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The Impact of ICT on the Profitability of Indian Banks: The Moderating Role of NPA

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  • Swapnilsingh Thakur

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune 412115, India)

  • Shailesh Rastogi

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune 412115, India)

  • Neha Parashar

    (Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune 412115, India)

  • Pracheta Tejasmayee

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune 412115, India)

  • Jyoti Mehndiratta Kappal

    (Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune 412115, India)

Abstract

The role of Information and Communications Technology (ICT) cannot be ignored in today’s era of working. Its effects are studied in several sectors by various researchers. This study covers the impact of ICT on the profitability of banks. Thirty-three banks are operating in India. A sample period of 10 years (2010 to 2019) was studied. The study also provides insight into how ICT helps the banks’ profitability during and post-COVID-19. A panel data analysis is performed to estimate the results. This study found that ICT adversely impacts banks’ profitability (NIM) in India in a linear association. However, the quadratic association indicates a positive U-curved relationship between ICT and profitability. In addition, the Net of Non-Performing Assets significantly but negatively impacts the connectivity of ICT and profitability. The findings imply that banks should invest in ICT to maximize the long run. The findings have no significant implication on all stakeholders, including policymakers, shareholders, and managers, to consider implementing ICT tools as an essential factor in enhancing a bank’s profitability in the long run. In addition, the level of otherwise lowered investments in ICT cannot be a fruitful step. The current study augments the existing literature on banking by providing novel evidence on the association of ICT with profitability under the influence of NPA. This study argues for the application of ICT in banks in order to increase their profitability. ICT helps the bank maintain transparency, accountability, and even the reach of financial services increases. This situation again leads to the enhancement of the country’s economy.

Suggested Citation

  • Swapnilsingh Thakur & Shailesh Rastogi & Neha Parashar & Pracheta Tejasmayee & Jyoti Mehndiratta Kappal, 2023. "The Impact of ICT on the Profitability of Indian Banks: The Moderating Role of NPA," JRFM, MDPI, vol. 16(4), pages 1-16, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:4:p:211-:d:1106851
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    References listed on IDEAS

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    1. Phan, Dinh Hoang Bach & Narayan, Paresh Kumar & Rahman, R. Eki & Hutabarat, Akhis R., 2020. "Do financial technology firms influence bank performance?," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
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    3. Maha Khemakhem Jardak & Salah Ben Hamad, 2022. "The effect of digital transformation on firm performance: evidence from Swedish listed companies," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 23(4), pages 329-348, May.
    4. Wagner, Wolf, 2007. "The liquidity of bank assets and banking stability," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 121-139, January.
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