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Cost Efficiency of Nepali Commercial Banks in the Context of Regulatory Changes

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  • Sabin Bikram Panta

    ()

  • Devi Prasad Bedari, Ph.D.

    () (GKathmandu University School of Management)

Abstract

Nepal has witnessed substantial quantitative growth in the banking sector after the regulatory reforms in early 1990s by Nepal Rastra Bank (NRB). The substantial increases in the number of banks have created intense competition among them. This has resulted in a sharp upward trend in the number of financially troubled banks. The study examined the level of cost efficiency of 18 “A” class commercial banks during the period of 2005/06 to 2011/12 by using stochastic frontier analysis. The overall result indicates that the level of cost efficiency has increased substantially over the period of time with small size banks exhibiting higher cost efficiency as compared to the medium size ones. Similarly, result also shows that change in the regulation after 2008 even though is positively related with the cost, but not statistically significant.

Suggested Citation

  • Sabin Bikram Panta & Devi Prasad Bedari, Ph.D., 2015. "Cost Efficiency of Nepali Commercial Banks in the Context of Regulatory Changes," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 27(2), pages 1-16, October.
  • Handle: RePEc:nrb:journl:v:27:y:2015:i:2:p:75-90
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    References listed on IDEAS

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    More about this item

    Keywords

    Cost Efficiency; Regulation; Stochastic Frontier Analysis;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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