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Digital Payment Expansion and Banking Profitability in India: A Time-Series Analysis
Dr M Devaki1*, Dr P Manochithra2
Abstract
The rapid growth of digital payment systems has significantly transformed the Indian banking sector by improving the speed, accessibility, and efficiency of financial transactions. This study examines the relationship between digital payment growth and banking profitability in India using secondary data for the period 2015–16 to 2024–25. The study employs a quantitative and analytical research design and utilizes EViews for econometric analysis. Return on Assets (ROA) is considered the measure of banking profitability, while UPI Transaction Volume, UPI Transaction Value, NEFT Transaction Value, and IMPS Transaction Value are used as indicators of digital payment growth. The statistical tools employed include Descriptive Statistics, Correlation Analysis, the Augmented Dickey–Fuller (ADF) Unit Root Test, and the Granger Causality Test. The findings indicate a positive relationship between digital payment growth and banking profitability. The unit root test confirms that all variables are stationary at the first difference, making them suitable for time-series analysis. Furthermore, the Granger causality results reveal a unidirectional causal relationship from digital payment growth to banking profitability, suggesting that increased adoption of digital payment systems contributes to improved financial performance of banks. The study concludes that continued investment in digital payment infrastructure and technological innovation can enhance banking profitability and operational efficiency. The findings provide useful insights for bankers, policymakers, financial regulators, and researchers in promoting sustainable digital banking growth in India.
Keywords:
Digital Payment Growth; Banking Profitability; Return on Assets (ROA); Unified Payments Interface (UPI); National Electronic Funds Transfer (NEFT); Immediate Payment Service (IMPS); EViews; Granger Causality Test; Unit Root Test; Indian Banking Sector.
