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Technological Change and Catching-Up in the Indian Banking Sector: A Time-Dependent Nonparametric Frontier Approach

Author

Listed:
  • Sushanta Mallick

    () (Queen Mary University of London)

  • Aarti Rughoo

    () (University of Hertfordshire)

  • Nickolaos G. Tzeremes

    () (University of Thessaly)

  • Wei Xu

    () (Ryerson University)

Abstract

This paper investigates whether there has been any improvement in efficiency convergence of banks in India during the post-reform period considering bank ownership structures, using a balanced panel for 73 banks over the time period 1996–2014. Utilizing nonparametric frontier estimators, we compute time-dependent bank efficiency scores, which allow us to examine the dynamics of technological frontier and catch-up levels of Indian banks, and to explore the convergence patterns in the estimated efficiency levels. Our results signify that the state-owned banks, which dominate the banking activity in India, establish themselves as the best performers, ahead of the private, foreign and cooperative banks during post-2005. Even during the recent global financial crisis period, we find that bank efficiency levels increased, except for foreign banks which have had the greatest adverse impact. The convergence results show that heterogeneity is present in bank efficiency convergence, which points to the presence of club formation suggesting that Indian banks’ efficiency convergence is partly driven by the ownership structure.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:compec:v:56:y:2020:i:1:d:10.1007_s10614-020-09993-1
    DOI: 10.1007/s10614-020-09993-1
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    More about this item

    Keywords

    Bank efficiency; Nonparametric frontiers; Conditional efficiency; Convergence; India;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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