Transaction Cost and Asymmetry of Information -The Twin Odds of Indian Commercial Banks in Rural Credit Market: Theoretical Fragility

摘要

This paper delves into the issues of transaction cost and asymmetry of information in the rural credit market. The first two sections deal with theoretical postulation of bank intermediation. The third section discusses the policy and administrative interventions in the rural credit market in India. The fourth section discusses the problem of asymmetry of information and high transaction cost the faced by the commercial banks in the rural credit market in India. The fifth section analyses the interrelation between the role of trust and transaction cost and examines the role of SHGs in bridging information asymmetry, fostering trust between bankers and the rural borrowers and thereby reduce the transaction cost.