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Determinants of Cost Efficiency of Commercial Banks in India

Author

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  • Siva Reddy Kalluru
  • Sham Bhat K

Abstract

The paper examines the determinants of cost efficiency of commercial banks in India by employing the Stochastic Frontier Approach (SFA) and the Tobit regression technique for the period 1992-2006. Empirical results reveal that cost efficiency of banks in India decreased during the study period. Among the three groups of banks, foreign banks seem to be relatively efficient, followed by private domestic banks and public sector banks. The Tobit regression results reveal that the earning capacity of banks is the main determinant factor of efficiency, followed by diversified and strategic non-interest income activities.

Suggested Citation

  • Siva Reddy Kalluru & Sham Bhat K, 2009. "Determinants of Cost Efficiency of Commercial Banks in India," The IUP Journal of Bank Management, IUP Publications, vol. 0(2), pages 32-50, May.
    • Handle: RePEc:icf:icfjbm:v:8:y:2009:i:2:p:32-50
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    Cited by:

    1. Abayomi Oredegbe, 2021. "Cost Efficiency Determinants: Evidence from the Canadian Banking Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(1), pages 1-86, July.
    2. Josiah Aduda & Stephen Obondy, 2021. "Credit Risk Management and Efficiency of Savings and Credit Cooperative Societies: A Review of Literature," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(1), pages 1-7.
    3. Evans, Olaniyi, 2018. "Improved Financial Performance Without Improved Operational Efficiency: The Case of Nigerian Firms," MPRA Paper 118202, University Library of Munich, Germany.
    4. Ogbonna, Ifeanyi George & Adudu, Chiangi Adudu & Thomas, Gbola Saheed, 2021. "Globalization and Organizational Performance in Nigerian Deposit Money Banks," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(07), pages 801-813, July.
    5. Lin, Kun-Li & Doan, Anh Tuan & Doong, Shuh-Chyi, 2016. "Changes in ownership structure and bank efficiency in Asian developing countries: The role of financial freedom," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 19-34.
    6. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
    7. Ogbonna, Ifeanyi George & Adudu, Chiangi Adudu & Thomas, Gbola Saheed, 2021. "Globalization and Organizational Performance in Nigerian Deposit Money Banks," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(7), pages 801-813, July.
    8. Gbenga I . Olorunsola PhD, ACA, FCIB & Adedoyin Bunmi-Alo & Oyekunbi Olubukola Dele- Oladejo PhD, 2023. "Credit Risk Management and Efficiency of Savings and Credit Cooperative Society in Lagos State," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(3), pages 505-515, March.

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