This document discusses technological developments in the Indian banking sector and analyzes the impact of electronic banking (e-banking) on banks' financial performance. It outlines key events in India's e-banking development like the introduction of debit/credit cards, electronic funds transfer, real-time gross settlement systems. The document also examines different studies that have analyzed the relationship between e-banking investments and banks' profitability and productivity, with mixed findings. Committee reports from the Reserve Bank of India on computerization and e-banking in the 1980s-1990s are also summarized.

1. 1
Introduction:-
Indian banking today is witnessing drastic changes. The liberalization of the financial sector
and banking sector reforms have exposed the Indian banks to a new economic environment that
is characterized by increased competition and new regulatory requirement. As a result, there is
a transformation in every sphere of the banks in India, especially in governance, nature of
business, style of functioning and delivery mechanisms. Indian banking is one of the healthiest
performers in the world banking industry seeing tremendous competitiveness, growth,
efficiency, profitability, productivity and soundness especially from last decades. Various
aspects of the Indian commercial banking sectors have been highlighted in recent studies.
Many of them used profitability and productivity index to find the financial performance of the
banking sectors by considering public and private sector banks.
This study analyses the various aspects of financial performance of the Indian commercial
banking sector by considering Trend Analysis, Data Envelopment Analysis (DEA) is used to
analyse the efficiency, Mann Whitney U test for ranking the banks based on their technological
developments, Multivariate Analysis, Regression and ANOVA (Analysis of Variance) in the
estimation of relationships. The E-banking Technology Index (ETI) is used toanalyse the
financial performance of the banks.
Technological Development in Indian Banking Sector:-
Developments in the field of E-banking strongly support the growth and inclusiveness of the
banking sectors by facilitating inclusive economic growth. E-banking improves the front end
operations with back end operations and helps in bringing down the transaction cost for the
customer. Important events in India:-
1. Arrival of card based payments – Debit, Credit card late 1980s and 1990s.
2. Introduction of Electronic Clearing Services (ECS) in late 1990s.
3. Introduction of Electronic Fund Transfer (EFT) in early 2000s.
4. Introduction of RTGS in March 2006.
5. Introduction of National Electronic Fund Transfer (NEFT) as a replacement of
Electronic Fund Transfer / special electronic fund transfer in 2005/06.
6. Cheque Truncation System (CTS) in 2007.
The different types of E-banking services provided by the banks:-
1. Computerization of branches
2. Automated Teller Machines
3. Internet Banking
4. Mobile Banking
5. Tele Banking
6. Electronic Payment System includes
Electronic clearing service
Debit clearing
Credit clearing
o National Electronic Fund Transfer
o Real Time Gross Settlement
o Cheque Truncation System etc....

2. 2
The technological development in the banking sector began with the use of Advanced
Ledger Posting Machine (ALPM) in the late 1980s and now a days bank are started using core
banking solutions for providing better customer services. Over the three decades several studies
have been conducted both at the industry and academic level to examine the impact of E-
banking on financial performance (profitability and overall efficiency) of the banks.
According toN Chandrashekaran, (2009) “It is important for the banks to adapt new
technologies that can brings down the cost of transactions and at the same time bring business
continuity. In the world of banking and finance nothing stands still.
Ballabh (2001)analysed challenges in the post-banking sector reforms. With globalization and
changes in technology, financial markets, world over, have become closely integrated. For the
survival of the banks, they should adopt new policies/strategies according to the changing
environment.
Laxman, et. al (2008) examined that banking industry is undergoing a paradigm shift in scope,
content, structure, functions and governance. The information and communication technology
revolution is radically and perceptibly changing the operational environment of the banks.
Madhavankutty (2007) concludes the banking system in India has attained enough maturity
and is ready to address prudential management practices as comprehensively as possible, which
an integral part of policy is making. Banking in India is poised to enter yet another phase of
reforms once the door opens further to foreign players in 2009. This requires further
improvement in technology management, human resource management and the ability to
foresee rapid changes in the financial landscape and adopt quickly. At present, there is a huge
hiatus between the top management earnings of state owned banks and private, as well as
foreign banks. Banks have to lay down sound risk management strategies and internal capital
adequacy assessment committees to ensure that they do not diverge from the prudential
requirements.
Nair (2006) discusses the future challenges of technology in banking. The author also point out
how IT posses a bright future in rural banking, but is neglected as it is traditionally considered
unviable in the rural segment. A successful bank has to be nimble and agile enough to respond
to the new market paradigm and ineffectively controlling risks. Innovation will be the key
extending the banking services to the untapped vast potential at the bottom of the pyramid.
Shroff (2007) gives a summary of how Indian banking system has evolved over the year. The
Paper discusses some issues face by these systems. The author also gives examples of
comparable banking system for other countries and the lesson learnt. The application of
technology and product innovations is bringing about structure change in the Indian banking
system.
Subbaroo (2007) concludes the Indian banking system has undergone transformation itself
from domestic banking to international banking. However, the system requires a combination
of new technologies, well regulated risk and credit appraisal, treasury management, product
Diversification, internal control, external regulations and professional as well as skilled human
resource to achieve the heights of the international excellence to play its role critically in
meeting the global challenge.

3. 3
Uppal and Kaur (2007) analysis the efficiency of all the bank groups in the post banking
sector reforms era. Time period of study is related to second post banking sector reforms
(1999-2000 to 2004-05). The paper concludes that the efficiency of all the bank groups has
increased in the second post banking sector reforms period but these banking sector reforms are
more beneficial for new private sector banks and foreign banks.
But few addressed it as “IT productivity Paradox” where paradox indicates its negative
correlation between Information technology investment and productivity.
Morrison and Berndt (1990) studied investment on the additional IT contributed to negative
financial productivity. It is pointed out that estimated marginal benefits of investment in IT are
less than the estimated margin cost.
Peffers and mauer, Dos Santos (1993) studied statistical correlation between IT spending and
performance measures such as profitability or stock‟s value. It is found that there is an
insignificant correlation between IT spending and profitability measures, implying thereby that
IT spending unproductive.
Loveman (1994), Barua et al (1991) says that there is no correlation between IT investment
and financial productivity.
Jordon and Katz (1999)says that even the most successful banks offering internet banking
were able to serve only a relatively small share of their customer base with IT channels. It was
difficult to determine whether E-banking has a significant impact on banking performance.
Lichtenberg (1995) found that there is a significant contribution from IT toward financial
growth.
Brynjolfsson and Hitt (1996) cautioned that these findings do not account for the economic
theory of equilibrium which implies that increased IT spending does not imply increased
profitability.
Gotlieb and Denny (1993) studied which deals with the impact of IT on banking productivity.
Computerization is one of the factors which improve the efficiency of the banking transactions.
They concluded that higher performance levels have been achieved without corresponding
increases in the number of employees. It has been possible for public sector banks and old
private sector banks to improve their productivity and efficiency by using IT.
Dhiraj Sharma (2012) found that by using the inter group comparison of the financial
performance of Indian commercial banks based on the usage of technology. The study is
divided into two parts low-technology era and high-technology era. The performance of almost
all the banks under study has tremendously improved in the high technology induction period.
It is found that the correlation between technology induction and financial productivity is
negative though statistically insignificant and low.
Committee Reports:-
Information Technology and the Communication Networking Systems have revolutionized
the functioning of banks and other financial institutions all over the world. Reserve bank of
India has played an important role in implementation of information technology in banking

