IDEAS home Printed from https://ideas.repec.org/a/sae/globus/v17y2016i2p318-331.html
   My bibliography  Save this article

Non-parametric Analysis of Technical Efficiency of Public Sector Banks (PSBs) in India

Author

Listed:
  • Aparna Bhatia
  • Megha Mahendru

Abstract

The aim of the article is to analyze and evaluate technical efficiency scores of public sector banks (PSBs) in India. The study also determines the nature of return to scale (RTS) of individual banks and thereby identifies the leaders and laggards in the PSBs. To measure the extent of overall technical efficiency, pure technical efficiency and scale efficiency (SE), the non-parametric approach, that is, data envelopment analysis (DEA) is used to determine the causes of inefficiency. The sample of the study includes 26 PSBs operating in India during the time period from 2007–2008 to 2011–2012. The results show that although the PSBs have more or less similar efficiency scores, that is, higher than 0.900, still out of 22 banks falling in the category of efficient banks in 2007–2008, only 7 of them were left by the year 2011–2012. Overall analysis of PSBs during the time period of the study explains that a greater part of inefficiency among PSBs is attributed to scale inefficiency. In addition, the number of banks operating at constant return to scale (CRS) came down to 9 in 2011–2012 from 23 in 2007–2008. Simultaneously, there was a reduction in leaders and increase in laggards. It is suggested that banks must optimize their scale of operations and adopt technological innovations.

Suggested Citation

  • Aparna Bhatia & Megha Mahendru, 2016. "Non-parametric Analysis of Technical Efficiency of Public Sector Banks (PSBs) in India," Global Business Review, International Management Institute, vol. 17(2), pages 318-331, April.
    • Handle: RePEc:sae:globus:v:17:y:2016:i:2:p:318-331
    DOI: 10.1177/0972150915619811
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0972150915619811
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0972150915619811?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. João Rebelo & Victor Mendes, 2000. "Malmquist indices of productivity change in Portuguese banking: The deregulation period," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(3), pages 531-543, August.
    2. Prasad V. Joshi & Mrs. J V Bhalerao, 2011. "Efficiency Evaluation of Banking Sector in India Based on Data Envelopment Analysis," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 2(3), pages 31-40, March.
    3. Igor Jemric & Boris Vujcic, 2002. "Efficiency of Banks in Croatia: A DEA Approach*," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 44(2-3), pages 169-193, September.
    4. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    5. 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.
    6. Piyu Yue, 1992. "Data envelopment analysis and commercial bank performance: a primer with applications to Missouri banks," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 31-45.
    7. Varadi, Vijay Kumar & Mavaluri, Pradeep Kumar & Boppana, Nagarjuna, 2006. "Measurement of Efficiency of Banks in India," MPRA Paper 17350, University Library of Munich, Germany.
    8. Saha, Asish & Ravisankar, T. S., 2000. "Rating of Indian commercial banks: A DEA approach," European Journal of Operational Research, Elsevier, vol. 124(1), pages 187-203, July.
    9. Jacobs,Rowena & Smith,Peter C. & Street,Andrew, 2006. "Measuring Efficiency in Health Care," Cambridge Books, Cambridge University Press, number 9780521851442.
    10. 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.
    11. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aparna Bhatia & Megha Mahendru, 2019. "Financial Efficiency Evaluation of Indian Scheduled Commercial Banks," Jindal Journal of Business Research, , vol. 8(1), pages 51-64, June.
    2. Gunjan M. Sanjeev, 2006. "Data Envelopment Analysis (Dea) for Measuring Technical Efficiency of Banks," Vision, , vol. 10(1), pages 13-27, January.
    3. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
    4. Deepak Tandon & Kamini Tandon & Nidhi Malhotra, 2014. "An Evaluation of the Technical, Pure Technical and Scale Efficiencies in the Indian Banking Industry using Data Envelope Analysis," Global Business Review, International Management Institute, vol. 15(3), pages 545-563, September.
    5. Ather Hassan Dar & Somesh Kumar Mathur & Sila Mishra, 2021. "The Efficiency of Indian Banks: A DEA, Malmquist and SFA Analysis with Bad Output," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(4), pages 653-701, December.
    6. Sathye, Milind, 2003. "Efficiency of banks in a developing economy: The case of India," European Journal of Operational Research, Elsevier, vol. 148(3), pages 662-671, August.
    7. Das, Abhiman & Ghosh, Saibal, 2006. "Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period," Review of Financial Economics, Elsevier, vol. 15(3), pages 193-221.
    8. Avkiran, Necmi K., 2009. "Removing the impact of environment with units-invariant efficient frontier analysis: An illustrative case study with intertemporal panel data," Omega, Elsevier, vol. 37(3), pages 535-544, June.
    9. Don U.A. Galagedera & Piyadasa Edirisuriya, 2004. "Performance of Indian commercial banks (1995-2002): an application of data envelopment analysis and Malmquist productivity index," Finance 0408006, University Library of Munich, Germany.
    10. E. Nur Ozkan‐Gunay & Arzu Tektas, 2006. "Efficiency Analysis Of The Turkish Banking Sector In Precrisis And Crisis Period: A Dea Approach," Contemporary Economic Policy, Western Economic Association International, vol. 24(3), pages 418-431, July.
    11. Karan S. Thagunna & Shashank Poudel, 2013. "Measuring Bank Performance of Nepali Banks: A Data Envelopment Analysis (DEA) Perspective," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 54-65.
    12. Ravi Kumar Jain & Ramachandran Natarajan & Amlan Ghosh, 2016. "Decision Tree Analysis for Selection of Factors in DEA: An Application to Banks in India," Global Business Review, International Management Institute, vol. 17(5), pages 1162-1178, October.
    13. Sunil Kumar, 2008. "An Analysis of Efficiency–Profitability Relationship in Indian Public Sector Banks," Global Business Review, International Management Institute, vol. 9(1), pages 115-129, June.
    14. Dipasha Sharma, 2018. "Stock Market Performance and Efficiency of Banks in a Developing Economy: Evidence from the Indian Banking Sector," IIM Kozhikode Society & Management Review, , vol. 7(2), pages 178-193, July.
    15. Udhayakumar, A. & Charles, V. & Kumar, Mukesh, 2011. "Stochastic simulation based genetic algorithm for chance constrained data envelopment analysis problems," Omega, Elsevier, vol. 39(4), pages 387-397, August.
    16. Kristjanpoller Rodríguez Werner & Saavedra Rodríguez Oscar, 2014. "La eficiencia técnica de los bancos durante la crisis Caso aplicado a la rentabilidad de la banca comercial en México y Chile," Contaduría y Administración, Accounting and Management, vol. 59(1), pages 95-122, enero-mar.
    17. Sufian, Fadzlan & Abdul Majid, Muhamed Zulkhibri, 2007. "Consolidation and efficiency: Evidence from non-bank financial institutions in Malaysia," MPRA Paper 12128, University Library of Munich, Germany, revised 01 May 2007.
    18. K. Ravirajan & K.R. Shanmugam, 2021. "Efficiency of commercial banks in India after global financial crises," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(628), A), pages 65-82, Autumn.
    19. R Ramanathan, 2005. "Estimating energy consumption of transport modes in India using DEA and application to energy and environmental policy," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(6), pages 732-737, June.
    20. Miguel SARMIENTOO & Andrés CEPEDA & Hernando MUTIS & Juan F. PÉREZ, 2013. "Nueva Evidencia sobre la Eficiencia de la Banca," Archivos de Economía 10705, Departamento Nacional de Planeación.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:globus:v:17:y:2016:i:2:p:318-331. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.imi.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.