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Are some Indian banks too large? An examination of size efficiency in Indian banking

  • Subhash Ray

    ()

In this paper we use data from the years 1997–2003 to evaluate the size efficiency, as distinct from scale efficiency, of Indian banks. Following Maindiratta [Maindiratta A (1990) J Econ 46:39–56] we consider a bank to be “too large” if breaking it up into a number of smaller units would result in a larger output bundle than what could be produced from the same input by a single bank. When this is the case, the bank is not size efficient. Our analysis shows that many of the banks are, indeed, too large in various years. We also find that often a bank is operating in the region of diminishing returns to scale but is not a candidate for break up. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11123-006-0022-6
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Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 27 (2007)
Issue (Month): 1 (February)
Pages: 41-56

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Handle: RePEc:kap:jproda:v:27:y:2007:i:1:p:41-56
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100296

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  1. 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.
  2. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  3. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-97, May.
  4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  5. Maindiratta, Ajay, 1990. "Largest size-efficient scale and size efficiencies of decision-making units in data envelopment analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 57-72.
  6. Sarkar, Jayati & Sarkar, Subrata & Bhaumik, Sumon K., 1998. "Does Ownership Always Matter?--Evidence from the Indian Banking Industry," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 262-281, June.
  7. Banker, Rajiv D., 1984. "Estimating most productive scale size using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 17(1), pages 35-44, July.
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