Technological Impact on Profitability of Banks With Relation to Employee Cost-a Mediation Analysis

Abstract

This study aims to know the technological impact on the profitability of banks in relation with employee cost. The study considered the quantitative research approach. The study examined the relationship and the impact of the operating profit on employee cost with the mediator has Banking technological index. The study has analyzed the relationship through Vector Error Correction Estimates (VECM) in E-views software and the Mediation analysis through SPSS software. It is concluded that the public banks technological impact is maximum than the private banks when compared with each other. Practical Implication: Majority of the banks are technology driven and utilizing the technology to serve the customers not only to improve the service quality but also to reduce the operational cost. In the present era it is notably identified that in the banking industry, especially in public sector banks in the financial performance of the company technology plays a vital role. It has been found that in public sector banks, there is a long run association between operational cost and financial performance, whereas in private sector banks it is very negligible. The public sector banks have significantly improved the financial performance with the banking technology by reducing the operational cost compared with the private sector banks. Originality/Value: This study described the analysis is considered public sector and private sector banks five each. Public banks that were used in this study were: SBI, Bank of Baroda, Bank of India, Canara and Punjab national bank while Private banks considered for this study were: ICICI, IndusInd, HDFC, Kotak Mahindra and Axis bank. This study has evaluated the impact of the use of technology services such as ATM, Mobile banking, Net banking, RTGS, Debit cards, Credit cards transactions (BTI) on the financial performance.