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Efficiency of Commercial Banks in India after Global Financial Crisis

Author

Listed:
  • K. Ravirajan

    (Research Scholar (Corresponding Author), Madras School of Economics, Gandhi Mandapam Road, Chennai-600 025 (India))

  • K. R. Shanmugam

    (Director and Professor, Madras School of Economics, Gandhi Mandapam Road, Chennai)

Abstract

While the global financial crisis had a cascading effect on all economies and financial sectors of countries, the Indian economy and its finances, particularly its banking system, due to its stringent regulatory and prudent policies. However, in the post crisis period, the scenario changed in the Indian banking because of the mounting pile of bad loans. The main purpose of the study is to estimate the bank specific efficiency utilizing the technical efficiency effect model in the stochastic frontier approach for panel data during the post global financial crisis period, 2009-2018 and find out the factors causing variations in efficiency of Indian banks. Results indicate that despite the consolidation of information technology efforts, the efficiency of the Indian banking industry deteriorated during the post global financial crisis period. This may be due to the mounting pile of non-performing assets. Interestingly, the public banks seem to be more efficient than their private counterparts. The results also indicate that banks with larger capital adequacy ratio or older banks or banks with more branches are less inefficient in generating interest income.

Suggested Citation

  • K. Ravirajan & K. R. Shanmugam, 2023. "Efficiency of Commercial Banks in India after Global Financial Crisis," Working Papers 2023-254, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2023-254
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    References listed on IDEAS

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    More about this item

    Keywords

    stochastic frontier; technical efficiency effect; panel data; Indian banks; financial crisis;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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