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Efficiency Performance in Indian Banking—Use of Data Envelopment Analysis

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  • Sathya Swaroop Debasish

    (Sathya Swaroop Debasish is Lecturer (Finance Area), PG Department of Business Management, Fakir Mohan University (UGC-State University), Vyasa Vihar, Balasore-756 019, Orissa. E-mail: sathyaswaroop2000@yahoo.com)

Abstract

Performance evaluation of the banking sector in India has assumed primal importance due to intense competition, greater customer demands and changing banking reforms. This study attempts to measure the relative performance of Indian banks over the period 1997–2004 using the output-oriented CRR DEA model. The analysis uses nine input variables and seven output variables. Segmentation of the banking sector in India was done along the following basis: bank assets size, ownership status and years of operation. Overall, the analysis supports the conclusion that foreign owned banks were on average most efficient and that new banks are more efficient that old ones, which are often burdened with old debts. In terms of size, the smaller banks are globally efficient, but large banks are locally efficient. Moreover, this study finds evidence of concentration of efficiency parameters among peer bank groups.

Suggested Citation

  • Sathya Swaroop Debasish, 2006. "Efficiency Performance in Indian Banking—Use of Data Envelopment Analysis," Global Business Review, International Management Institute, vol. 7(2), pages 325-333, August.
    • Handle: RePEc:sae:globus:v:7:y:2006:i:2:p:325-333
    DOI: 10.1177/097215090600700209
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    References listed on IDEAS

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    1. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    3. Bhattacharyya, Arunava & Lovell, C. A. K. & Sahay, Pankaj, 1997. "The impact of liberalization on the productive efficiency of Indian commercial banks," European Journal of Operational Research, Elsevier, vol. 98(2), pages 332-345, April.
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    Cited by:

    1. Silva, Thiago Christiano & Tabak, Benjamin Miranda & Cajueiro, Daniel Oliveira & Dias, Marina Villas Boas, 2018. "Adequacy of deterministic and parametric frontiers to analyze the efficiency of Indian commercial banks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 506(C), pages 1016-1025.
    2. Kashif Rashid & Adeela Rustam, 2014. "Comparative Analysis of Local and Foreign Banks Efficiency: A Case Study of Pakistan," Oeconomics of Knowledge, Saphira Publishing House, vol. 6(3), pages 7-52, August.

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