How Does A Health Insurance Program Covering 500 Million Poor Impact Credit Market Outcomes?

We study the impact of the world's largest publicly funded health insurance plan for the poor on credit markets. India launched a health insurance plan that covered 500 million beneficiaries. The fact that opposition-ruled states did not implement the program due to political reasons allows us to compare border districts of implemented and non-implemented states within a difference-in-differences framework. We find that the loan delinquency reduces by 35% in implemented districts. Increased liquidity for loan repayment seems to be the short-term mechanism at play. We rule out the federal-level ruling party's influence as an explanation.