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Banks and their technology investment decision are aligned or not – an experience of Indian banks

Banks and their technology investment decision are aligned or not – an experience of Indian banks The purpose of this study is to measure the impact of technology spend on bank profitability focusing on Indian public and private sector commercial banks. The study also assesses the longevity duration of impact for both public and private sector banks. The trade-off is created between the bank’s profitability and technology spent across four identified columns: increase product sales, reduce cost, enhance employee efficiency and optimally use existing resources.Design/methodology/approachThe metrics of four columns converted to measurable 11 financial alarming indicators and impact is again checked on profitability indicator ROE. The data used for empirical analysis for the study are between the year 2003 and 2019, across 12 public and 15 private banks. The interface between technology spend and profitability is measured using panel vector autoregression (VAR) and panel vector error correction model (VECM) and further the link between 11 financial indicators and profitability measures is established using panel data analysis.FindingsThe study found that there is a mixed effect of technology spent on profitability and performance of Indian banks, where public sector banks were found to be more unstructured over private sector banks. The study advises the optimal technology spend strategies to gain enhanced productivity for banking business which are to name a few – planned technology reserves, customer awareness campaigns for products, robust employee-customer motivation policy and customized technologies aligned to existing infrastructure.Originality/valueThe data was original and extracted from the Reserve bank of India website and respective banks’ annual reports. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Facilities Management Emerald Publishing

Banks and their technology investment decision are aligned or not – an experience of Indian banks

Journal of Facilities Management , Volume 19 (1): 20 – Jan 22, 2021

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1472-5967
DOI
10.1108/jfm-04-2020-0020
Publisher site
See Article on Publisher Site

Abstract

The purpose of this study is to measure the impact of technology spend on bank profitability focusing on Indian public and private sector commercial banks. The study also assesses the longevity duration of impact for both public and private sector banks. The trade-off is created between the bank’s profitability and technology spent across four identified columns: increase product sales, reduce cost, enhance employee efficiency and optimally use existing resources.Design/methodology/approachThe metrics of four columns converted to measurable 11 financial alarming indicators and impact is again checked on profitability indicator ROE. The data used for empirical analysis for the study are between the year 2003 and 2019, across 12 public and 15 private banks. The interface between technology spend and profitability is measured using panel vector autoregression (VAR) and panel vector error correction model (VECM) and further the link between 11 financial indicators and profitability measures is established using panel data analysis.FindingsThe study found that there is a mixed effect of technology spent on profitability and performance of Indian banks, where public sector banks were found to be more unstructured over private sector banks. The study advises the optimal technology spend strategies to gain enhanced productivity for banking business which are to name a few – planned technology reserves, customer awareness campaigns for products, robust employee-customer motivation policy and customized technologies aligned to existing infrastructure.Originality/valueThe data was original and extracted from the Reserve bank of India website and respective banks’ annual reports.

Journal

Journal of Facilities ManagementEmerald Publishing

Published: Jan 22, 2021

Keywords: Profitability; Indian banks; Policy framework; Technology investment; Optimal investment

References