4. 4
sector. Various researchers have also contributed in this regard. In addition to the work done by
various scholars in the area of Information Technology and Banking organization, RBI had
appointed various committees to work in this area. The reports of various committees are
briefly summarized below:
1) Dr. C. Rangarajan Committee [1983]
Dr.Rangarajan committee had drawn up in 1983-84 the first blue print for computerisation and
mechanisation in banking industry and looked into modalities of drawing up a phased plan for
mechanisation for the banking industry covering period 1985-89. The committee in its report in
1984 recommended introduction of computerisation and mechanisation at branch, regional
office / zonal office and head office levels of banks.
In 1988 another committee was constituted under the chairmanship of Dr.Rangarajan for
making plans for computerisation for the next five years from 1990-94 for the banking
industry. It identified the purpose of computerisation as improvement in customer service,
decision making, housekeeping and profitability. The committee observed that banking is a
service industry and improved efficiency will lead to a faster rate of growth in output and help
to expand employment all around. The work force in the banking industry must, therefore, look
upon computerisation as a means to improve customer service and must welcome it in that
spirit.
2) W.S. Saraf Committee [1994]
In 1994, the Governor, Reserve bank of India had appointed a committee on technology
issues under the chairmanship of W. S. Saraf. The committee looked into technological issues
related to the payment system and to make recommendations for widening the use of modern
technology in the banking industry. The Saraf committee recommended to set up institutions
for electronic funds transfer system in India. The committee also reviewed the
telecommunication system like use of BANKNET and optimum utilization of SWIFT by the
banks in India.
3) Shere Committee [1995]
In 1995, RBI formed a committee under the chairmanship of K. S. Shere, to study all
aspects relating to electronic funds transfer and propose appropriate legislation. The Shere
committee had recommended framing of RBI (EFT system) regulations under section 58 of the
Reserve bank of India Act 1934 (RBI Act.), amendments to the RBI act and to the bankers
book evidence act, 1891 as short term measures and enacting of a few new acts such as EFT
act, the computer misuse and data protection act etc. as long term measures.
4) Narasimhan Committee [1998]
The recommendations of the NC-I in 1991 provided the blueprint for the first generation
reforms of the financial sector. The period 1992-97 witnessed the laying of foundations for
reforms in the banking system. Cataclysmic changes were taking place in the world economy,
coinciding with the movement towards global integration of financial services. Against such
backdrop, the committee NC-II, appointed for the said purpose generated its report in 1998,
provided the roadmap for the second-generation reform process In order to examine the various
issues related to the technology up gradation in the banking sector, the Reserve Bank of India
appointed Narasimhan committee in September 1998. The committee consists of
representatives from the Government, Reserve Bank of India, banks and academic institutions
associated with the information technology. The committee dealt with the issues on technology
up gradation and observed that the most of the technology that could be considered suitable for
India in some form or the other has been introduced in some diluted form or as a pilot project,

5. 5
but the desired success has not been achieved because of the reasons inter-alia lack of clarity
and certainty on legal issues. The committee also suggested implementation of the necessary
legislative changes, keeping in the view the recommendations of Shere committee. The need
for addressing the following issues was also emphasised:-
o Encryption on Public Switching Telephone Network (PSTN) lines
o Admission of electronic files as evidence
o Treating Electronic Funds Transfers on par with crossed cheques / drafts for purposes
of Income Tax etc
o Electronic Record keeping
o Provide data protection
o Implementation of digital signatures
o Clarification on payment finality in case of EFT
Taking into consideration the recommendations by various committees appointed by RBI
And guidelines of RBI, banks have started using IT to automate banking transactions and
Processes.
The NC – II examined the second generation of reforms in terms of three broad interrelated
issues:
(i) Action that should be taken to strengthen the foundation of the banking system.
(ii) Strengthening procedures, upgrading technology and HRD and
(iii) Structural changes in the system.
These cover the aspects of banking policy, institutional, supervisory and legislative documents.
The major recommendations of the committee were strengthening banking system, systems and
methods of banking, structural issues, integration of financial markets, rural and small scale
industrial credit and regulation and supervision.
E-Banking:-
E-banking is the term that signifies and encompasses the entire sphere of technology
initiatives that have taken place in the banking industry. E-banking is a generic term making
use of electronic channels through telephone, mobile phone, internet etc., for delivery of
banking services and products. The concept and scope of E-banking is still in the transitional
stage. E-banking has broken the barriers of branch banking. The second banking sector reforms
gave much importance to the modernization and technology up gradation. The IT Act, 1999
started the speedy process of e-banking.
Evolution of E-bankingE-banking began in UK and USA in 1920s. It became prominently
popular during 1960s through electronic funds transfers and credit cards. The concept of web-
based banking came into existence in Europe and USA in the beginning of 1980s. It has been
estimated that around 40 percent of banking transaction would be done through net.
E-Banking In India
In India E-banking is of fairly recent origin. The traditional approach for banking has been
through branch banking only in the early 1990s there has been start of non-branch banking
services. The good old manual systems on which Indian banking depended upon for centuries
seem to have no place today. The credit of launching internet banking in India goes to ICICI
bank, Citi bank and HDFC bank followed with internet banking services in 1999. Several
initiatives have been taken by government of India as well as the RBI to facilitate the
development of E-banking in India. The government of India enacted the IT act, 2000 with
effect from October 17, 2000 which provided legal recognition to electronic transactions and
other means of electronic commerce. The reserve bank is monitoring and reviewing the legal
and other requirements of E-banking on a continuous basis to ensure that E-banking would

6. 6
develop on sound lines and E-banking related challenges would not pose a threat to financial
stability. A high level committee under chairmanship of Dr. K.C Chakrabarty and members
from IIT, IIM, IDRBT Banks and Reserve bank of India had prepared the “IT VISION
DOCUMENT – 2011-17” for the reserve bank and banks which provides an indicative road
map for enhanced usage of IT in the banking sector.
Implications
The banks were quick in responding to the changes in the industry; especially the new generation banks.
The continuance of the trend has re-defined and re-engineered the banking operations as whole with more
customization through leveraging technology. As technology makes banking convenient, customers can
access banking services and do banking transactions any time and from any ware. The importance of
physical branches is going down. Thus the changes have the following implications
Anywhere Anytime Anyplace Banking
Timeless and Placeless Banking
Banking at Convenience
Dismantling of Physical Structure
Goodbye to Traditional Instruments and Invitation to New Instruments
Disappearance of Conventional Risk and Arrival of New Risks
Leading to Currency-less Monetary system.
Need For the Study:-
1. To know the impact of E-banking on financial performance of the Indian commercial
banks.
2. In literature survey it is found that the large number of studies on financial performance
of Indian commercial banks have been carried out individually and or relating few
parameters of each other. However, there are no holistic studies done by considering E-
banking technology on public and private sector banks by applying Data Envelopment
Analysis (DEA) to analyse the performance.
3. There are more studies relating financial performance at the time of liberalization,
financial performance of pre and post mergers of the banks, but very few studies have
been carried out to know the performance of E-banking technology.
4. The main tenet of this study lies in understanding the impact of E-banking i.e.,before
and after the implementation of E-Banking {pre E-banking (1996-97 to 2000-01) and
post E-banking period (2001-02 to 2012-2013)}.
5. There is a need to carry out a holistic study by using ratio analysis and Data Envelopment
analysis, to study the impact of E-banking on financial performance.
6.
Literature Survey:-
The literature review examines the concept of E-banking in two periods that is Post E-banking
and Pre E-banking period.To know the effect of E-banking in these two periods.The purpose of
the review of literature is to synthesize and summarize the key findings from many of these
studies and show that there is a change in the banking technology in these periods. From this
reviews, it is found that there is a drastically change in the banking technology and the
financial performance of the banks have improved. The reviews are divided into six parts:-
1. Studies related to Banks
2. Studies related to Customers
3. Studies related to Technology

7. 7
4. Studies related to Financial Performance
Studies Related to Banks:-
Dannenberg and Kellner (1998), in their study, overviewed the opportunities for effective
utilization of the Internet with regard to the banking industry. The authors evaluated that
appropriate application of today‟s cutting edge technology could ensure the success of banks in
the competitive market. They evaluated the services of banks via internet as websites provide
sophisticated line of products and services at low price. The authors analyzed that transactions
via internet reduce the risk of data loss to customers, chance to cut down expenses, higher
flexibility for bank employees, re-shaping the banks‟ image into an innovative and
technologically leading institutes, etc. The researchers found that banks could move one step
further by entering into a strategic alliance with internet service provider. So, the bank of
tomorrow stands to be feasible with today‟s technology.
Daniel (1999), in his research paper, described e-banking as the newest delivery channel
offered by the retail banks in many developing countries. The objective of the study was to
analyze the current provision of electronic services of major retail banking organizations in the
UK. The researcher through a questionnaire found that 25% banks in the UK were those
already providing e-banking services, 50% banks were testing or developing such services
while 25% were not providing any e-banking services. Electronic channels, PC, digital TV and
all these provide greater accessibility and services at lower price. To make services more
adaptable, customers should be provided maximum choice and convenience. Restriction and
limitation within organization to operate the services and its market share or strength were
viewed as important to decide and operate the e-banking services.
Sathye (1999), in his research paper, explored the factors affecting the adoption of internet
banking by Australian customers. The author stated that internet and other virtual banking had
significantly lower the cost structure than traditional delivery channels. So, the banks should
encourage customers to use internet for banking transactions. The author also emphasized that
for adoption of internet banking, it was necessary that the banks offering this service made the
consumers aware about the availability of such a product and explain how it adds value to the
other products. The analysis of the study showed that security concerns and lack of awareness
stand out as the reasons for non-adoption of internet banking by Australian customers.
However, internet should be considered as a part of overall customers‟ service and distribution
strategy. These measures could help in rapid migration of customers to internet banking
resulting in considerable saving of operating costs of banks.
Kamesam (2001) studied the changes that took place in the Indian banking industry which
emphasized on technological advancements and profitability in banks. Technology has helped
in centralized data storage with decentralized processing which has helped in reduction of costs
and NPAs. Further, emergence of services such as electronic data interchange (EDI), usage of
smart cards, RTGS, e-commerce; all resulted in increasing the level of profitability and
productivity of banks. The author concluded that in order to reduce crimes, security audit
should be done which will be helpful in improving customer service, increase systematic
efficiency and thus increased productivity and profitability.

