Integrating psychological predictors and relational moderators on loan repayment intentions in India's textile sector

The Indian banking industry is facing an increase in defaults on loan repayments by small and medium-sized enterprises (SMEs). This research investigates the impact of psychological factors, specifically integrity, financial self-efficacy, and materialism, on loan repayment intentions (LRI), with relationship length and proximity serving as moderating variables. This study contributes to the literature by highlighting the role of psychological factors in the financial behaviour model. It further extends the understanding of contextual issues influencing LRI, guided by the extended theory of planned behaviour. In this quantitative cross-sectional study, data were collected using a self-administered questionnaire from 392 SMEs across the textile industry in Tamil Nadu, India. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used for data analysis. The results indicate that integrity has a strong positive correlation with LRI, whereas financial self-efficacy and materialism are not significant. The proximity to banks strengthens the link between integrity and LRI, whereas the relationship length moderates the psychological effects negatively. The findings offer important policy implications and can guide policymakers and financial institutions in developing strategies to strengthen repayment intentions. Given the growing concern over non-performing assets, these insights are timely and highly relevant for ensuring broader financial system stability.