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IMPACT OF INFORMATION TECHNOLOGY (IT) INVESTMENTS ON THE COST EFFICIENCY OF INDIAN BANKING SECTOR-A STOCHASTIC FRONTIER APPROACH (SFA)

This research study explores the Cost efficiency of Indian banking sector by employing Stochastic Frontier Approach (SFA). This paper empirically evaluated the impact of Information Technology (IT) on the Cost efficiency of the Indian banks .The present study is based on panel data over the period of 2009-2013. For this paper 77 banks of India are being considered. This paper identifies the average cost efficiency of Indian banks found to be 61 percent over the entire period of study. The findings of this paper suggest that to some extent IT impact the cost efficiency of Indian banks. There is significant difference among Indian banks on their cost inefficiency in bank-wise. There is no significant difference among Indian banks on their cost inefficiency in year-wise. The difference in cost inefficiency between the best and worst performance banks is significantly reduced by 78.8% for the study period by Information technology investments. Thus, Information Technology contributes to cost efficiency to Indian banking industry.