8. 8
Unninthan (2001) described the impact of e-banking adaptation on Australian Indian banking
sectors with the help of qualitative and quantitative analysis. The researcher found that
Australia had a strong platform for e-banking growth with 37.7 percent of population willing to
engage in e-banking mostly in urban areas due to literate young working population with
discretionary income. However, India by comparison was played by weak infrastructure, low
PC penetration and consumer reluctance in rural sector. But the professionals are compelling
the government and bureaucracy in the country to support and develop new initiatives at a
faster speed of internet banking. However, in both the countries, e-banking was a successful
strategic weapon for banks to remain profitable in a volatile and competitive market place.
Yu and Boon (2003), in their study, examined the implications of technological advances in
the banking sector in Malaysia. An empirical study was made through a structured
questionnaire. The results highlighted that electronic channels provide alternatives for faster
delivery of banking services to the customers. They described that prior to adoption of
electronic channels like ATMs, kiosks, internet banking; investment costs must be identified to
ensure a more cost-effective and efficient execution of e-channel services. The authors
analyzed the commercial banks in Malaysia via frequency analysis and factor analysis. The
results of the study indicated that banks‟ operation management was the main factor affecting
the success of ATMs, PC and branch banking, while product innovation and knowledge
development factors were found to have most significant effect on the success of banking
kiosks and phone banking respectively.
Lustik (2004), in his study, tried to assess the profitability of electronic banking services for
the banks. In order to analyze the cost structure for traditional and electronic channel
transactions, the author explored the implementation techniques of activity based costing
(ABC). The results of the study indicated that electronic channels provide cost saving for banks
and their clients. The study revealed that with help of ABC technique, banks can reduce and
regulate some costs. It was also found that the decrease in transaction costs after introduction
of electronic channels was slower than expected as existing traditional channels could not be
closed at the same speed as the new electronic channels were introduced.
Studies related to Customer:-
Simon and Victor (1994) examined the reasons why ATM card holders accept or reject
EFTPOS and how they viewed the risk of EFTPOS when compared to credit and cash. The
authors signified that more marketing research and consumer participation was needed in
designing and introducing e-banking services so as to gain more user acceptance. They
signified that in order to reduce fears in the minds of people regarding security, it was required
to introduce risk reduction techniques such as money back guarantee, live demonstration and
free trial to reduce psychological, financial and time loss risk. The researchers suggested that to
prove e-payment methods more successful, it should be based on proper marketing risk, prompt
service support, sufficient legal protection and awareness.
Krishnan (2001) examined the evolution of E-banking in Malaysia and analyzed the various
electronic delivery channels used by local banks to assess the consumer reaction to these
delivery channels. The objective of the study was to present progressive development of e-
banking, electronic delivery channels and some pertinent issues for successful implementation
of E-banking. The study was based on a sample of 300 bank customers, and revealed that 90
per cent of respondents visit their bank branches at least once every month, 63.3 per cent
customers indicated four or more visits to ATMs every month, 20 per cent of the respondents
were using tele-banking services. Only 6.7 percent customers indicated that they would not be

9. 9
interested at all using these services. The results showed that among different channels of e-
banking like mobile banking, internet banking, ATM‟s, PC banking; ATMs were widely
accepted by the people. The researcher also found that bank branches and interaction with
human tellers were still important. 60 per cent of the respondents had internet access at home
and it presents a positive indication of PC banking in future. The author concluded that for
successful implementation of e-banking, the major pre-requisites were legal and physical
infrastructure because e-banking requires a lot of tangible and technological changes in banks.
Pikkarainen et al. (2004) highlighted that electronic banking technology had created new
ways of handling daily banking affairs especially via online banking channel. The authors
adopted technology acceptance model to leverage the online environment. The model indicated
online banking acceptance among private banking customers in Finland through a sample
survey. The findings of the study indicated that perceived usefulness, information on online
banking, security and privacy, quality of service, ease of use on the website were the main
factors influencing online banking acceptance. The authors suggested that banks should now
more concentrate on their e-banking issues so that online banking could become more popular
and adaptive for customers.
Singh (2004) examined the impact of online banking and internet banking. The objective of the
study was to find who uses internet, why and where. It also examined the respondents‟ reasons
for not using banking online. The data was collected from two universities of Kwazunatal. The
researcher analyzed that males use more internet banking than females. Main services used
through websites were inter-account transfer, paying accounts, checking balance/ statement,
communication with the banks, etc. Security was the main issue for not using banking online.
The author suggested that to make online banking more adaptive, websites should be more
attractive, more informative and colourful. Training should be given to customers. Charges of
online facilities should also be less. Banks should advertise and publicize their new products
and services offered on the websites so as to make internet banking more popular among
customers.
Robbins (2006) tried to evaluate whether the adoption of e-banking by the banks affected the
importance of bank location. The study looked into the state of consumer adoption of e-
banking products and growth of e-banking products since 1995. The study also investigated
whether consumer choice had changed as a result of increased e-banking use and how banks
had responded. The study also questioned why location was still important today. The author
focused that e-banking was not a perfect substitute of physical presence of banks in the market.
Consumers want the convenience of e-banking products but only of those banks which fall
close to their place. So, the location of a bank and electronic banking were complementary to
each other.
Studies related to Technology:-
Aggarwal (2003), in his paper, looked for such avenues where e-banking could play significant
role in E-democracy. The author discussed two case studies on the implementation of E-
banking in digital democracy. One was farmer service and other was E-seva. While applying
E-banking in E-democracy, services become more secure, efficient, transparent and fast. It
becomes a win-win situation for all, for banks its low cost, for government its better service,
for business its fast and secure, and for citizens its transparent and efficient. The author
evaluated that e-banking could be used for successful e-banking for online bill payment, online
brokerage, online account management, anywhere banking, etc. The author concluded that e-

10. 10
banking services provide one stop service and informational unit that provides great benefits to
banks, customers, employers and government.
Arora (2003) made an attempt to prove that technology had a definitive role in facilitating
transactions in the banking sector; and the impact of technology had resulted into the
introduction of new products and services by various banks in India. The author discussed
various initiatives taken by the banks to manage transformation and these initiatives had
brought customers the convenience of anywhere, anytime banking. The author concluded that
technology was a facilitator for advancement in the core business of banking and not an end in
itself.
Hogarth and Hilgert (2004) highlighted that electronic banking technology represents a
variety of different services, ranging from common ATM services and direct deposit to
Automatic Bill Payment (ABP), Electronic Transfer of Funds (EFT) and computer banking (PC
banking). The use of e-banking technologies had grown rapidly in the USA, while others have
been adopting it slowly. The authors explored such factors that affect the adoption to adopt
three e-banking technologies and changes in these factors over time. They suggested that e-
banking technologies could not be aggregated into a single category, and thus, “one size fits
all‟‟ would not work. The use of e-banking depends upon how it helps in saving time, decrease
the errors, improving inaccurate accounting and preventing in manipulation of data.
Enders et al. (2006), in their paper, addressed a fundamental problem of the disruptive
innovation theory which lies in the difficulty to categorize new technologies into sustaining and
disruptive innovation. The researchers first discussed basic principles of disruptive innovation
theory, outlined five main strategic diversions that incumbent firms need to address when they
face disruptive circumstance in their industry. They further discussed different e-banking
modes used by Nordea banks, i.e., e-identification, e-signature services, e-billing services, e-
salary function, e-payment function. However, e-banking services should be properly analyzed
for the relativity of disruption.
Krishnamurthy (2006) highlighted the advantages, risks, innovations and convenience
involved in e-banking. ATM, telephone, internet and cluster banking helped banks to deliver
the products more effectively. The author, in his paper, also described operational efficiency of
e-banking. It included basic e-banking, simple transactional and advanced transactional e-
banking. Each site offered a differential kind of services to customers. The author also
commented upon some risks such as loss of secrecy of the customers, financial stability, fraud
prone possibilities, eruption of legal claims, etc. So, the author suggested that banks should
adopt such a strategy in which risks and innovation in banking products move parallel and
simultaneously.
Paul (2006) discussed the role of technology and scope of remote channels, their implication,
strength, weakness, opportunity and threat in banking sector. The author evaluated that IT
development affects banking in two ways. Firstly, it had contributed in reduction of costs
associated with management of information by replacing paper based and labour intensive
methods with automated processes. Secondly, it had modified the ways in which customers had
access to banks‟ services and products. The researcher found that the introduction of RTGS,
NDS, and CFMS had increased the safety, security, efficiency and soundness in payment
system. Lastly, the author revealed that technology had a great impact on the structure of
banking sector in the form of bank branches, bank personnel and alliance.

