Impact of Digital Financial Services on the Profitability Performance of Banks in India

Abstract

This paper aims to find the impact of digital financial services on the profitability performance of commercial banks in India. Recently, the Indian banking industry has witnessed the rollout of digital and innovative banking models. The immense growth of digital financial services makes a significant impact on the performance of Indian banks. Panel data regression was adopted to find the impact of digital financial services on profitability performance. Forty-four banks and an eight-time period are considered for the study. The data suffers from both heteroscedasticity and serial correlation. Panel Corrected Standard Error (PCSE) estimation was used to overcome these problems. Four models were used to assess the bank profitability. The coefficient of digital financial services variables is found to be significant. This indicates that digital banking facilities could enhance the financial performance of banks. To ensure further utilization of digital financial services by the public, with the help of the Payment and settlement system, the RBI should focus more on providing electronic services facilities on a larger scale to the public and ensuring security and making the process more efficient cost-effective for the banks. © 2022 IEEE.