Dr. Udupa and his co-authors find that Indian importers face difficulties due to extreme financial shocks to their foreign partners. They show that taper tantrum episode during May-September 2013, when a surprise US Fed announcement reduced supply of dollars globally, resulted in reduction in import transactions for Indian importers. Firms’ inability to find alternate currencies to make purchases was the primary cause; and firms which could not arrange dollars from alternate sources were more affected.

Dr. Kulkarni, along with co-authors, examines asset-quality forbearance policies in India that allowed banks to lower capital provisioning requirements for loans under temporary liquidity stress. Her research shows that stressed banks increase lending to low-solvency firms, potentially reallocating credit away from solvent to zombie firms. This pattern that persists even after forbearance is withdrawn. Her findings suggest that forbearance provided banks with an incentive to hide true asset quality, and a license to engage in regulatory arbitrage potentially sowing the seeds for a banking crises.

Dr.  Kishore studies how too big to fail institutions (TBTF) can create systemic risk. Since TBTF will be bailed out in case they are in trouble, banks may herd to make similar investments and insure these investments by writing underpriced contracts with a TBTF institution. His research highlights why before the global financial crisis, banks made large investments in the real estate sector and insured them by writing underpriced contracts with AIG which was a TBTF institution.

Financial inclusion policies are gaining momentum as governments around the world are pushing on all cylinders to get more of their population a formal bank account. However, what are the best choices given the policy alternates available? Dr. Udupa, along with his co-authors, evaluates how three types of costs of bank account – one-time account opening costs, annual maintenance costs, and minimum balance required to be held – affect banking choices of the poor. The popular Pradhan Mantri Jan Dhan Yojana can be thought of as reducing banking costs along all the three dimensions to varying degrees, while other governments have also experimented with one or more of these costs. Dr. Udupa’s paper estimates the benefits of reducing each cost individually and together to see what generates the best outcome from a policy maker’s perspective.