11. 11
Raghvan (2006) highlighted the transformation in the banking sector due to effect of
information technology, tele-communication and electronic data processing. He also attempted
to visualize the perception of banks in India in the year 2020 taking into account the impact of
internet banking, ATMs, EFT on the performance of banks and initiative taken in
liberalization, privatization and globalization. He also evaluated the future of online and
internet banking. Due to tangible and proven benefits, automation of manual processes; online
and internet banking was slated to increase manifold. Ho also evaluated that currently an
estimated 46 lakh net users were online and this was estimated to touch 160 lakh by March
2008. Furthermore, he analyzed the projected indicators of banks in India in 2020 with special
emphasis on internet banking, online banking and electronic banking.
Raja et al. (2008) evaluated the impact of e-payment system on the business opportunities.
They identified that due to the growth of internet users, various electronic payment
mechanisms had been developed to cater the diversity of applicants. The researchers classified
the e-payments into three main groups, namely, cash like systems, cheque like systems, and
hybrid systems which were further classified into credit cards, debit cards and electronic
cheques. They identified three main issues related to e-payment that were security issues, low
interest among businessmen, and heavy reliance on traditional payment methods. They also
analyzed that there were technical and cultural problems which hinder the path of e-payments.
However, to make e-payments more effective, security threats should be reduced; and people
should be realized that traditional payment methods were more time consuming than electronic
payment methods. They should also be realized that plastic card payments were more
convenient, easier and more secure than cash or cheques.
Sarangapani and Mamtha (2008) studied the impact of Information Technology on banking
sector and its security related aspects. Due to recent developments in banking industry and with
introduction of Basel-I and II implementation; customers are more demanding now and it
requires innovation in banking services. The researchers found that now the banking industry
has been more customer-oriented with unlimited market place, extensive product breadth and
e-enabled services provided to the customers. The IT initiatives in banking industry have
resulted into reduction of time. Introduction of negotiated dealing system, screen based trading
and RTGS for online settlement of inter-bank transfers of fund had also resulted into safe,
secure and quick movements of funds. The authors also studied e-security aspects of banking
which pose damage and threat to the existing e-banking system. It includes unauthorized access
to computer system or network, stealing information, e-mail bombing, data diddling, denial of
service, viruses, etc. The authors concluded that existing legal framework was adequate to meet
the challenges of e-banking; and it had become essential to create awareness of e-banking
among customers, banks and society. Different attempts have been made by the researchers to
give a close look to the concept of electronic banking. The review of literature provided that e-
banking services have a negative impact on banks‟ profitability in the short run because of
increased capital costs on account of technical and electronic infrastructure, training their
employees and also to create the environment where the banks can electronically operate
smoothly. However, these services have a positive impact on the profitability of banks in the
long run. Despite the increasing importance of E-banking services, the research pertaining to E-
banking in Indian context has been limited. While concluding, it can be said that e-banking
services are complementary to the existing branch network and not a substitute to it.
Studies related to Financial Performance:-
But few studies say that for decades, it has been a matter of debate whether
Technology/Information Technology (it) provides better financial results. To date there is no

12. 12
conclusive evidence that spending on it improves financial performance. The scholars call it
the „it Productivity Paradox.‟ The term „paradox‟ indicates a negative correlation between it
investments and productivity. On similar lines, studies by
Strassman (1990) have also concluded that there is an insignificant correlation between it
spending and profitability measures, which means it spending is unproductive. There are, on
the other hand, studies which show that there is no correlation between IT investment and
financial productivity.
Brynjolfsson (1993); Wilson (1993), analyzed thatMost of these firm-level studies have been
restricted to the manufacturing sector (that too, outside India), in large part owing to lack of
firm-level data from the service sector. There are studies which have drawn on the statistical
correlation between IT spending and profitability or stock value for their analyses and they
have concluded that the impact of it on productivity is positive It is apparent that most of the
studies relating to the contribution of it towards productivity have been restricted to the
manufacturing industry. The problem is particularly relevant to the banking industry, which is
the focus of the present study. In India, there are not many studies that have focused on it
contribution in the banking sector.
Mariappan (2006) found that the it revolution has brought stunning changes in the business
environment. No other sector has been influenced by advances in technology as much as
banking and finance, as a result, the Indian banking has a totally new face today.
Kamakodi (2007) examines how computerization has influenced the banking habits and
preferences of Indian bank customers and what factors influence these preferences. He found
that change of residence, salary account and non-availability of the technology based services
were the three main reasons for shifting to another bank.,
Patnaik (2004) found that shared atms are taking place and they are mutually beneficial. This
mushrooming new dimension of shared ATMs has increased the non-interest income of the
banks. This is the most popular e-channel and widely used in all the bank groups.
Paul and Mukherjee (2007) explained that cash management in ATMs is a new concept
which facilitates the banks to source cheaper funds and serve its clients more efficiently.
Yet, there have been a number of studies which have focused on the financial performance and
efficiency of the banks in the recent past. The studies reveal that the profitability of Indian
banks has increased since the second generation banking reforms and, among the several bank
groups, the foreign and private sector banks are performing well as compared to the public and
nationalized banks in India (Sarkar, Sarkar and Bhaumik 1998; Muniappan 2002; Sooden
and Bali 2004; Aggarwal 2005; Arora and Verma 2005; Bhaskar 2005; Madhavankutty
2007; Uppal and Kaur 2007; Kumar and Sreeramulu 2008).
Another significant area which has emerged recently and been explored by the researchers is
that of risk management in the banks.
Habbar (2004) emphasizes that managing technology is a key challenge for the Indian banking
industry. Banks have enhanced their networks and communication infrastructure to reap the
full benefits of computerization. E-banking is fast catching up. There is a great need for trust,
privacy and confidentiality. Only sound corporate governance would lead to effective and

13. 13
meaningful banking (LakhsmiNaraynan 2004). Narayanasami (2005) states that Indian
banking is in a better position with respect to technology, capital adequacy, credit management,
risk bearing capacity, international competitiveness and contribution to the national economy.
For global competition, Indian banks will have to gear up to meet stringent prudential capital
adequacy norms under Basel i and ii accords (Subbaroo 2007).
Bhattacharya et.al (1997) &Sathye (2003) have measured efficiency of the banks using the
mathematical programming technique of data envelopment analysis (DEA). It shows that
analysis to the traditional financial ratios to measure performance and efficiency mainly
because of ready availability of data there on.
A1 – Tamimi (2010) &Aburime (2005) the performance of commercial banks can be affected
by internal and external factors, these factors can be classified into bank specific factor
(Internal) and macroeconomic variables. The internal factors are individual bank characteristics
which affect the bank‟s performance.
Nzongang and Atemnkeng in olwency and shipho (2011) balanced portfolio theory also
added additional dimension into the study of bank performance. It states that the portfolio
composition of the banks, its profit and the return to the shareholders is the result of the
decisions made by the management and the overall policy decision.
Athanasoglou et.al (2005) the internal factors include bank size, capital, management
efficiency and risk management capacity. The same scholars contend that the major external
factors that influence bank performance are macroeconomic variables such as interest rate,
inflation, economic growth and other factors like ownership.
Vincent OkothOngore&GemechuBerhanuKusa (2013) studies on moderating effect of
ownership structure on bank performance are scanty. To fill this glaring gap in this vital area
of study, the author used linear multiple regression model and generalized least square on panel
data to estimate the parameters. The findings showed that bank specific factors significantly
affect the performance of commercial banks in Kenya, except for liquidity variables. The
moderating role of ownership identity on the financial performance of commercial banks was
insignificant.
The Data Envelopment Analysis (DEA) method uses linear programming Techniques to
measure efficiency of production units that produce multiple outputs. Several studies use this
approach to measure efficiency of Indian banks like Bhattacharya, Lovell and Sahay (1997),
Sathye (2003), Das and Ghosh (2006), Kumar and Gulati (2009). However this method failed
to capture the effect of random shocks to the production system.
The existing studies that use stochastic frontier analysis (SFA) to measure different types of
efficiency of Indian banks either focus on measuring cost and profit efficiency in monetary
terms to avoid the problem of considering multiple output (Sensarma (2006), Zhao et al (2010))
or measure technical efficiency using a simple production model with one type of output only
(Shanmugam and Das (2004)). In reality bank produce many financial services (output) using a
given set of inputs and none of the existing studies use the stochastic frontier analysis to
measure technical efficiency of banks.
Berg et al (1993) made an attempt to compare banking efficiency in the Nordic countries. A
non-parametric Data Envelopment Analysis and Malmquist productivity index have been
adopted to measure the efficiency and productivity and productivity differences among

