Effect of Financial Crisis in Efficiency and Strategic Homogeneity of Indian Commercial Banks: An Empirical Investigation (original) (raw)
Related papers
2015
The financial crisis has send shock waves cutting across boundaries and economies. Major economies are still struggling to recover. The cause of the crisis was primarily the inefficiency of the banking system to manage their sub-prime asset class. It reflected the importance of efficiency of the banking system irrespective of the credit rating which signifies its quality of asset class. In the contemporary world economy no economic system can remain isolated. Indian banking system also felt the shock but managed it efficiently. This motivates for a comprehensive analysis to discover whether the so called resilience was due to some policy stimulus or the Indian banking industry is intrinsically efficient. Also, the pattern of grouping of the banks plays an important role in providing stability in the inter-connected system. Thus technical analysis of the banks along with the dynamics of cluster formation after factoring the pre and post financial crisis time periods was studied, so t...
Global Crisis: Problems and Prospects for Indian Banking Industry
Journal of Economics and Behavioral Studies, 2011
The present paper analyses the efficiency of all the bank groups in the post-banking sector reforms era. Time period of the study is related to second post-banking sector reforms (1999-2000 to 2005-06). This period has been chosen taking into consideration the following factors; On the basis of some parameters of efficiency i.e. profitability per employee, per branch, business per employee, per branch and expenses per employee and per branch, the paper concludes that efficiency of all the bank groups has increased in the second post-banking reforms period but these banking sector reforms are more beneficial for new private sector banks and foreign banks. At the end, paper suggests some measures for the improvement of efficiency of Indian nationalized banks.
Kuala Lumpur : International Islamic University Malaysia, 2013, 2013
Recent economic crises have shown the impact not only to the well-developed banking sector but also to the developing banking sector in the emerging economies. This study seeks to investigate a comparative analysis of evolution of technical efficiency of commercial banks in India and Pakistan during the recent economic crises (2004-2010). Using Data Envelopment Analysis, we measure the technical efficiencies of each bank in the sample, which further decomposes to provide pure technical efficiency (PTE) and scale efficiency scores (SE).The parametric technique like t-Test and two non-parametric techniques Mann Whitney test and Krushka wallys test are employed for comparing the means of the obtained DEA result. As a robustness check, the technical efficiency score is further examined by the second stage regression model which accommodates to provide the relationship factor of bank specific variable, macroeconomic & market condition and some binary variables to account for financial crises and stability. The empirical finding suggests that Indian banks' mean TE score exceeds higher than that of Pakistan banking sector and the changes in efficiency measure been seen higher in Pakistan banking sector. So in general, Pakistan banking sector efficiency is heavily affected from the financial crises than the Indian banking sector and former always remain more technically efficient in the period under study. Furthermore, mean PTE in both banking sector deteriorates relatively in a constant rate during the crises and post crises period, whereas mean SE improved in Pakistan banking sector than Indian banking sector. The result of multivariate regression analysis has exhibited liquidity risk, bank overhead cost, ROAA, and bank capitalization being positively related with technical efficiency. Conversely, bank size, loan default and non-interest expenses over asset variables exhibits negatively related with both banking sector efficiency. However, the regression analysis has shown Pakistan banking sector being more financially stable than the Indian banking sector in terms of efficiency during the crises period. Hence, the dual banking system is seen as more efficient and stable compare to the single banking system and thus single banking system should urge to seek the introduction of Islamic banking as economically viable and financially stable for the banking sector of a country.
Performance of Private Banks in India after the Global Financial Crisis
Saudi Journal of Economics and Finance
The present study attempts to evaluate the growth and performance of 21 private banks of the Indian banking system using indicators like credit, deposit, return on assets etc. The study also evaluates the overall technical efficiency, pure technical efficiency, scale efficiency, allocative efficiency and cost efficiency between 2009-10 to 2018-19 using non-parametric data envelopment analysis (DEA). The inputs and outputs have been specified using intermediation approach. The inputs used are sum of deposits and borrowings, number of employees and fixed assets. Investments, advances and other income are taken as outputs. Prices of inputs have also been used to evaluate allocative and cost efficiency. The findings of the study indicate that new private banks had better average overall technical efficiency, average pure technical efficiency, average scale efficiency and average cost efficiency. IDFC bank was the only bank efficient in all the types of efficiencies. Further, the negativ...
CENTRUM Católica's Working Paper Series, 2012
Enticed by the reform of Indian banking sector in the early 1990s and further slowdown in the economy as a result of global financial crisis in late 2000s, the current study analyzes the performance of Indian banks using data envelopment analysis. The performance is measured in terms of technical efficiency, returns-to-scale, and Malmquist productivity index for a sample of 33 banks, consisting of 19 public sector and 14 private sector banks during the period spanning 1995-96 to 2009-10. The jackknifing analysis, followed by the dummy variable regression model is used to identify the outlier and its possible impact on overall efficiency trends. Findings reveal that efficiency scores are robust in the sense that the inclusion of outlier does not affect the overall efficiency trends. The public sector bank is faintly doing better than the private sector banks in terms of (i) technical efficiency since 2003-04 and (ii) scale efficiency from 2000-01 onwards. There is growing tendency of public banks operating under increasing returns to scale, implying that substantial gains could be obtained from altering scale via either internal growth or consolidation in the sector. The difference in the Total Factor Productivity (TFP) change between these two types of banks is found to be statistically significant in favour of public sector banks. The technological change has been the dominating source of productivity growth, whereas, the contribution of pure efficiency change and scale change are found to be negligible in Indian banking sector during the period of study. The reform in Indian banking sector has clearly re-energized the Indian banking sector as a whole, resulting in a positive change in TFP through technological change possibly as a result of adoption of latest technology and new business practices in post reform period. However, there is evidence of shrink in the market resulting in movement of the banks towards increasing returns-to-scale as well as negative growth in TFP in both the sectors during the period of global financial crisis.
