Technical Efficiency and Its Determinants: A Panel Data Analysis of Indian Public and Private Sector Banks (original) (raw)
Related papers
A Study on Technical Efficiency of Public Sector Banks in India
International Journal of Business and Economics Research, 2013
Banking companies in the service sector exhibit the problem of distinct results in terms of efficiency. This problem is a cause of concern for many big organizations in the service sector like hotels, courier companies, hospitals, banks and so on. In particular, the last decade has observed continuous amendment in regulation, technology and competition in the global financial services industry, and Indian banks are no exception. To measure the stability, sustainability and profitability of the banking system, it is therefore crucial to scale the operations of banks performing in India. A wellorganized banking system will provide an extensive way to higher economic growth in any country. Thus, evaluating the technical efficiency is important to depositors, owners, potential investors, managers and to policy makers. The present study investigates the technical efficiency of public sector banks in India by considering the study period between 2008-09 and 2010-11and using the data extracted from RBI website (www.rbi.org.in) and IBA website (www.iba.org.in). For this purpose, the data envelopment analysis (DEA) was used with two input variables (Interest expenses and operating expenses) and two output variables (interest income and other income). The efficiency scores were calculated for a sample of twentysix public sector banks operating in India. The result shows that Corporation Bank, State Bank of India and IDBI were consistently performed efficiently in all the years under study.
A Study on Operational Efficiency of Public and Private Sector Banks in India
2016
The Indian banking system has undergone significant transformation following financial sector reforms as laid out by Shri M.Narasimham Committee in 1991. The banking sector's performance is perceived as the replica of economic activities of the economy. The stage of development of the banking industry is a good reflection of the development of the economy. In this present study we have analysed the operational efficiency of commercial banks in India with objectives of comparative performance public sector banks and private sector banks, profitability position of different sector in relation to number of employees and challenges faced by public sector banks in Indian banking scenario. In this study the physical performances of the banks is analyzed based on its branches and enrolled permanent employee strength. The performance of the branch network is bound to have a significant impact on the bank as a whole. Some parameters like productivity, efficiency ratio etc to analyse the ...
A Study of Technical Efficiency of Banks in India
SSRN Electronic Journal, 2000
Many firms in the service industry face the problem of disparate results in terms of efficiency. This problem is a cause of concern for many big organizations such as banks, hotels, courier companies, and so on. In particular, the last decade has witnessed continuous changes in regulation, technology and competition in the global financial services industry, and Indian banks are no exception. Rising cost-income ratios and declining profitability reflect increased competitive pressure. To assess the stability of the banking system, it is therefore crucial to benchmark the performance of banks operating in India. An efficient banking system contributes in an extensive way to higher economic growth in any country. Thus, studies of banking efficiency are very important for policy makers, industry leaders and many others who are reliant on the banking sector.
Technical efficiency of Indian commercial banks: an empirical analysis
International Journal of Business Performance Management, 2012
Indian banking has witnessed reforms since 1991 thus providing it with operational flexibility and institutional transformation. The reforms have strengthened the fundamentals of the Indian banking sector. Still more the resilience of the Indian banking sector in withstanding financial crisis has proved its stability beyond doubt. Deregulation of the Indian banking sector has opened up new avenues of banking both in terms of outreach and services. While Indian banking industry is placed globally and has to compete with global standards, it is still struggling to achieve global standards. The best rated banks in India are not able to get position within the top hundred banks globally. Thus, efficiency along with growth assumes vital tip in any analysis concerning bank. Efficiency of the banks in managing its inputs and outputs, is thus of prime importance in deciding the position of the bank. All this calls for a comprehensive analysis of the technical efficiency of the banks operating in India.
Though the consolidation of banking sector has been debated since financial sector reforms in early nine-ties, it is gaining ground during the current decade and is one of the emerging trends in the banking sector. A study of the relationship between the size and the operational efficiency of the public sector banks is attempted in this paper. The present study is on the 20 public sector banks based on the secondary data for the last five year period 2009-10 to 2013-14. Cost to Income Ratio (CIR) is taken as a measure of operational efficiency and size of assets of the bank as measured by log of assets is taken as dependent variable. Though data analysis of all the 20 banks revealed negative correlation between CIR and log of assets indicating positive impact of size on operational efficiency, the strength of the relationship is not so strong.
Multiple aspects of indian banking efficiency
Efficiency issues in banking institution are gradually emerging for its survival and growth. The present study, therefore, aims at measuring and evaluating technical efficiency in a very comprehensive manner of the major 30 Indian commercial banks. For this, the present study indentifies four aspects or areas of banking operational efficiency: deposit mobilizing, fund conversing, off-balance sheet activities and cost revenue management. CCR model of Data Envelopment Analysis (DEA) methodology is utilized to measure area wise efficiency and efficiency as a whole of the selected banks. Input output variables are computed as an average over two years; 2009 -10 and 2010 -11. Results reveal that only two banks -Corporation bank and IDBI bank are found to be efficient in all the four areas of efficiency. Lowest efficiency level is found in the area of 'off-balance sheet activities (63.3%)' and then 'deposit mobilizing' (86.4%), 'cost revenue management' (94%), 'deposit conversing' (96.3%). Only three banks namely Corporation bank, IDBI bank and Axis Bank are found to be efficient under both the approaches. Based on these six types of efficiency scores, Corporation Bank ranks first followed by IDBI Bank, Axis Bank, ICICI Bank whereas, Central Bank of India ranks last followed by Bank Maharashtra, Indian Overseas Bank, United Bank of India among the selected banks under study.
Efficiency of Indian Commercial Banks
The Indian Economic Journal
In recent times, Indian banks have resorted to mergers and acquisitions (M&A) in the expectation to reap efficiency gains brought in by such strategies. This paper explores the impact of M&A on technical efficiency of Indian commercial banks during the second decade (2000-2010) of reforms. We use DEA to compute the relative technical efficiency of banks that participated in M&A activities. The technical efficiency is computed under both common and separate frontier with the assumption of constant as well as variable returns to scale. We also compare the postamalgamation efficiency scores of the participating banks with that of a control group comprising of such banks that did not undergo any consolidation since 1991. Our results indicate evidence of efficiency gains for the merging and/or acquiring banks. At the same time there are banks that have experienced deterioration in their post-M&A average efficiency levels. It would be wise for the banks to carefully consider the potential gains as well as threats posed by M&A before venturing into such activities.