Technical Efficiency of Public Sector Banks in India Using Data Envelopment Analysis (original) (raw)

Efficiency of Banks in India:A DEA Approach

Review of Professional Management- A Journal of New Delhi Institute of Management, 2006

Measuring Bank efficiency has always been an important concern for policy makers and researchers. An understanding of a bank's relative efficiency is important for analysts, practitioners and policymakers alike. The objective of this paper was to measure the operational efficiencies of Indian commercial banks. In this paper, we analyze bank efficiency in India using Data Envelopment Analysis (DEA). We found that foreign-owned banks are on an average most efficient, that the new generation banks are more efficient than the old ones The study recommend that the Indian nationalized and private sector banks are required to put more efforts to enhance their operational efficiencies.

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.

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.

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.

Evaluating Efficiency of Commercial Banks in India: Using DEA Model

The proposed study is an attempt to assess the stability of the Indian banking system by evaluating their relative performance through a non-parametric data envelopment analysis (DEA) approach. The results reveal that Foreign Commercial Banks have performed inadequately as compared to Public as well as Private Sector Banks during the study period.

Performance of Commercial Banks in India: DEA Measurement and Determinants of Technical Efficiency

International Journal of Banking, Risk and Insurance, 2021

As commercial entities, commercial banks are expected to maintain profitability in the face of stiff competition, while serving the mandatory government priorities and policy commitments, and central bank regulations. The performance of commercial banks crucially depends on their technical efficiency of realising the full potential output, which the banks invariably do not. This paper measures the technical efficiency of 94 public, private, foreign, and small financial commercial banks in India in 2019 using the data envelopment analysis (DEA) method; the determinants of technical efficiency are analysed by applying the Tobit regression method. The estimated technical efficiency scores of public sector banks are below average and private banks do little better than average, while the technical efficiency of foreign banks varies widely. The Tobit estimates show that capital adequacy and return on assets positively influence technical efficiency, while bank size reduces the technical efficiency of the banks. The managerial quality, bank profitability, and diversification are irrelevant to the technical efficiency levels of commercial banks. The results suggest that the performance of commercial banks in India may be improved by choosing a proper input-output mix and an appropriate scale size.

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.

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.