Efficiency Analysis of Banks using DEA: A Review (original) (raw)
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DEA TECHNIQUES FOR MEASURING EFFICIENCY OF INDIAN PUBLIC SECTOR BANKS
The main purpose of the study is, measuring the efficiency of Indian public sector banks. One may have a challenging task to evaluate the efficiency in the banking system, because every bank has its own policies with varying management philosophical attitudes. In the present scenario, measuring efficiency is necessary for commercial bank as well as for investors. Data Envelopment Analysis (DEA) is a linear programming-based technique for measuring relative efficiency assessment called DEA efficient, for a group of decision making units (DMUs) with multiple inputs and multiple outputs. As DEA is non-parametric method, it does not require any assumptions as in parametric approach. Using DEA technique, we calculate Global technical Efficiency, Local pure technical efficiency and scale efficiencies for 26 public sector banks operating on Indian soil.
DEA AS A TOOL TO MEASURE BANK EFFICIENCY: A STUDY OF PUBLIC SECTOR BANKS IN INDIA
Data Envelopment Analysis (originated in 1957) uses a linear-programming method to identify the efficient DMUs. DEA is a powerful managerial tool for performance measurement and it has been widely used for assessing the efficiency of the public and private sectors. Literature suggests that DEA is a highly objective benchmarking technique particularly well suited to such multi-office organizations as bank branches. Considering the advantage of Data Envelopment Analysis (DEA) over other techniques of measuring efficiency, the present study endeavours to measure efficiency of Indian Public Sector Banks using DEA. A database for public sector banks operating in India was collected from the Reserve Bank of India for the year 2013. The CCR model of DEA was used taking four inputs as owned funds, deposits, borrowings and wage bills whereas Spread and other income have been taken as outputs. It was found that majority of the public sector banks are inefficient. Majority of State Bank group banks are efficient and majority of nationalised banks are inefficient. Further, the excessive borrowings are the major source of inefficiency followed by unutilised deposits, owned funds and wages. It was concluded that in order to improve efficiency, public sector banks should improve their credit-deposit ratio and should reduce the level of borrowings.
Efficiency analysis by using Data Envelopment Analysis model: evidence from Indian banks
The structure of Indian banking has substantially changed over the past decades, partially as a result of adoption of new technologies and process of reforms and accompanying deregulation has embodied an incentive for bank management to focus on improving efficiency, especially given the more competitive banking environment. This study aims to examine the efficiency of Indian commercial banks during 2000 – 2010 by utilizing Data Envelopment Analysis (DEA). Based on the sample of 8 commercial banks, our findings reveal that the mean of cost (economic) efficiency, technical efficiency, and allocative efficiency are 0.991, 0.995, and 0.991 in VRS model and 0.936. 0.969, and 0.958 in CRR model, respectively using DEA approach. Inputs and outputs of this study were analyzed based on intermediation approach. In addition, the results suggest that Bank of India and ICICI bank are more efficient as compare to other banks in India and result confirmed that selected Public Sector Banks are more efficient than Private sectors during the study period in India.
EVALUATING THE PERFORMANCE EFFICIENCY OF FOREIGN BANKS OPERATING IN INDIA: A DEA APPROACH
The efficient financial system leads to better economic development of a country because an efficient financial system guarantees the smooth functioning of country's payment system and effective implementation of monetary policy. The literature analyzing efficiency of banking system has increased rapidly over the last years. Data Envelopment Analysis (DEA) is a non-parametric approach which is widely used to measure the efficiency of financial institutions. Most studies only focus on Input side of /Technical efficiency. Only few studies have measure the output side evaluating pure technical and scale efficiency. We know that both input and output oriented efficiency is important. So the Primary aim of this paper is to evaluate the efficiency of foreign banks operating in India for the period of 2010-2017. The preset study is confined to both constant return to scale (CRS) and variable return to scale (VRS).For DEA analysis the inputs selected as interest expense and other expense while output selected as interest income and other income.
Measurement of Efficiency of Banks in India
In modern world, performance of banking is more important to stable the economy. In order to see the efficiency of Indian banks we have used four indicators i.e, profitability, productivity, asset quality and financial management for all banks include public, private and foreign banks in India for the period 1999-2000 to 2002-2003. For measuring the efficiency of banks we have adopted DEA (Data Envelopment Analysis) and found that public sector banks are more efficient than other banks operating in India.
Benchmarking: An International Journal, 2019
Purpose The purpose of this paper is to estimate the relative efficiencies of banks of the Indian domestic banking sector by employing various models of data envelopment analysis (DEA) using the panel data of the recent decade (2008–2017). The paper provides a comparative analysis of these models based on the efficiency outputs. It compares the performance of banks based on their ownership and sizes and studies the decade-long trend of productivity using Malmquist indices. Design/methodology/approach This paper estimates overall technical, pure technical and scale efficiencies of 21 public sector banks and 17 private banks. It compares the descriptive statistics of efficiency estimates found out through 18 different DEA models and compares them using two non-parametric statistical tests. It studies the difference in efficiencies based on ownership and size by applying the same statistical tests. It employs the Malmquist index method to study the technological and technical progress ...
Banking sector is one of the most important mechanisms of Bangladesh financial system since the early 1970s. In most developing countries, the banking sector represents the backbone of the financial system. Performance of a bank is generally conceptualized as bank's ability to generate transaction by effectively utilizing its resources. Bank efficiency has been an important issue in transition. This paper focuses on measuring efficiency performance of 21 commercial banks in Bangladesh of the year 2014 with the help of Data Envelopment Analysis (DEA). The technical efficiency is estimated by using the input-oriented and output-oriented DEA methods under the variable return to scale (VRS). Results show that under the VRS assumptions, both input-oriented output-oriented methods out of twenty one banks only five banks namely ICB Islami bank, National bank, Basic Bank, EXIM bank and NRB bank are technically efficient because they have the technical efficiency scores equal to one. The Bangladesh banking sector is expected to be able to meet the increasing and more sophisticated demands from consumers and businesses, to adapt and adjust to the technological advances, to face the challenges of globalization and liberalization, and thereby contributing to the overall economic growth and stability.