CHAPTER - I
Two most powerful forces affecting each sector of the economy today are the increasing rate of globalisation and advances in information and communication technology. It causes companies to use their input resources as much as possible in an effective way. Information technology is a powerful force and perhaps the single massive drive, impacting global society during the past decade. No doubt, it has given a new meaning to the word ‘convenience’. Information technology has drastically changed the business landscapes and word information technology (IT) has become the catchword for the modern life today. It has become such an essential ingredient of one’s way of life that it is difficult to imagine a world without information technology.
Under the saga of information technology, world economy has
witnessed a massive technological change in the recent past. Technological change brings about an increase in per capita income, either by reducing the amount of inputs per unit of output or by yielding more output for a given amount of input. Technological change in an economy, therefore, refers to changes in the input-output relations of production activities [Mathur, P.N. (1968)]. Consequently, as an economy moves from lower to higher stages of development, there occurs a shift from simpler to more modern and complicated techniques of production. Information technology is defined as the modern handling of information by electronic means which involves its access, storage, processing, transfer and delivery (Ige, 1995).Whitten et al. (2004) stated that “information technology is an arrangement of people, data and processes that interact to collect, process, store and provide information output needed to support an organization.”
In the last decade, almost all the sectors have gone in for a massive investment in information technology. One of the major areas of economy that
has received renewed focus in recent times has been the financial sector and with in the broad ambit of the financial sector, it is the banking sector that has been the cynosure of academia and policy makers alike. Application of information technology has changed the face of banking industry from a highly protected government agency only for lending and borrowing purposes to an independent industry. Banks have undergone a paradigm metamorphosis from being provider of ordinary financial services to that of wide varieties of services, resulting in revolutionary changes in service, support and competencies. Banking is one of the industries which involves both high information content of the product and high information intensity of process. With intense competition both from domestic sector and international players and explosive growth in information technology, the way in which commercial banks conduct business has changed considerably. In order to survive and adapt to the changing environment, the banks are putting more stress on understanding the drivers of success to generate better financial performance. The role of information technology in performance of an organization is still a paradox. As technology is not a panacea, it is a tool for efficiency, to make it work it requires planning, organizational capabilities, managerial skills, and entrepreneurship. In the age of competition, the contribution of information technology to the performance of an organization is being questioned. In this context, the study is an attempt to analyse the effect of information technology on the performance of Indian banking industry.
1.1: Review of Literature
The enduring magnitudes of investment in information technology have drawn attention of researchers and policy makers to analyse the impact of information technology on growth and productivity. The expectation was that increased investment in information technology would naturally lead to an increase in performance of organization but despite massive investment in...
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