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Indian bank efficiency and productivity changes with undesirable outputs: A disaggregated approach

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  • Fujii, Hidemichi
  • Managi, Shunsuke
  • Matousek, Roman

Abstract

The objective of this study is to examine technical efficiency and productivity growth in the Indian banking sector over the period from 2004 to 2011. We apply an innovative methodological approach introduced by Chen et al. (2011) and Barros et al. (2012), who use a weighted Russell directional distance model to measure technical inefficiency. We further modify and extend that model to measure TFP change with NPLs. We find that the inefficiency levels are significantly different among the three ownership structure of banks in India. Foreign banks have strong market position in India and they pull the production frontier in a more efficient direction. SPBs and domestic private banks show considerably higher inefficiency. We conclude that the restructuring policy applied in the late 1990s and early 2000s by the Indian government has not had a long-lasting effect.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 38 (2014)
Issue (Month): C ()
Pages: 41-50

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Handle: RePEc:eee:jbfina:v:38:y:2014:i:c:p:41-50

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: DEA; Efficiency; Bank; India; Non-performing loan;

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Cited by:
  1. Benjamin M. Tabak & Daniel O. Cajueiro & Marina V. B. Dias, 2014. "The Adequacy of Deterministic and Parametric Frontiers to Analyze the Efficiency of Indian Commercial Banks," Working Papers Series 350, Central Bank of Brazil, Research Department.

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