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Technical efficiency and its determinants in the Indian domestic banking industry: an application of DEA and Tobit analysis

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  • Sunil Kumar
  • Rachita Gulati

Abstract

Using cross-sectional data for 51 banks, this paper not only endeavours to measure the extent of technical efficiency in the Indian domestic banking industry, but also explores the most influential factors explaining its variations across banks. The empirical results show that: only 9 of the 51 banks operating in the financial year 2006-2007 are found to be efficient and, thus, define the efficient frontier of the Indian domestic banking industry; the technical efficiency scores range from 0.505 to 1, with an average of 0.792; de novo private sector banks dominate in the formation of the efficient frontier; managerial inefficiency is the main source of Overall Technical Inefficiency (OTIE) in the Indian domestic banking industry; the efficiency differences between public and private sector banks are not statistically significant; significant differences between large and medium banks appear with regard to Scale Efficiency (SE); exposure to off-balance sheet activities and profitability are the most influential determinants of Overall Technical Efficiency (OTE).

Suggested Citation

  • Sunil Kumar & Rachita Gulati, 2009. "Technical efficiency and its determinants in the Indian domestic banking industry: an application of DEA and Tobit analysis," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 1(3), pages 256-296.
    • Handle: RePEc:ids:amerfa:v:1:y:2009:i:3:p:256-296
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    Citations

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    Cited by:

    1. Miningou, Élisé Wendlassida & Vierstraete, Valérie, 2013. "Households' living situation and the efficient provision of primary education in Burkina Faso," Economic Modelling, Elsevier, vol. 35(C), pages 910-917.
    2. Rishabh Goswami & Farah Hussain & Manish Kumar, 2019. "Banking Efficiency Determinants in India: A Two-stage Analysis," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(4), pages 361-380, November.
    3. Asish Saha & Umakant Dash, 2016. "Consolidation in Indian banking: Does size matter?," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(3), pages 223-238, September.

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