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Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis

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  • Bhattacharyya, Aditi
  • Pal, Sudeshna

Abstract

In this study we estimate technical efficiency of Indian commercial banks from 1989 to 2009, using a multiple-output generalized stochastic production frontier and analyze the effects of financial reforms on estimated efficiency. The generalized method estimates technical efficiency in the presence of multiple outputs, filling a gap in the existing literature. Our results show that Indian commercial banks were operating with 64% efficiency on average during the sample period. The initial phase of reform had a positive impact on while the later phase adversely affected technical efficiency of banks. Public sector banks show higher efficiency levels compared to private and foreign banks.

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  • Bhattacharyya, Aditi & Pal, Sudeshna, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, Elsevier, vol. 22(3), pages 109-117.
    • Handle: RePEc:eee:revfin:v:22:y:2013:i:3:p:109-117
    DOI: 10.1016/j.rfe.2013.04.002
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    More about this item

    Keywords

    Technical efficiency; Generalized stochastic production frontier; Indian commercial banks; Financial reforms; Liberalization;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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