The objective of this paper is to examine the performance of the Indian banking sector, measured and compared through the construct of productive efficiency using the non-parametric frontier methodology, Data Envelopment Analysis (DEA). The efficiency scores, for three groups of banks, viz., State Bank and its subsidiaries, other nationalized banks and privately owned banks are determined for the three year period, 1999-2002. The determinants of productive efficiency are found using regression. This paper is based on the Intermediation approach as opposed to the Production approach. Hence, the inputs and outputs are measured in monetary value rather than physical value. The study shows that the public sector State banks, as a group, have highest efficiency, followed by private sector banks, and the other nationalized banks in India. These results are consistent over a three year period, but, the efficiency differences diminish over a period of time. The study also finds that profitable banks are more productive and that CAR has significantly positive impact on the productive efficiency.
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