14. 14
countries. A total of 779 banks were considered for the analysis and necessary information
were collected from the official bank statistics in Finland and Norway and published annual
accounts reports in Sweden for the year 1990.The study at individual country analysis
identified that the efficiency spreads between banks were most important in Finland and
Norway and least important in Sweden.
Lozana-Vivas (1998) examined the effectiveness of deregulation in improving the cost
efficiency of the Spanish banking industry by adopting Thick Frontier and Data Envelopment
Analysis methods. Separate panel data for the years 1985-91 of 88 Spanish commercial banks
and 55 savings banks have been considered for analysis. The study identified that deregulation
was associated with a decrease in relative cost efficiency for commercial banks but no change
for savings banks and in both types of institutions operating with cost inefficiency which was
almost completely composed of technical rather than allocative.
Drake (2001) investigated the efficiency and productivity change in UK banking by using Data
Envelopment Analysis and Malmiquist productivity index. A panel data set consists of 9 UK
banks for analysis has been obtained from the annual reports of the respective banks and
statistics published by the British Banks Association for the period 1984-1995. The analysis
revealed that increasing returns to scale were evident for smaller banks while decreasing
returns to scale for large-scale throughout the sample period. Malmiquist productivity indices
suggested that UK banks have exhibited positive productivity growth over the period. All U.K
banks have been experienced with positive technical change due to increasing competition and
product diversity.
Gaps Identified:-
There is minimal research in understanding the interaction among the pre E-banking
period and Post E-banking period.
There are more studies related to customer perception, employee perception, service
quality, security and awareness of the banking technology but very few studies related
to financial performance of the banks by considering E-banking technology.
There are comparatively more studies relating to financial performance based on the pre
and post-merger reform period, financial performance at the time of liberalization, but
very few studies relating to financial performance based on Pre E-banking and Post E-
banking period.
The study on the impact of E-banking on Financial Performance of Pre E-banking and
Post E-banking by application trend analysis Model will facilitate the researchers and
practitioners to know more about the changes in the banking technology in these two
periods.
There are more studies related to financial performance of the banks based on Data
Envelopment Analysis and Stochastic Frontier Analysis, but very few studies related to
Data Envelopment Analysis (DEA) to analyse the efficiency of profitability of the
banks based on E-banking technology in India.

15. 15
Present Research Work:-
As the survey of literature strongly identified the
the direction of research as well as the missing links in E banking there is a great scope to study
further in this direction. The methodology, literature work and data available till recent period
may sharpen the policy prescriptions. So, study of this kind continues as an effort in the
understanding and analysing of eventualities in technology and further to fix the lapses so as to
gain the best out of E Banking as a part of fine tune in new policy.
Research Methodology
Research Method
There is a strong data base and statistical tools available with RBI and organisations like CMIE
provide extended data base serve as the best in the estimation process. However, scientific
approach in the whole process is need to be formulated to avoid the bias and hasty
generalisations.
Research Enquiry
The present banking environment in the global world with unstable economy and constant
changes taking place in the technology of the banks,there is need to look for new tools and

16. 16
processes . The liberalised era witnessed many changes in the financial sector and the
introduction of E-banking technology served to boost the performance and creativity of the
banking world. Questions of the following necessitate the present study.
1. Would E-banking Technology help the Bank to manage the workplace challenges of
today?
2. Does the financial performance of Indian commercial banks can be measured by using
productivity and profitability efficiency?
3. Are there any changes in Profit Maximization and cost of transaction of the banks after
adoption of E-banking Technology?
Variables for constructing E-Banking Technology Index (ETI)
The variables considered for developing an E-banking technology Index (ETI) which is the
combination of two sub – indices such as Bank Disclosure Attribute Index (BDAI)
developed by (Charumathi B et.al) and E-banking technology Index (ETI).
E-banking Technology Index Variables
Sl.No. Name of the Index Variables Considered
1 Bank Disclosure Attribute Index
(BDAI)
1. General Attribute
2. Financial Attribute
3. Investor Attribute
4. Corporate Governance
2 E-Banking Technology Index 1. No., of computerized branches / Total
branches
2. No., of ATMs / Total Branches
3. No., of Mobile Banking / Total
Branches
4. No., of Internet Banking / Total
Branches
5. No., of Tele banking / Total Branches
As the data related to the various payment gateways (facilitated by E-Banking) were available
only for the banking industry as a whole, the same could not be included for construction of
ETI. However, the implementation status of various payment gateways is analyzed and the
variables considered are:-
Variables for payment Gateway variables considered
Sl. No. Name of the Payment Gateway Variables
1 Paper Based Vs ECS Debit Clearing
Credit Clearing
2 Paper Based Vs NEFT / EFT Debit clearing
Credit Clearing
E-Cheques
3 Paper Based Vs RTGS Inter Bank Transaction
Intra Bank Transaction
4 Paper Based Vs MICR CTS

17. 17
Variables for Analyzing the performance
The analysis is made on the basis of available information and divided into two parts:-
1. First part explains the trend and growth in selected ratios of productivity and
profitability of E-banking technology.
2. Second part explains the impact of technology on productivity and profitability by
using DEA Analysis.
Profitability:-
Profitability is a rate expressing profit as a percentage of total assets or sales or any other
variable to represent the relationship. In fact, there may be various dimensions of profitability
analysis. A large number of ratios can be used in order to measure the banks profitability as:
1. ROA
2. ROE
3. PM
Return on Assets = Net Income/Total Assets: ROA is the ratio of a company's annual
revenues to its total assets and always displayed as a percentage. Return on Assets measures
and displays how lucrative a company could be in comparison to the firms‟ total assets. Also
for management efficiency, ROA gives a detailed idea as to how it uses its fixed assets to
produce incomes.
Return on Equity = Net Income/Share holder‟s Equity: Return on equity is another
profitability ratio that that evaluates profitability of any company, especially for big sized
company, by giving a detailed information of how much income or earnings a company makes
with the total money shareholders of that company invested. The ratio is always in percentage.
Profit Margin = Net Income/Total Operating Income: This ratio calculates the level of dollar
worth in sales a company actually retains in income. It is very of use when evaluating different
companies in the same scale. We also know that when profit margin is high, it shows that the
company is a very profitable one, and it also indicates that the company has an enhanced
control of its expenditures as compared with those they are competing with.
Productivity
Productivity is a vital indicator of economic performance. In simple words, it is output-input
ratio. It is a relationship between given output and the means used to produce it. Banking is
primarily a service industry. There are number of indicators to measure the productivity of
banking sector. Measures of productivity at bank or industry level may differ from the
indicators of productivity at branch level.
Productivity is affected by man power, mechanization, system and the procedures, costing of
operations, customer services and various external aspects. There are number of ratios of
compute productivity as:
Per Employee Indicators (Labour Productivity):
1. Deposit per employee
2. Business per employee
3. Net profit per employee
Per Branch Indicators (Branch Productivity):
1. Deposits per branch
2. Business per branch
3. Net profit per branch

