ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By Indian banking sector

The Effect of Information Technology on Banking Efficiency

The effect of information technology in the Indian banking sector is analysed using the stochastic frontier production model to estimate technical efficiency during 2002–18. The evidence suggests that the adoption of IT has a positive and significant impact on the performance of banks. On average, nationalised and new private sector banks are more efficient than foreign ones, while old private sector banks have fallen back in efficiency. While a higher number of bank employees adversely impacts efficiency, greater capital positively impacts banking performance. It is also found that IT-led performance is a promising strategy for a multiplier effect on banking performance. 

Do Foreign Banks Affect Market Power, Efficiency, or Stability in India?

An assessment of foreign bank ownership’s direct and indirect effects on market power, efficiency, and stability in Indian banking produces two main results. First, foreign banks have greater market power, lower marginal cost of the production of bank output, greater price–cost margin, and higher insolvency risk than domestic banks. Second, greater foreign bank presence increases market power, reduces marginal cost of the production of bank output, increases price–cost margin, and reduces inefficiency, insolvency risk and net non-performing loan ratio of an individual bank. The findings have implications for a policy decision on foreign bank presence.