We study the impact of regulations expanding bank branching in India. We find that public sector banks (PSBs) reduce their lending to poorly performing firms when branching expands in a district. Non-performing loans at PSBs also increase when branching expands. Also, inefficient firms that...

We thank Lakshmi Aiyar, Shawn Cole, Stijn Claessens, Oded Galor, Adair Morse, Mark Rosenzweig, Jeremy Stein, as well as participants in seminars at the IMF, the NBER Political Economy, Corporate Finance, and Growth Workshops, M.I.T., Northwestern University, the University of Chicago, the WFA...

Theory suggests the reduction in financing capacity after the failure of a financial intermediary can reduce the value of financial assets. Forced sales of the intermediary's assets could consume liquidity, depressing the liquidation value of the assets of healthy intermediaries and causing...