South Asian Journal of Management

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Impact of Information Technology on the Efficiency and Total Factor Productivity of Indian Banks


Affiliations
1 Centre for Innovation and Technology, Administrative Staff College of India, Hyderabad 500082, India
2 Shailesh J Mehta School of Management, Indian Institute of Technology Bombay, Mumbai 400 076, India
     

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Banks in India have invested substantially in Information Technology (IT) in the past decade. Studying the impact of technology inputs on bank performance has been engaging the attention of researchers for some time. However, the research carried out thus far in this regard analyzed the efficiency at the industry level and not at group or sector level. To address this unmet need, this paper examines the effect of IT investments and related assets on the efficiency and total factor productivity of domestic banks, group-wise. For this purpose, panel data of 29 banks constituting the public and private sector banks is analyzed. Results for the study period 2001-02 to 2005-06 indicate that private sector banks had a slight edge over their industry counterparts. However, on the technology front as well as in exercising managerial control, substantial scope exists for improvement, across the sectors. Accordingly, this study provides a few directions for future research.
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  • Impact of Information Technology on the Efficiency and Total Factor Productivity of Indian Banks

Abstract Views: 151  |  PDF Views: 0

Authors

M. Chandrasekhar
Centre for Innovation and Technology, Administrative Staff College of India, Hyderabad 500082, India
Rajendra M. Sonar
Shailesh J Mehta School of Management, Indian Institute of Technology Bombay, Mumbai 400 076, India

Abstract


Banks in India have invested substantially in Information Technology (IT) in the past decade. Studying the impact of technology inputs on bank performance has been engaging the attention of researchers for some time. However, the research carried out thus far in this regard analyzed the efficiency at the industry level and not at group or sector level. To address this unmet need, this paper examines the effect of IT investments and related assets on the efficiency and total factor productivity of domestic banks, group-wise. For this purpose, panel data of 29 banks constituting the public and private sector banks is analyzed. Results for the study period 2001-02 to 2005-06 indicate that private sector banks had a slight edge over their industry counterparts. However, on the technology front as well as in exercising managerial control, substantial scope exists for improvement, across the sectors. Accordingly, this study provides a few directions for future research.