The impact of payment systems on India's banking landscape: An OLS approach

Abstract

This study seeks to examine the influence of digital banking on banking operations in India. The variables used in this study include the total amount of deposits and loan transactions as dependent variables, while National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), Point of Sale (POS) transactions, and Electronic Clearing Service (ECS) serve as the explanatory variables. The Ordinary Least Squares (OLS) model is applied to achieve the stated objectives. The dataset used in this study has been sourced from the National Payments Corporation of India and the Reserve Bank of India, covering the period from January 2004 to August 2023. A comprehensive analysis has been conducted using 236 monthly observations to address the research objectives. The OLS analysis reveals significant impacts of NEFT, POS, and RTGS on both loans and aggregate deposits, while ECS shows minimal statistical significance in explaining the dependent variables. The findings affirm the substantial influence of digital banking on the banking landscape. This study makes a noteworthy contribution to the banking sector by advocating a fresh and innovative approach to banking reforms in India, which would strengthen the Indian monetary system.