18. 18
The performance indicators and variables considered bank performance indicators are:-
Sl., No., Performance Indicators Variables Considered
1 Profitability (Financial performance) ROA
ROE
PM
2 Employee Productivity (Non Financial
Performance) (Productivity)
Branch Productivity
Number of employees
Business per employees
Net Profit per employees
Number of branches
Business per branches
Net Profit per branches
Dependent
Variables
ROA
ROE
PM
Deposit per Employees
Business per employees
Credit per employees
Deposit per branches
Business per branches
Credit per branches
The ratio of average net income to total asset
The ratio of average net income to average equity
The ratio of net income to total operating income
The ratio of The amount of Total deposit to no., of
Employees
The amount of total business / number of employees
The amount of total credit / number of employees
The amount of deposit / number of branches
The amount of total business / number of branches
The amount of total credit / number of branches.
Independent
Variables
X1 Computerized
Branches
X2 ATMS
X3 Mobile Banking
X4 Internet Banking
X5 Tele Banking
X6 VOL OF CUS
X7 VOL of TRAN
X8 BDAI
Number of Computerized branches / Total Branches
Number of ATMs / Total Branches
Number of Mobile Banking / Total Branches
Number of Internet Banking / Total Branches
Number of Tele Banking / Total Branches
The ratio of Number of Customer / Total Cost
The ratio of Transaction per day / Total Cost
Dummy for the banks who have BDAI
E-Banking Technology Index (ETI) Model specification:-
ETI = [(number of computerized branches / Total Branches) + (number of ATMs / Total
Branches) + (number of Mobile Banking / Total Branches) + (number of Tele-banking / Total
Branches) + (number of Internet banking / Total Branches)] X 100
Research Objectives
1. To analyse the financial performance of banks after adoption of E-banking technology.
2. To know the impact of E-banking in pre and post technology period in terms of wages,
expenditure and cost of transaction.
3. To estimate the impact of E-banking technology in terms of efficiency (profit and
productivity) of bank groups operating in India.
4. To empirically evaluate the status of technology implementation among the bank
groups operating in India by using E-banking technology index. (ETI)

19. 19
5. To analyse the impact of technology on efficiency in terms of cost and profit by using
Data Envelopment Analysis (DEA) of public and private sector Indian commercial
banks.
6. To empirically evaluate the status of technology on the performance using (financial
and non-financial performance) of bank groups operating in India.
7. To analyse the overall performance of banks in two period i.e., Pre and post E-banking
period
Research Hypothesis
1. H0:- The financial performance of banks adopting E-banking is not different from those
of banks not to adopt E-banking in terms of Size, profitability, asset quality, operating
capability, financing, diversification and cost of operation.
2. H0:- The financial performance of banks adopting E-banking in pre E-banking period is
not different from those banks not adopted E-banking in terms of wages and
expenditure.
3. H0:- The financial performance of banks adopting E-banking in post E-banking is not
from those of banks adopted E-banking in terms of wages and expenditure.
4. H0:- The financial performance of banks adopting E-banking in pre E-banking period is
not different from those not adopted E-banking in terms of profitability.
5. H0:- The financial performance of banks adopting E-banking in pre E-banking period is
not different from those not adopted E-banking in terms of productivity.
.
6. H0:- The financial performance of banks adopting E-banking is not different from those
of banks adopted E-banking in terms of Cost of Transaction.
Population
Sl.No., Ownership and Category No., of Banks as on
March 31 2013,
1 Public Sector Bank
SBI and its Associates
Nationalized Banks + Other public sector Bank
1 + 5 = 6
19 +1 = 20
2 Private Sector Bank
New Private Sector Bank
Old Private Sector Bank
7 = 7
11 = 11
Total 44
RBI Website
Period of the Study
For this study, the time period divided into two parts because in the first period, IT was not
mature but after 2001, IT is becoming mature in the banking sector. Before the IT Act, there
was very limited computerization and there were no e-delivery channels and that is why
considered this period as pre-e-banking period (1996-2001). After the IT Act, almost all the
banks, started to use e-delivery channels that is why I have considered this period as post E-
banking period
(A) Pre E-banking period (from 1996-97 to 2000-01)
(B) Post E-banking period (from 2001-02 to 2012-13)

20. 20
Sources of Data
The source of data is Secondary Data obtained from the Annual Reports of the banks, Balance
Sheet, RBI Publication, CMIE and websites of the various banks. Experts in the field were also
approached for the purpose of discussion to understand the problem in right perspective the
work of academicians on the subject has also been consulted for the purpose of analysis.
Data Envelopment Analysis:-
DEA is a non – parametric approach used for evaluating the relative efficiency of similar units,
referred to as decision making units developed by (Charnes, cooper and Rhodes (1978)). In a
view of banking activity as a transformation of particular set of inputs () into a particular set of
outputs (ROA, ROCE and RONW) the relative efficiency of banks can be analyzed by using
DEA. DEA is non-parametric, deterministic methodology for determining relatively efficient
production frontier, based on the empirical data on chosen inputs and outputs of a number of
entities called Decision making units (DMUs). From the set of available data DEA identify
reference points (relatively efficient DMUs) that define the efficient frontier (as the best
practice production technology) and evaluate the inefficiency of other, interior points
(relatively inefficient DMUs) that are below that frontier.
Compared to the regression analysis, DEA provides an alternative approach. The DEA is based
on external observations; while in the regression approach a single estimated regression
equation is assumed to apply to each observation vector, DEA analyse each vector DMUs
separately, producing individual efficiency measures relative to the entire set under evaluation.
The main advantage of DEA is that unlike the regression analysis, it does not require a prior
assumption about the analytical form of the production function. Instead, it constructs the best
practice production function solely on the basis of observed data and therefore the possibility
of misspecification of the production technology is minimized.
On the other hand, the main disadvantage of DEA is that the frontier is sensitive to extreme
observations and measurement errors (the basic assumption is that random errors do not exist
and that all deviations from the frontier indicate efficiency).
Multivariate Analysis:-
Although the univariate analyses depict a tremendously higher performance by banks in the E-
banking group(s) relative to non-E-banking group, however it is hard to make any conclusive
statement on the actual impact of the E-banking adoptions on bank performance without a
multivariate analysis. Here a multivariate regression model is estimated to investigate whether
there is a link b/w offering E-banking and bank performance.
The focus of the investigation is to see if E-banking has an effect on bank performance. A
dummy variable (EBANKING) was created that takes a value of 1 if the bank has adopted E-
banking activities; otherwise it takes a value of zero. The co-efficient associated with this E-
banking adoption dummy will indicate the possible association between the E-banking
adoption by banks and their overall performance. The other variables the bank‟s performance
have been developed from the available literature on determinants of bank‟s performance
(eg.,Athanasolou et.al 2005, Shanmugam and Das 2004). Return on asset, return on equity, are
used as performance measures. Various bank characteristics are used as proxies for the bank‟s

21. 21
internal measures eg., size, capital, expanses management. Ratios and bank ownership
dummies while macroeconomic indicators are used to represent the external measures.
A linear equation, relating the performance measures to a variety of financial indicator is
specified. Following model has been used to examine the relationship between the performance
of banks and adoption of E-banking after controlling the other variables affecting the
performance.
Yit = c + α*EBANKINGit + ΣβiXit + €it
Where, Yit presents profitability and bank i at time t,
C is a constant term
Xit are explanatory variables.
€it is the disturbance term the subscript i indexes bank level observation sand the subscript t
indexes time in years. EBANKING is a dummy variable equal to 1 to E-banks and the co-
efficient α provides the main static test. A statistically significant value for α indicates a
financial performance gap between the E-banks and the non – E-banks at the means of the data.
The co-efficient are estimated by employingregression on a sample of all banks as well as
sample of different categories of banks.
The explanatory variables with their labels and definitions that have been used to examine the
relationship between the performance of banks and adoption of E-banking.
Software and Packages
The software and packages used for this study include SPSS 21.0, Frontier 4.1 developed by
Tim Coelli (2005).
Statistical Analysis
In addition to the trend analysis parameters have been tested statistically with the help of
following statistical tools:-
Multivariant Analysis
Regression
ANOVA (Bank wise and Year wise difference among the banks)
Testing of hypothesis by Mann Whitney U Test.
Utility of the study
Academia: Add to the body of knowledge which can be used for banking and further
research.
Tentative Chapter Scheme
The probable chapter scheme for the thesis would be as follows, please note this scheme is
tentative and is amenable to changes based on recommendations from the guide and other
experts.
1. Introduction
The first chapter includes introduction, statement of the problem, rationale of the study,
objectives of the study, variables, hypotheses, research methodology (population, sample,
research models, tools and techniques, software and packages used) period of study, limitations
of the study and chapterization.
2. Review of Literature
The second chapter includes the review of work related to the impact of technology on the
performance of firms in general and banks in particular.
3. Evolution and Recent Trends in Banking Technology

