanced operational efficiency. Robustness checks support the stability and likely causal nature of the results. While the text-based proxy may not fully capture the depth of technological adoption, the study highlights fintech’s role in enabling scalable and efficient credit delivery. It contributes to the literature by identifying loan growth as a key outcome of fintech integration in an emerging market context.