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Digital bank transactions and performance of the Indian banking sector

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  • Imlak Shaikh
  • Mohd Anwar

Abstract

Our study examines the impact of digital bank transactions on the performance of Indian banks. The study aims to identify the digital mode of transaction parameters that influence financial and operating performance and reduce bank costs. A panel data set has been prepared for 2011 to 2020, considering 32 public and private banks. On the prima facie, the share of public sector banks has declined in the digital mode of transactions on the counterpart of private sector banks. It’s evidenced that a 1% increase in the value of Real-Time Gross Settlement (RTGS) and National Electronic Fund Transactions (NEFT) causes a rise of 0.03% and 0.08% in the business per employee, respectively. Indeed, a change in the RTGS and NEFT transaction further explains CASA to Deposit ratio (0.016% and 0.0078%). Also, a change in RTGS shows a prominent effect on the advances (0.7%). Credit card transactions at ATMs and POS have negatively impacted the cost of funds. Our study proposes two practical implications: First, acceleration in promoting RTGS-based transactions is required; consequently, it will enhance the bank’s performance. Secondly, banks should facilitate credit-based digital transactions to lessen the cost of funds.

Suggested Citation

  • Imlak Shaikh & Mohd Anwar, 2023. "Digital bank transactions and performance of the Indian banking sector," Applied Economics, Taylor & Francis Journals, vol. 55(8), pages 839-852, February.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:8:p:839-852
    DOI: 10.1080/00036846.2022.2094880
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    Cited by:

    1. Shilpa Agarwal & Priyanka Malik & Shalini Gautam, 2024. "Analysis of financial performance with regard to digital payment: a case of HDFC bank," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 15(6), pages 2085-2096, June.
    2. Luiz Antonio Bueno & Tiago F. A. C. Sigahi & Rosley Anholon, 2023. "Digital Banks in Brazil: Struggling to Reach the Breakeven Point or a New Evolution Wave?," FinTech, MDPI, vol. 2(3), pages 1-14, June.
    3. Bekir Zengin, 2024. "Unraveling the Nexus between Digital Banking Transactions and Bank Profitability: Insights From Turkey’s Deposit Banks," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 236-248, May.

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