Global Economic Crisis and Productivity Changes of Banks in India: A DEA-MPI Analysis (original) (raw)
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This study aims to assess the direct impact of US subprime crisis and turbulent macroeconomic conditions on the productivity gains of Indian banking sector using non-parametric data envelopment analysis (DEA) based Malmquist productivity index (MPI) and panel data regression model for the period 2000–2010. This study evaluates the trend of productivity change and assesses the influence of turbulent macroeconomic environment and financial crisis along with regulatory/microeconomic factors on the productivity of the Indian banking sector. The results reveal overall productivity increase during the period under study with the technological improvement across the sector. Financial crisis 2008–2009 exhibits positive and significant impact on the productivity Indian banking sector. Empirical findings suggest that the Indian banking industry sustained their productivity growth even during the global crisis. GDP and inflation exhibit negative and significant association with the productivity gains of Indian banking sector. Productivity growth exhibits significant and positive association with the listing in the stock exchange and therefore this study supports the ‘market discipline’ hypothesis in Indian banking sector. Bank size in terms of total assets, bank’s diversification strategy and profitability exhibit insignificant relationship whereas bank’s expense preference behaviour reveals negative relationship. Bank origin exhibits insignificant association and ownership reveal positive association. Therefore, results of the study do not support global advantage hypothesis in Indian banking sector.
A productive and efficient banking industry plays vital role in financial intermediation for accelerating the economic growth. In recent years, the competition among public, private and foreign sector banks has increased tremendously in India. This paper aims to study the change in productivity and efficiency of private sector banks (PVSBs) in India after financial crisis 2008. Non-parametric DEA approach used here to study the productivity and efficiency change of 20 PVSBs operating in India. The results show that there is a wide variation of productivity and efficiency change among PVSBs and few PVSBs are suffering from deterioration of efficiency which requires special policy approach to improve upon it. The paper has also highlighted the sources of inefficiency and their remedial measures.
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.
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Tij S Research Journal of Social Science Management Rjssm, 2014
Indian banking today is witnessing drastic changes. The liberalization of the financial sector and banking sector reforms have exposed the Indian banks to a new economic environment that is characterized by increased competition and new regulatory requirements. As a result, there is a transformation in every sphere of activities of the banks in India, especially in Governance, nature of business, style of functioning and delivery mechanisms. But as we know that banks are the mirror of an economy. So better functioning of banking sector may lead to the overall improvement of the economy. In fact, banks act as a link between those who want to save and those who want to invest. So improvement in the productivity of the banking sector is very much needed. This paper presents the study on productivity by analyzing the various data and banking sector reforms and identifies improvement in productivity in Indian banking sector.
Determinants of Productivity and Profitability of Indian Banking Sector: A Comparative Study
Eurasian Journal of Business and Economics, 2015
The purpose of this paper is to discuss the different determinants of productivity and profitability of banks functioning in India. The performance of public and private sector banks in terms of productivity and profitability is being assessed in two different time periods (2003-04 to 2008-09 and 2009-10 to 2013-2014). The linear programming model Data Envelopment Analysis (DEA) based Malmquist index is used to measure total factor productivity of groups and subgroup banks. The decomposition of total factor productivity into pure technical and scale efficiency is done to get a comprehensive insight of the effect of these two on the overall productivity. Further, regression analysis discovers the determinants of different bank groups. The results of the study disclose that private sector banks are more productive than public sector banks over the whole study period. But no significant difference exists in the profitability of two bank groups. The main reason of more productivity of private sector banks is the better utilization of technology than the public sector banks. Further, the productivity of banking sector of India is not found significantly different in the two sub-periods although the banks have performed better in the sub-period II (2009-10 to 2013-14).
Efficiency of Foreign Banks Operating in India: DEA Analysis
Asian Journal of Finance & Accounting, 2014
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.
2010
Assessments of the performance of Indian commercial banks are not new in the literature. However, most of the earlier studies consider relatively partial measures such as technical efficiency of the banks in assessing their performance. In this paper they have considered overall (Malmquist) total factor productivity improvement achieved by 68 Indian commercial banks from 1998-99 to 2006-07, the true liberalised era in some senses, and decomposed it into the three of its economically meaningful components, namely technical change, technical efficiency change and scale (efficiency) change factor using Data Envelopment Analysis (DEA) methodology. [Working Paper No. 435]
Malmquist productivity and efficiency analysis for banking industry in India
International Journal of Business Excellence, 2010
This paper attempts to analyse the productivity and efficiency growth pattern of Indian banking industry during the post-liberalisation era. Malmquist data envelopment analysis (DEA) has been used to estimate the different performance measures viz., productivity growth, technological change, technical efficiency and scale efficiency for the period 1996-2006. Results indicate that during the study period, this industry experienced regress in technological progress along with stagnation in technical efficiency. Some progress is reported in scale economies but the dominating technological regress resulted in productivity decline. From the group wise analysis, nationalised sector came out to be the leader in case of scale economies whereas private sector emerged as the best performer in technical efficiency. None of the groups could experience positive productivity growth over the study period.
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.
Total Factor Productivity of Indian Banking Sector-Impact of Information Technology
2015
Technological changes play a vital role in increasing Total Factor Productivity (TFP) of an economy. This study focuses on the TFP of Indian banking sector and the impact of information technology on productivity. TFP is worked out for the Indian banking sector covering public, private and foreign banks operating in India using a non–parametric Data Envelopment Analysis (DEA). An attempt is also made to find out the impact of information technology on the productivity of the Indian banking sector using a multiple regression model. The results of the study show that the Indian banking industry experienced a growth in productivity as judged by Malmquist Productivity Index during 2008-10. The succeeding years showed a diminished growth of productivity. Further, the multiple regression model suggests that increased electronic transactions in the banking channel have resulted in increase in productivity. Additionally, the intermediation cost which is a proxy for technology investment is ...