Structure, Conduct and Performance of Indian Banking Sector
Review of Economic Perspectives, 2012
In the context of initiation of economic reforms in general and changes in policies and regulations of the banking sector in particular, the present paper attempts to examine the structure-conduct-performance relationships in Indian banking sector. It is observed that there have been changes in the market structure of Indian banking sector, conducts of the banks and their performance in the post-reform era, especially during the last decade, though the changes have not been significant in every aspect. Using a panel dataset of 59 banks operating in India during 1999India during -2000India during to 2008India during -2009 and applying the two-stage least squares (2SLS) method of estimation, the paper finds that there exist strong inter-linkages amongst structure of the market, banks' conduct and their financial performance. While market share of a bank depends directly on its market size, asset base, selling efforts, and past financial performance, its selling efforts vary directly with market share, asset base, and past financial performance. On the other hand, returns on assets of a bank vary directly with its market share, but inversely with its asset base and selling efforts. The regression results essentially suggest for multidirectional and dynamic SCP relationships in Indian banking sector. It is also found that the nature of ownership has significant influence on market share, selling efforts and financial performance of the banks. As compared to the nationalised banks, market share of the private banks (both domestic and foreign) is found to be lower. But private banks make greater selling efforts and have better financial performance vis-àvis their public sector counterparts.
Productivity and Efficiency of Public Sector Banks in India after the Global Financial Crisis
A productive and efficient banking industry plays a vital role in financial intermediation for accelerating the economic growth. In recent years, the competition among public sector, private sector and foreign banks has increased tremendously in India. This paper aims to study the change in the productivity and efficiency of Public Sector Banks (PSBs) in India after the financial crisis of 2008. Non-parametric Data Envelopment Analysis (DEA) approach is used to study the productivity and efficiency change of 26 PSBs operating in India. The results show that there is a wide variation of productivity and efficiency change among PSBs, and a few PSBs are suffering from deterioration of efficiency, which requires special remedial policy approach.
Global Economic Crisis and Productivity Changes of Banks in India: A DEA-MPI Analysis
The present study explores the relationship between Global economic crisis (GEC) and productivity growth of Indian banking sector using data envelopment analysis based malmquist index (DEA-MI) for the study period 2005 to 2012, which are partition into three different period viz., pre-crisis, crisis and post-crisis. The empirical result showed that total factor productivity (TFP) for pre and crisis regressed by 7 and 0.6% respectively and post by a slight progress of 0.3%. Comparing technical and technological efficiency changes over the study periods, during pre-crisis, improvements in productivity of Indian banking sector was influenced by technological innovation whereas it went down and technical efficiency influenced the productivity in crisis and post-crisis periods. This may be due to effect of economic crisis and banks would have struggled for survival and hard to concentrate on new technological innovations.
Introduction For economic growth as well as development financial services are fundamental. Financial services are those economic services which are facilitated by finance industry, which includes banks, insurance companies, stock brokerage companies, investment funds, mutual fund companies etc. financial services provide the way to save or invest the money in most appropriate way that this money provides optimal profit to the customers. In India the functioning of banks, financial institutions, insurance companies and national pension system are worked under the supervision of ministry of finance. Financial system in a country is established to enable financial transactions. These financial transactions are performed by financial institutions for example banks, mutual funds, insurance companies etc. These financial transitions are performed in financial markets like money market, capital market and Forex market by the way of financial assets like loans, deposits, bonds, equities etc. Review of Literature Ongore and Kusa (2013) in their study, "Determinants of Financial Performance of Commercial Banks in Kenya" explained about the profitability measurement and determinants of profitability of banks. For this purpose they have used ROA (Return on Assets) and ROE (Return on equity) and NIM (Net Interest Margin) as the indicators to measure the performance of banks operating in Kenya. The study was rely on secondary sources of data and for this purpose data was collected from CBK, IMF and World Bank publications from 2001 to 2010. The study concluded that capital adequacy, asset quality and management efficiency have significant affect the performance of commercial banks in Kenya in contrast liquidity was not having strong effect on performance of banks. Narwal and Pathneja (2015) in the paper titled, "Determinants of Productivity and Profitability of Indian Banking Sector: A Comparative Study" described about the various determinates of productivity and profitability of Indian banks. The study divided into two different periods from 2003-04 to 2008-09 and 2009-10 to 2013-2014. For the purpose of analysis Malmquist index was applied to measure total factor productivity of groups and subgroup banks. The study discovered that private banks were more efficient and productive than public banks. Apart from this, profitability was positively connected with total factor productivity but the association was found to be insignificant. However, diversification is positively associated with productivity and it was also significant. Moreover, small sized banks were found to be more productive than the large sized banks.