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Measuring efficiency, effectiveness and performance of Indian public sector banks

Author

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  • Sunil Kumar
  • Rachita Gulati

Abstract

Purpose - The purpose of this paper is to appraise the efficiency, effectiveness, and performance of 27 public sector banks (PSBs) operating in India by using a two‐stage performance evaluation model. Design/methodology/approach - Using the cross‐sectional data for the financial year 2006/2007, the technique of data envelopment analysis has been used for computing the efficiency and effectiveness scores for individual PSBs. The overall performance scores have been derived by taking the product of efficiency and effectiveness scores. Findings - The empirical results reveal that high efficiency does not stand for high effectiveness in the Indian PSB industry. A positive and strong correlation between effectiveness and performance measures has been noted. Further, on the efficiency front, State Bank of Travancore appears as an ideal benchmark, while State Bank of Bikaner and Jaipur, and State Bank of Mysore emerge as ideal benchmarks on the effectiveness front. Practical implications - The practical implication of the research findings is that in their drive to improve overall performance, Indian PSBs should pay more attention to their income‐generating capabilities (i.e. effectiveness) relative to their ability to produce traditional outputs such as advances and investments (i.e. efficiency). Originality/value - This paper is perhaps the first to evaluate the performance of Indian banks by considering simultaneously the aspects of efficiency and effectiveness.

Suggested Citation

  • Sunil Kumar & Rachita Gulati, 2010. "Measuring efficiency, effectiveness and performance of Indian public sector banks," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 59(1), pages 51-74, January.
    • Handle: RePEc:eme:ijppmp:v:59:y:2010:i:1:p:51-74
    DOI: 10.1108/17410401011006112
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    Citations

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    Cited by:

    1. Ghassan S. Obeidat & Dr. Adnan Rawashdeh & Nurah Musa Allozi, 2016. "The Effect of Using Managerial Accounting Techniques on Banking Sector: A Theoretical Study," Journal of Social Sciences (COES&RJ-JSS), , vol. 5(3), pages 388-395, July.
    2. Ather Hassan Dar & Somesh Kumar Mathur & Sila Mishra, 2021. "The Efficiency of Indian Banks: A DEA, Malmquist and SFA Analysis with Bad Output," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(4), pages 653-701, December.
    3. Panayiotis Curtis & Michael Hanias & Eleftherios Kourtis & Michael Kourtis, 2021. "Financial Performance Assessment οf Strategy for Building Resilience and Readiness in the Hotel Sector of Greece," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 11(2), pages 3-27.
    4. Eleftherios Kourtis & Michael Kourtis & Panayiotis Curtis & Michael Hanias, 2022. "Sustainable Business Growth, Value Creation and Dynamic Competitive Advantage: The Greek Pharmaceutical Industry," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 46-79.
    5. Asem Alshami, 2016. "Theoretical Evidences Regarding Methodologies Of Calculating Efficiency Of Public Sector," Management Strategies Journal, Constantin Brancoveanu University, vol. 34(4), pages 88-94.
    6. Wanke, Peter & Tsionas, Mike G. & Chen, Zhongfei & Moreira Antunes, Jorge Junio, 2020. "Dynamic network DEA and SFA models for accounting and financial indicators with an analysis of super-efficiency in stochastic frontiers: An efficiency comparison in OECD banking," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 456-468.
    7. Boriboon Pinprayong & Dr. Sununta Siengthai, 2012. "Restructuring For Organizational Efficiency In The Banking Sector In Thailand: A Case Study Of Siam Commercial Bank," Far East Journal of Psychology and Business, Far East Research Centre, vol. 8(2), pages 29-42, August.
    8. Shailesh Rastogi & Rajani Gupte & R. Meenakshi, 2021. "A Holistic Perspective on Bank Performance Using Regulation, Profitability, and Risk-Taking with a View on Ownership Concentration," JRFM, MDPI, vol. 14(3), pages 1-22, March.
    9. Warda Nadeem & Nadeem Iqbal & Hassan Hanif, 2022. "Assessing the Determinants of Efficiency: An Empirical Evidence from Developing Economy," Journal of Economic Impact, Science Impact Publishers, vol. 4(1), pages 71-80.
    10. Chia-Chi Lee, 2014. "Performance evaluation of CPA firms in Taiwan from the perspective of industry-specific client groups," Service Business, Springer;Pan-Pacific Business Association, vol. 8(2), pages 267-293, June.
    11. Michael Kourtis & Panayiotis Curtis & Michael Hanias & Eleftherios Kourtis, 2021. "A Strategic Financial Management Evaluation of Private Hospitals’ Effectiveness and Efficiency for Sustainable Financing: A Research Study," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 1025-1054.
    12. Wanke, Peter & Barros, Carlos P. & Faria, João R., 2015. "Financial distress drivers in Brazilian banks: A dynamic slacks approach," European Journal of Operational Research, Elsevier, vol. 240(1), pages 258-268.
    13. Heli Hookana, 2011. "Measurement of Effectiveness, Efficiency and Quality in Public Sector Services: Interventionist Empirical Investigations," MIC 2011: Managing Sustainability? Proceedings of the 12th International Conference, Portorož, 23–26 November 2011 [Selected Papers],, University of Primorska, Faculty of Management Koper.
    14. Arpita Sharma & Shailesh Rastogi, 2021. "Impact of Efficiency on Voluntary Disclosure of Non-Banking Financial Company—Microfinance Institutions in India," JRFM, MDPI, vol. 14(7), pages 1-21, June.
    15. Anang, Benjamin Tetteh & Shafiwu, Adinan Bahahudeen, 2022. "Profit Efficiency of Smallholder Maize Farmers in Sagnarigu Municipal of Northern Ghana," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 25(2), December.
    16. Sushanta Mallick & Aarti Rughoo & Nickolaos G. Tzeremes & Wei Xu, 2020. "Technological Change and Catching-Up in the Indian Banking Sector: A Time-Dependent Nonparametric Frontier Approach," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 217-237, June.
    17. Nan Zhu & Yun Zhang, 2017. "Comparative Research on Performance of Feed Companies in China---Based on an OR-DEAE Matrix," Asian Social Science, Canadian Center of Science and Education, vol. 13(6), pages 169-169, June.
    18. Jorge Antunes & Abdollah Hadi-Vencheh & Ali Jamshidi & Yong Tan & Peter Wanke, 2022. "Bank efficiency estimation in China: DEA-RENNA approach," Annals of Operations Research, Springer, vol. 315(2), pages 1373-1398, August.
    19. Carlos Pestana Barros & Emanuel Reis Leão & Nkanga Pedro João Macanda & Zorro Mendes, 2016. "A Bayesian Efficiency Analysis of Angolan Banks," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 484-498, September.

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