Review of literature

According to the big bank barrier hypothesis large banks provide the credit facilities for larger clients or larger corporate businesses.

Large banks are more likely headquartered in metropolitan cities near to large corporate businesses.

Large banks may not able to get adequate information because the distance between large banks and small businesses are at large. It is frequently determined the credit facilities to them.

Large banks do not have local based environment for relationship lending to small businesses. They are more frequently offered transaction loans for well equipped, larger and financially secure firms. (Hayes and Berney (1999))

Banks relationship lending may be based on local knowledge of small business.

Large banks relatively associates with large clients. They are provided loans with high interest rates and high collateral requirements to large businesses.

Small customers may not able to get loans from large banks with this high collateral requirements and high interest rates. (Berger and Udell 1996)

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Small banks are most likely associated with low interest rates and low collateral requirements for transaction loans to small customers.

They also do have local based knowledge about small firms. Informational distance between the small banks and customers are frequently helped to small businesses.

Hauswold and Marquez (2000) suggest that informational distance between the banks and small clients more often reduces relationship lending of the banks to firms.

The consolidation process and bank size frequently have in significant results for small business lending.

Some M&As process between the financial organizations slightly raises and rather than frequently reduces small business lending.

The evidence from the China, shows that total assets of banks is partially insignificant variable for banks to take decision for small and medium business lending. Frequently, the bank’s lending power has been stimulated by the banks’ lending authority, special incentives schemes form government and powerful law enrichments that gives more credit facilities for small and medium scale businesses. Yan Shen et.al (2009)

According to De yang et.al (1996), U.S banking industry has been splinted two primary groups based on asset size of banks through the changes of deregulation, technological and consolation process of banks. They are viz. very large banks and small banks.

Large banks are specialized to create normalized loans with the use of hard information of small business.

Small banks are specialized to give non-normalized loans with the use of soft information and development relationship lending between the small customers.

In the period of 1993-2001 performance of small business lending is based on relationship lending and non-standardized loans of small banks.

Smaller banks performance with small customers are more likely better than larger banks performance in the market of small business lending.

However, large banks are also slightly involved to make roadways for the small business loans. They are very consistent to lend credit facilities to small business due to informational distance. (Berger et.al 2004)

Consolidation process between the small and large banks slightly improves small business loans rather than more frequently reduces lending opportunities to them.

After this process large banks credit facilities declines due to high interest rates and lack of informational collateral requirements. Small banks offer more credit than large banks. After the consolidation process, small banks becomes big with large banks and their credit facilities to small customers has been splinted and shared by non-bank financial institutions of the regions.