Impact of FinTech Adoption on Bank Performance Using CAMEL Model: A Study of Selected Indian Banks

Abstract

Introduction: The integration of Fintech into the banking sector in India has been transformative, driven by technological advancements and the need for enhanced customer experiences. Fintech adoption plays a very important role in banking sector as it utilizes technological innovation to improve accessibility, efficiency and enhancing operational effectiveness.

Objectives: The study examines the impact of fintech adoption using the CAMEL model components Capital Adequacy, Asset Quality, Management Efficiency, Earnings, and Liquidity on the performance of Indian commercial banks.

Methods: Bank performance is measured by Return on Assets & Return on Equity. Secondary data from the annual reports of selected four banks, namely State Bank of India (SBI), Punjab National Bank (PNB), Axis Bank, and HDFC Bank, was collected and analyzed through suitable statistical test such as descriptive statistics and Pooled Ordinary Least Square test using E-views.

Results: The findings reveal that Asset Quality and Management Efficiency significantly influence performance, with poor asset quality and inefficient management negatively impacting both ROA and ROE. While Capital Adequacy measures show limited or insignificant effects, Earnings exhibit a negative relationship with ROE, indicating the need to address revenue volatility. Liquidity measures present mixed results, where specific indicators adversely affect performance, highlighting the importance of optimal liquidity management. The regression results demonstrate strong model reliability, with high explanatory power and no autocorrelation issues.

Conclusions: These findings suggest that banks must focus on improving asset quality, enhancing managerial practices, and maintaining stable liquidity to strengthen their financial performance. The study contributes to the understanding of bank performance drivers in the Indian context and provides actionable insights for policymakers, managers, and stakeholders. Future research can explore additional performance indicators and external macroeconomic factors to develop a more comprehensive understanding of bank performance determinants.