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Conclusion
Conclusion
Number of credit cards has been experiencing an upward trend for the
entire period. Sector wise analysis shows that private sector banks are the
market leader. Bank-wise growth of credit cards is evenly distributed
among the banks but the SBI in particular and public sector banks in
general have a major chunk of customer by virtue of their wider customer
base. It is inferred that growth of foreign banks in terms of credit card is
shrinking due to competition with Indian banks which are coming with
better modernised and localized strategic solutions. The new generation
private banks and foreign banks are the leaders in introducing internet
banking in India. However, the number of public sector banks offering
internet banking has been increasing exponentially. Keeping in view the
customer segment served by public sector banks, the availability of
hardware and security software for internet banking at the customer end
is still in queue, but the culture of internet banking is picking up in urban
Indian segment.
New private banks and foreign banks have been able to create a niche in
the mobile banking in the early stages of technology adoption, as their
share of mobile banking branches in the total branches has been much
higher as compared to public sector banks. Here, the size, scale, customer
heterogeneity and mind set attuned towards resisting new technology are
holding back the public sector banks. It is proving to be an impediment
and resulting in delayed response in adoption of new technologies. This
needs elaborate customer awareness and change in the mind set of
banking staff.
Volume of business per branch shows that foreign bank and new private
banks are many time more efficient than the nationalised banks but this is
highly misleading. No doubt some differences cannot be ignored due to
the non- electronic work culture but it also assumes that branches across
the industry are of the same size, following same technologies and are
evenly distributed throughout the geographical length and breadth of
country and are catering needs of all strata of the population. It is not so.
Foreign banks and private sector banks with bigger branches located in
metropolitan cities are catering very small elite strata. On the other hand,
public sector banks and private banks with large number of small sized
branches, with traditional technology and with a network of branches, are
serving the needs of common masses that include the rural strata also. So,
the comparison of branch efficiency among the banks of different
organisational set up with different objectives is not valid.
Operating profit has grown faster than the net profit and profit per branch
has grown faster than the profit per employee. First, it implies that non
operating incomes of banks have grown at a slower pace than the
operating incomes and non-operating expenditure has grown faster.
Secondly, banks have been able to economize by managing their non-
establishment branch expenses. Thirdly, cost saving by intellectual capital
management will take a little longer time. Various performance
parameters have been analysed. In terms of profit per branch foreign
banks are twenty times more efficient as compared to public sector banks.
It is inferred that branch profitability of foreign banks is the highest and is
increasing due to their check on burden. New private sector banks are
following the foreign banks and are initiating to fill this gap but the
performance on the profit front of nationalized banks as compared to
other banks has a dismal position, as these banks are lagging far behind
the new private banks and foreign banks. Currently, the profit per
employee of foreign banks is almost three times the industry average.
Nationalised banks and private banks are performing with a slight
difference, almost at par with the industry benchmark but it is far below
the national benchmark for SBI and its associate bank group.
As regards bank groups, the State Bank group and nationalised banks
adopted technology long after foreign and new private sector banks.
Hence, while foreign banks were mostly defining the grand technological
frontier of the Indian banking system, public sector and nationalised
banks closely pursued the frontier to stay competitive. Many public sector
banks also computerised their branches and introduced core banking
solutions. Although in the initial years, it pushed up the cost, it however,
appeared to have resulted in cutting operating cost and improving
efficiency in the subsequent years. New private sector banks such as
ICICI Bank and HDFC Bank were relatively better off due to their access
to the frontiers of technology assisted by foreign direct investment.
Hence 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 compatible with it are available; otherwise it
can rather affect the performance adversely. This is what explains the
productivity paradox in service sector, in general, and in banking sector,
in particular. The study found strong evidences of the fact that technology
can play a major role not only in reducing operating cost but also
improving productivity. Banks, therefore, need to look at technology both
b) It is not just the process of buying the computers and software that
gives performance, rather the competitive advantage from introduction of
information technology stems from the organizational dynamic
capabilities which are defined in terms of timely responsiveness, rapid
and flexible product innovation and management capabilities to
effectively coordinate internal and external competencies.
and customers. Interactive processes alone can place new demands and
open opportunities for those who can respond to the need for increased
flexibility. Especially, in the context of public sector banks, the
organization structure is poorly suited to the effective implementation of
information technology and it need to be restructured.