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Analysis of Operational Efficiency in Indian Banks: A Comparative Study

Author

Listed:
  • Jagdish R. Raiyani

    (Assistant Professor, Faculty of Management, Shree Maharshi Dayanand Saraswati MBA College, Tankara-Rajkot(Gujarat), India.)

Abstract

Many firms in the service industry face the problem of disparate results in terms of efficiency. This problem is a cause of concern for many big organizations such as banks, hotels, courier companies, and so on. In particular, the last decade has witnessed continuous changes in regulation, technology and competition in the global financial services industry, and Indian banks are no exception. Rising cost-income ratios and declining profitability reflect increased competitive pressure. To assess the stability of the banking system, it is therefore crucial to benchmark the performance of banks operating in India. An efficient banking system contributes in an extensive way to higher economic growth in any country. Thus, studies of banking efficiency are very important for policy makers, industry leaders and many others who are reliant on the banking sector. The present study investigates the technical efficiency of Indian banks, segmented in terms of ownership. For this purpose, the data envelopment analysis (DEA) model was used with five input variables (viz. borrowings, deposits, fixed assets, net worth, and operating expenses) and four output variables (advances & loans, investments, net interest income, and non-interest income), and the efficiency scores were calculated for a sample of forty-nine major banks operating in India.

Suggested Citation

  • Jagdish R. Raiyani, 2011. "Analysis of Operational Efficiency in Indian Banks: A Comparative Study," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 6(2), pages 80-88, October.
  • Handle: RePEc:jct:journl:v:6:y:2011:i:2:p:80-88
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    File URL: http://jctindia.org/october-2011-v-6-i-2/oct-11-v-6-i-2-jct-13.pdf
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    References listed on IDEAS

    as
    1. Haslem, John A. & Scheraga, Carl A. & Bedingfield, James P., 1999. "DEA efficiency profiles of U.S. banks operating internationally," International Review of Economics & Finance, Elsevier, vol. 8(2), pages 165-182, June.
    2. Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 339-366, November.
    3. Abhiman Das & Ashok Nag & Subhash Ray, 2004. "Liberalization, Ownership, and Efficiency in Indian Banking: A Nonparametric Approach," Working papers 2004-29, University of Connecticut, Department of Economics.
    4. Bhattacharyya, Arunava & Lovell, C. A. K. & Sahay, Pankaj, 1997. "The impact of liberalization on the productive efficiency of Indian commercial banks," European Journal of Operational Research, Elsevier, vol. 98(2), pages 332-345, April.
    5. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Financial Services; Banking Efficiency; Data Envelopment Analysis; Technical Efficiency; Borrowings; Deposits.;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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