Adoption of RPA and AI to Enhance the Productivity of Employees and Overall Efficiency of Indian Private Banks: An Inquiry

Abstract

In order to remain competitive in an ever- dynamic environment, especially in terms of technological advancements, customer satisfaction, maximising security, and reducing operational costs, banks have become early adopters of Robotic Process Automation (RPA) and Artificial Intelligence (AI). Against this backdrop, some very normative questions become inevitable. Does this technological diffusion lead banks towards productivity? Does the adoption of RPA and AI impact the productivity of employees and the overall efficiency of banks? Are these technological investments worth making? These are some of the questions we endeavour to answer through our study. We choose India's two largest private sector banks (HDFC and Axis) for the study. The productivity ratios like business per employee, profit per employee and employee cost to operating cost ratio are considered indicators of employees' productivity. The cost to income ratio is used as the banks' efficiency indicator. Furthermore, the number of onsite and offsite ATMs and POS terminals installed by the banks are used to substantiate the diffusion of RPA and AI. The data is taken for the period 2011- 2021 from the annual reports of the banks available on the CMIE prowess website and Reports on trends and progress of banking in India from the Reserve Bank of India's official website. The relationship among those variables is made using the Time Series multiple regression models. The study showed a significant positive impact of POS on the business per employee and a significant negative impact on the cost to income ratio for both banks considered for the study. The findings reconfirmed the positive role of technological and artificial intelligence diffusion in the banking sector. The study recommends that by leveraging the information provided by RPA and AI, banks can build a 360-degree view of each customer, including purchases, critical life events, circle of influence, complaints filed, satisfaction level, etc. Thus, banks can create customer-centric strategies that make customer experience frictionless by further harnessing these technologies.