22. 22
The third chapter traces the evolution of technology applications in banking and presents the
recent trends in banking technology.
4. Status of IT implementation among bank groups in India – An Empirical Evaluation
The fourth chapter presents the empirical evaluation of the status of IT implementation among
the bank groups operating in India by using E-banking Technology Index (ETI). Various
statistical tools such as correlation, regression, ANOVA and Mann Whitney U Test is used to
rank the banks.
5. Impact of E-banking on the financial Performance of Indian banking industry
This chapter presents the analysis and interpretation of data related to the effect E-banking on
the financial performance/Index on the performance of banks using ratio analysis. The various
statistical tools such as correlation and regression are used.
6. Impact of E-banking on the financial Performance of Indian Banking Industry
This chapter presents the analysis and interpretation of data related to the financial performance
of banks in terms of cost and profit using Data Envelopment Analysis. Impact of E-banking
investments on financial performance and its efficiency is also found. ANOVA is used to find
out the bank-wise and year-wise difference among the banks‟ cost inefficiency and estimates
which is arrived by using the software FRONTIER 4.1.
7. Summary of Findings, Suggestions and Conclusion and possibility for future research
This chapter summarizes the findings and offers suggestions to improve the impact of E-
banking on the financial performance of Indian banking industry than ever before.
Brief CV
Name: Jayashree Narayan H.T
Education:
College / University Degree Year
MVJ College of Enigneering
(VTU)
MBA (Finance) 2006-2008
Indian Academy College,
(Bangalore)
BBM (Finance) 2003-2006
Worked as a Lecturer in Vivekananda Institute of Technology for 1 Year.
Plan of Action for 2 to 3 Years
a) The framework will be framed by having discussions with the guide and bank managers.
b) Tool will be developed based on:
Available Balance sheet and RBI Publications
Taking items from available balance sheet and modifying for our purpose

23. 23
Developing new items
Testing the Hypothesis based on Mann Whitney U Test for ranking the banks
based on the technology.
c) Ratio analysis is used and Data Envelopment analysis is used to analyse the efficiency of
the banks. Correlation, Regression and ANOVA is used.
d) Using E-Banking Technology Index (ETI) to analyze the performance
e) Actual study: collecting the B/S from the banks and analyzing it.
f) Analysis to find out the interrelation among the parameters.
Tasks Till Dec‟13 Jan‟14 to
June‟14
July‟14 to
Dec‟14
Jan‟15 to
June‟15
July‟15 to
Sep‟15
Further
Literature
Review and
Theoretical
and
Conceptual
Framework
Finalization
Development of
measuring tool,
Testing of tool,
ratio analysis
Data
collection,
having
discussions
with the
experts.
Analysis and
Interpretation
Thesis
writing and
Review
Reference:-
Al-Tamimi, H., Hassan, A. (2010). “Factors Influencing Performance of the UAE Islamic and
Conventional National Banks.”, Department of Accounting, Finance and Economics, College
of Business Administration, University of Sharjah.
Abu rime, U. (2005). “Determinants of Bank Profitability: Company-Level Evidence from
Nigeria. Nigeria”, University of Nigeria, Enugu Campus.
Aggarwal, M. (2005). “Liberalization‟s Effect on Operational Productivity of Commercial
Banks in India”, IBA Bulletin 27 (6): 33–40.
Aggarwal, N. (2003). “E-banking for E-democracy”, Journal of Internet Banking and
Commerce, Vol.8, No.1.Available atwww.arraydev.com/commerce/JIBC/0306 -05.htm,
Accessed on 11/07/13.
Arora, K. (2003). “Indian Banking: Managing Transformation Through Information
Technology”, IBA Bulletin, Vol. 25, No. 3, March, pp.134- 138.
Arora, U., and R. Verma. (2005). “Banking Sector Reforms and Performance Evaluation of
Public Sector Banks in India”, Punjab Journal of BusinessStudies 1 (1): 11–25.

24. 24
Athanasoglou, P.P., et.al (2005). “Bank-specific, industry-specific and macroeconomic
determinants of bank profitability”, Working paper, Bank of Greece. 1(1), 3-4.
Ballabh, J. (2001). “The Indian Banking Industry: Challenges Ahead”, IBA Bulletin, 23
(4 & 5): 8-10.
Barua, A., C. et.al. (1991). “Information Technology and Business Value: An Analytical and
Empirical Investigation”, Working Paper, University of Texas, Austin, TX.
Berg, S.A., et. al (1993). “Banking efficiency in the Nordic countries”. Journal of Banking and
Finance 17, pp371-388.
Bhaskar, P. V. A. (2005). “Trends towards Universal Banking with Strategic Alliances”, IBA
Bulletin 27 (3): 8–11.
Bhattacharyya, et.al (1997).“The impact of liberalization on the productive efficiency of Indian
commercial banks,” European Journal of Operational Research, 98 (2), 332–345.
Brynjolfsson, E. (1993). “The Productivity Paradox of Information Technology”,
Communications of the ACM 35 (7): 66–7.
Brynjolfsson, E., and L. Hitt. (1996). “Paradox Lost? Firm-Level Evidence on the Returns to
Information Systems Spending”, Management Science 42 (4): 541–58.
Chandrashekaran (2009), Chairman, CII Banking Tech Summit.
Daniel, E. (1999). “Provision of E-Banking in the Republic of Ireland”, International Journal of
Bank Marketing, Vol.17, No.2, pp.72-82.
Dannenberg, M.; and Kellner, D.(1998). “The Bank of Tomorrow with Today‟s Technology”,
International Journal of Bank Marketing, Vol.16, No. 2, pp. 90-97.
Drake, L.,(2001). “Efficiency and Productivity change in UK banking”. Applied Financial
Economics 11, pp 557-571.
Das, Abhimaan and SaibalGhosh, (2006).“Financial deregulation and efficiency: An empirical
analysis of Indian banks during the post reform period,” Review of Financial Economics, 15
(3), 193–221.
Dhiraj Sharma, (2012). “Does Technology Lead to Better Financial Performance”, Managing
Global Transition, 10 (1): 3-28.
Dos Santos, B. L., et.al. (1993). „The Impact of Information Technology Investment
Announcements on the Market Value of the Firm” Information Systems Research 4 (1): 1–23.
Enders, A. et.al (2006). “The Relativity as a Sustaining Innovation in the Banking Industry”,
Journal of ElectronicCommerce Research, Vol.7, No.2, pp. 67-76.

25. 25
Gupta P.K. and Jain Ashima, (2010). “Factor Modelling For Indian Private Sector Bank‟s
Problem Loans”, InternationalConference On Applied Economics Publishing.
Habbar, R. (2004). “Building Trust in E-Banking”, Vinimaya24 (3): 14–23.
Hogarth, M.J.; and Hilbert, A.M. (2004).“Adoption of E-banking Technologies by U.S.
Consumers”, International Journal of Bank Marketing, Vol. 22 No. 4, pp. 238-259.
Jordan, J., and J. Katz. (1999). “Banking in the Age of Information Technology”, Regional
Review 9 (2): 39–50.
Kamakodi, N. (2007). “Customer Preferences on E-Banking Services: Understanding through a
Sample Survey of Customers of Present Day Banks in India”, Banknet Publications 4:30–43.
Kamesam,V. (2001). “Information Technology Challenges to Banks”, RBI Bulletin, Vol. 55,
No.11, November. pp. 1225-1228.
Krishnan, B. (2001). “Electronic Banking in Malaysia: A Note on Evolution of Services and
Consumer Reaction, http/www.arraydev.com/commerce/JIBC 2005-08/
Krishnan.try.asp.Accessed on 16/08/13.
Krishnamurthy, M. (2006). “Product Innovation in Banking Industry”, Professional Banker,
Vol. 8, No. 6, pp. 51-55.
Kumar et.al, (2009). “Did efficiency of Indian public sector banks converge with banking
reforms?” International Review of Economics, 56 (1), 47–84.
Kumar, S., and M. Sreeramulu. (2008). “Employees‟ Productivity and Cost: A Comparative
Study of Banks in India during 1997 to 2008”, ReserveBank of India Occasional Papers 28 (3):
35–50.
LakhsmiNaraynan, P. (2004). “Corporate Governance of Banks”, IBA Bulletin26 (7): 14–7.
Laxman R., et.al. (2008). “Changing Dimensions of Banking Sector in India”, edited book by
R.K Uppal: Paradigm Shift in Indian Banking, New Delhi: 70-80.
Lichtenberg, F. (1995). “The Output Contributions of Computer Equipment and Personnel: A
Firm Level Analysis”, Economics of Innovation andNew Technology 3 (4): 201–17.
Loveman, G.W. (1994).“An Assessment of the Productivity Impact of Information
Technologies”, In Information Technology and the Corporationof the 1990s: Research Studies,
edited by T. J. Allen, and M. S. ScottMorton: 84–110. Cambridge, MA: MIT Press.
Lozano-Vivas, A., (1998).“Efficiency and Technical Change for Spanish banks”. Applied
Financial Economics 8, pp 289-300.
Lustik, O. (2004). “Can E-banking Services be Profitable”, Paper Provided By Faculty of
Business Administration, University of Tartu (Estonia) Working Paper Number-30.

