Technology Investment and its Effect on the Productivity of Banks in India

By : T Viswanathan , Kartikay Pathak , Nidhi Nair

Page No: 1-10

Abstract
The objective of this paper is to examine whether technology leads to an increase in a bank’s productivity. The main objective of technology investment is to improve the efficiency of operations, reduce employee cost and increase the revenue by offering innovative products and services. There is a trade-off between the cost of investment and the benefits arising thereon. The paper examines whether the investment in technology improves bank productivity. Return on Assets (ROA) and Return on Equity (ROE) are considered as the performance measures (outputs) of banks. The input variables are the ratio of IT investment to net fixed assets, IT to equity, IT to total cost, and IT to operating cost. Overall, 34 public and private banks were considered for the study, and panel data analysis are applied to measure the effect of leading indicators on profitability. The study covers the period between 2010 and 2019. We found there is a positive effect of investment in technologies on the profitability and performance of the Indian commercial banks. However, the effect is more evident in public sector banks than in private sector banks.

Authors :
T Viswanathan : Professor, Symbiosis Institute of Business Management, Bengaluru.
Kartikay Pathak : MBA Student, Symbiosis Institute of Business Management, Bengaluru.
Nidhi Nair : MBA Student, Symbiosis Institute of Business Management, Bengaluru.

 

DOI: https://doi.org/10.32381/PROD.2020.61.01.1