Effect of information technology on performance of Indian banking industry

Abstract

Two most powerful forces affecting each sector of the economy today are the increasing rate of globalisation and advances in information and communication technology. Technological change brings about an increase in per capita income, either by reducing the amount of inputs per unit of output or by yielding more output for a given amount of input. In the last decade, almost all the sectors have gone in for a massive investment in information technology. Banking is one of the industries which involves both high information content of the product and high information intensity of process. The role of information technology in performance of an organization is still a paradox. In this context, the study is an attempt to analyse the effect of information technology on the performance of Indian banking industry. The main objectives of the proposed study are : a) To review the theory and empirics on the relation of technology and performance with special reference to service sector; b) To analyse the structure and structural changes in the Indian banking; c) To explore the trends in nature and quantum of information and communication technology being used in the banking sector in India; d) To evaluate the performance by inclusive measures of performance; and e) To analyse the relation of information technology and performance Data and Methodology is as follows. The present study is based upon the time-series data from 1998-99 to 2010-11. To derive the overall technology parameter, a technology index has been derived using the discrete technology parameters. Performance analysis has been done by computing a performance index .The relation of technology index and performance index has been analysed by using correlation and regression technique on both time- series and panel data. The overall conclusion that emerges from the analysis is that in banking industry, performance is a positive function of information technology, if some other complement conditions like intellectual capital, size and scale of operations