26. 26
Madhavankutty, G. (2007). “Indian Banking – Towards Global Best Practices”, Bankers
Conference Proceedings (Nov.): 84-86.
Maheshwara Reddy D. et.al (2011). “Evaluating Performance of Regional Rural Banks: an
Application of CAMEL Model”, International Refereed Research Journal,2(4).
Mariappan, V. (2006). “Changing the Way of Banking in India”, Vinimaya26 (2): 26–34.
Morrison, C. J., and E. R. Berndt. (1990). “Assessing the Productivity of Information
Technology Equipment in the US Manufacturing Industries”, National Bureau of Economic
Research Working Paper 3582, National Bureau of Economic Research, Cambridge, M.A.
Muniappan, G. P. (2002). “Indian Banking: Paradigm Shift – A Regular Point of View”, IBA
Bulletin 24 (3): 151–5.
Narayanasami, T. S. (2005). “Rural Lending: A Commercial Venture for All Classes of
Banks”, IBA Bulletin 27 (6): 5–8.
Nair, K. N. C. (2006). “Banking on Technology to Meet 21st Century Challenges”,
Contributions, II, Bank net India: 6-11.
Olweny, T., Shipho, T.M. (2011).“Effects of Banking Sectoral Factors on the Profitability of
Commercial Banks in Kenya”, Economics and Finance Review, 1(5), 1-30.
Parsons, D., Gotlieb, C.C. and Denny, M. (1993).“Productivity and Computers in Canadian
Banking”, Z. Griliches and J. Mairesse (Eds.), Productivity Issues in Services at the Micro
Level, Kluwer, Boston.
Prasuna D G (2003). “Performance Snapshot 2003-04”, Chartered Financial Analyst, Vol. 10,
No.11, pp.6-13.
Patnaik, S. (2004). “Shared ATMs – The Way Forward”, IBA Bulletin 26 (12): 24–7.
Paul, J. (2006). “Global Trends in Banking Sector: Analysis of High TechServices and Remote
Channels,” IBA Bulletin, Vol.1, No.5, May, pp.10-15.
Paul, J., and A. Mukherjee. (2007). “Retail Banking, ATMs and Supply Chain Management in
Banking: A Study of Two Banks”, Prajnan35 (1): 47– 60.
Pikkarainen, T. et.al (2004). “Consumer Acceptance of Online Banking: An Extension of the
Technology Acceptance Model”, Internet Research, Vol.14, No. 3, pp. 224-235.
Raghavan, R.S. (2006). “Perception of Indian Banks in 2020”, Journal of Accounting And
Finance, Vol.55, No.4, pp.600-606.
Raja.J. et.al. (2008). “E-payments: Problems and Prospects”, Journal of Internet Banking and
Commerce, April, Vol.13, No.1, pp.1-17.
Sarangapani, A.; and Manta, T. (2008).“IT Initiatives in E-banking and their Security Aspects”,
Professional Banker, Vol.8, No.10, pp. 45-53.

27. 27
Sarkar J, S. Sarkar, and S. K. Bhaumik. (1998). “Does Ownership always Matter? Evidence
from the Indian Banking Industry”, Journal of ComparativeEconomics 26 (2): 262–81.
Sathye, Milind, (2003). “Efficiency of banks in a developing economy: the case of India,”
European Journal of Operational Research, 148 (3), 662–671.
Sathye, M. (1999).“Adoption of Internet Banking by Australian Consumers: An Empirical
Investigation”, International Journal of Bank Marketing, Vol.17, No.7, pp. 324-334.
Sensarma, Rudra, (2006). “Are foreign banks always the best? Comparison of state-owned,
private and foreign banks in India,” Economic Modelling, 23(4), 717–735.
Shanmugam, K.R. and A. Das,(2004). “Efficiency of Indian commercial banks during the
reform period,” Applied Financial Economics, 14 (9), 681–686..
Shanker, A. G. (2004). “Customer Service in Banks”, IBA Bulletin 26 (8): 5–8.
Shroff, F. T. (2007). “Modern Banking Technology”, Contributors, Vol. 4, Bank net
Publications: 44-49.
Simon, S.M. and Victor, T.F. (1994).“Customers Risk Perception of Electronic Payment
System”, International Journal of Bank Marketing, Vol.12, No.8, pp.26-38.
Singh Prakash, (2007). “Global Competitiveness of Indian Banks, A study of select banking
indicators, issues of concern and opportunities”, IIM, Luck now Publications.
Singh, M. A. (2004). “Trends in South African Internet Banking”, Journal of New Information
Perspective, Vol. 56, No. 3, Accessed on 18/06/13.
Sooden, M., and M. Bali. (2004). “Profitability in the PSBs in India in the Pre and Post Reform
Period”, Indian Management Studies Journal 8 (2): 69–91.
Strassman, P. A. (1990). “The Business Value of Computers.New Canaan”, ct: Information
Economics Press.
Subbaroo, P. S. (2007). “Changing Paradigm in Indian Banking”, Gyan Management,
1(2):151-160.
Suresh, R. (2008). “E-banking: The Core Capabilities to Exploit”, The Management
Accountant, Vol.43, No.6, June, pp. 49-53.
Unninthan, R. C. (2001). “Impact of E-banking Adaptation on Australian and Indian Banking
Sector, Available at http.www.deabin.edu.au/working papers/archive/2001/14 unninthan.pdf.
Accessed on 11.08.2012.
Uppal, R. K. and Kaur, R. (2007). “Indian Banking Industry: Comparative Performance
Evaluation in the Liberalized and Globalized Era”, Gyan Management, 2 (2):3-24.

28. 28
Vincent OkothOngore, GemechuBerhanuKusa (2013). “Determinants of Financial
Performance of Commercial Banks in Kenya”, International Journal of Economics and
Financial Issues Vol. 3, No. 1, 2013, pp.237-252.
Wilson, D. (1993). “Assessing the Impact of Information Technology on Organizational
Performance”, In Strategic Information Technology Management, edited by R. Banker, R.
Kauffman, and M. A. Mahmood: 471– 514. Harrisburg, PA: Idea.
Yu, M.C. and Boon, H.O. (2003). “Success Factors in E-channels: The Malaysian Banking
Scenario”, International Journal of Bank Marketing, Vol.21, No.7, pp. 369- 377.
Zhao, et.al (2010).“The impact of regulatory reforms on cost structure, ownership and
competition in Indian banking,” Journal of Banking &Finance, 34(1), 246–254.
Appendix:-
List of the Banks Selected for the Study:-
Sl. No. Public Sector Banks Private Sector Banks
SBI and associate banks New Private Sector Banks
1 State Bank of India ICICI Bank
2 State Bank of Bikaner and Jaipur HDFC Bank
3 State Bank of Hyderabad AXIS Bank
4 State Bank of Mysore Kotak Mahindra Bank
5 State Bank of Patiala Yes Bank
6 State Bank of Travancore IndusInd Bank
Nationalized Banks Development Credit Bank
7 Allahabad Bank Old Private Sector Bank
8 Andhra Bank
9 Bank of Baroda Bharat Overseas Bank
10 Bank of India City Union Bank
11 Bank of Maharashtra Dhanlaxmi Bank
12 Canara Bank Federal Bank
13 Central Bank of India ING Vyasa Bank

29. 29
14 Corporation Bank J & K Bank
15 Indian Bank Karnataka Bank
16 Indian Overseas Bank KarurVyasa Bank
17 Punjab National Bank South Indian Bank
18 Syndicate Bank Tamilnadu Mercantile Bank
19 UCO Bank Catholic Syrian Bank
20 Union Bank of India
21 United Bank of India
22 Vijaya Bank
23 IDBI Bank
24 Dena Bank
25 Oriental Bank of Commerce
26 Punjab and Sind Bank
BANK DISCLOSURE ATTRIBUTE INDEX
GENERAL ATRRIBUTE FINANCIAL ATTRIBUTE
Site map
On line banking
Financial highlight summary
Search box
Telebanking Auditors‟ reports
Contact us Calculators
Income statement
Downloads of data Webcasting events Cash
flow statement
e-mail Privacy statement Full accounts
SMS Branches
Intrim accounts (unaudited)
Latest products Atm sites Financial results
Latest services Market news Financial
highlight summary
What‟s new
Logon to e-banking on home page