Trusting financial institutions: Out of reach, out of trust?

• A lack of trust in financial institutions in India still exist.
• Consumer trust varies for different types of financial institutions.
• Geographic proximity positively affects trust in financial institutions.
• Information sources bridge distances to banks.
• We employ a subjective measure of geographic proximity.

This paper empirically investigates the relevance of geographic proximity to a financial institution for trusting this institution with money. In doing so, the paper considers the use of different information sources that may bridge physical distances between individuals and financial institutions, investigating to what extent geographic proximity is still needed to trust a financial institution when information sources are used by Indian households. Based on a large-scale survey of savings patterns of Indians, the empirical results suggest that individuals who cannot commute a financial institutions within a distance of one day are less likely to trust this institution with their money. However, geographic proximity to a financial institution is still relevant for trusting financial institutions when controlling for the use of different information sources.