IDEAS home Printed from https://ideas.repec.org/a/ids/ijsoma/v50y2025i3p287-304.html
   My bibliography  Save this article

Inception, growth and efficiency of small finance banks in India: an empirical study

Author

Listed:
  • Padmasai Arora
  • Hitesh Arora

Abstract

This study traces the origin and operations of small finance banks (SFBs) in India. Using input-oriented data envelopment analysis, efficiency scores are computed for 2017-2018 to 2019-2020. These are regressed on four bank-specific variables to examine their impact on efficiency scores. Results show that small finance banks are operating at extremely low efficiency levels. Regression analysis shows a significant and negative influence of cost of funds on efficiency. The high cost of funds puts the SFBs at a competitive disadvantage. Also, increase in size of SFBs is an important source of inefficiency. Reserve Bank of India's initiative to set up these differentiated banks for greater financial inclusion shall prove futile if their efficiency is not improved on an urgent basis.

Suggested Citation

  • Padmasai Arora & Hitesh Arora, 2025. "Inception, growth and efficiency of small finance banks in India: an empirical study," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 50(3), pages 287-304.
    • Handle: RePEc:ids:ijsoma:v:50:y:2025:i:3:p:287-304
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=144759
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijsoma:v:50:y:2025:i:3:p:287-304. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=150 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.