Effect of Automation in Banks as Regulatory Intervention in the Indian Bourses: New Evidence from India

Abstract

The paper aims to investigate whether the automation of NPA as a regulatory intervention by RBI has effect on banking and finance sector indices. This study takes the BSE Bankex and BSE Finance in Bombay stock exchange (BSE) as sample for the period when RBI initiated the regulatory intervention. Findings from this study indicate that investors welcome the digitization through NPA automation as effective method to improve bank performance. However the initial introduction of NPA automation is not considered as a welcome step for banking sector. Similar effect is not observed in financial services sector. This indicates that since the automation of NPA is focused on banks in specific, hence no visible reaction is observed in financial services industry. This study is among few studies on effect of regulatory intervention on market returns. The impact of reforms at a policy level on financial markets has been explored through this study.