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Technical Efficiency of Public Sector Banks in India : An Empirical Study

Author

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  • Nitashree Barman

    (Research Scholar, Department of Commerce, Assam University (A Central University), Silchar, India)

  • Dr. Kingshuk Adhikari

    (Assistant Professor, Department of Commerce, Assam University (A Central University), Silchar, India)

  • Dr. Nikhil Bhusan Dey

    (Professor, Department of Commerce, Assam University (A Central University), Silchar, India)

Abstract

The purpose of the present paper is to analyse the performance of public sector banks in India for the period 2002-03 to 2011-12 with the help of non-parametric frontier approach. The technical efficiency of twenty five (25) public sector banks has been computed using Data Envelopment Analysis (DEA) model and the same has been further decomposed into pure technical efficiency and scale efficiency. The study reveals that on an average, technical efficiency score of the banks has turned out to be 0.963 and majority of the banks have obtained efficiency score within the range of (0.982-0.999). The empirical findings of the study conclude that performance of the public sector banks in respect of optimum utilization of inputs for producing the given level of output has improved over the period. However, the major source of technical inefficiency of public sector banks in India is found to be managerial inabilities in converting inputs into outputs optimally rather than inappropriate size of operation.

Suggested Citation

  • Nitashree Barman & Dr. Kingshuk Adhikari & Dr. Nikhil Bhusan Dey, 2015. "Technical Efficiency of Public Sector Banks in India : An Empirical Study," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 10(1), pages 56-65, April.
    • Handle: RePEc:jct:journl:v:10:y:2015:i:1:p:56-65
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    References listed on IDEAS

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    1. Keshari, Pradeep K & Paul, Thomas M, 1994. "Relative efficiency of foreign and domestic Banks," MPRA Paper 47072, University Library of Munich, Germany.
    2. Ruchi Trehan & Niti Soni, 2003. "Efficiency and Profitability in Indian Public Sector Banks," The IUP Journal of Bank Management, IUP Publications, vol. 0(4), pages 73-82, November.
    3. Ali Ataullah & Hang Le, 2006. "Economic reforms and bank efficiency in developing countries: the case of the Indian banking industry," Applied Financial Economics, Taylor & Francis Journals, vol. 16(9), pages 653-663.
    4. H P Mahesh, 2006. "Liberalisation and Efficiency of Indian Commercial Banks: A Stochastic Frontier Analysis," Working Papers 177, Institute for Social and Economic Change, Bangalore.
    5. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
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    Cited by:

    1. Victor Moutinho & José Vale & Rui Bertuzi & Ana Maria Bandeira & José Palhares, 2021. "A Two-Stage DEA Model to Evaluate the Performance of Iberian Banks," Economies, MDPI, vol. 9(3), pages 1-22, August.

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    More about this item

    Keywords

    Technical Efficiency; Pure Technical Efficiency; Scale Efficiency; Data Envelopment Analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Z0 - Other Special Topics - - General

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