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Eurasian Journal of Business and Economics 2009, 2 (4), 43-62.
The Impact of Internet Banking on Bank
Performance and Risk: The Indian Experience
Pooja MALHOTRA
*
, Balwinder SINGH
**
Abstract
The paper describes the current state of Internet banking in India and discusses its
implications for the Indian banking industry. Particularly, it seeks to examine the
impact of Internet banking on banks’ performance and risk. Using information
drawn from the survey of 85 scheduled commercial bank’s websites, during the
period of June 2007, the results show that nearly 57 percent of the Indian
commercial banks are providing transactional Internet banking services. The
univariate analysis indicates that Internet banks are larger banks and have better
operating efficiency ratios and profitability as compared to non-Internet banks.
Internet banks rely more heavily on core deposits for funding than non-Internet
banks do. However, the multiple regression results reveal that the profitability and
offering of Internet banking does not have any significant association, on the other
hand, Internet banking has a significant and negative association with risk profile of
the banks.
Keywords: Banking, Internet banking, performance, risk, India
JEL Classification Codes: G21, O33, L25, G32, O53
* Assistant Professor and Head, Department of Business Management, Geeta Institute of
Management and Technology, Kanipla, Kurukshetra, Haryana, India. Email:
pkwatra@gmail.com
** Reader, Department of Commerce & Business Management, Guru Nanak Dev University,
Amritsar 143005, Punjab, India. Email: bksaini@gmail.com
Pooja MALHOTRA & Balwinder SINGH
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EJBE 2009, 2(4)
1. Introduction
Internet technology holds the potential to fundamentally change banks and the
banking industry. An extreme view speculates that the Internet will destroy old
models