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Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis

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  • Aditi Bhattacharyya
  • Sudeshna Pal

Abstract

In this study we estimate technical efficiency of Indian commercial banks from 1989 to 2009, using a multiple‐output generalized stochastic production frontier and analyze the effects of financial reforms on estimated efficiency. The generalized method estimates technical efficiency in the presence of multiple outputs, filling a gap in the existing literature. Our results show that Indian commercial banks were operating with 64% efficiency on average during the sample period. The initial phase of reform had a positive impact on while the later phase adversely affected technical efficiency of banks. Public sector banks show higher efficiency levels compared to private and foreign banks.

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  • Aditi Bhattacharyya & Sudeshna Pal, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, John Wiley & Sons, vol. 22(3), pages 109-117, September.
    • Handle: RePEc:wly:revfec:v:22:y:2013:i:3:p:109-117
    DOI: 10.1016/j.rfe.2013.04.002
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    2. Huaqing Wu & Jingyu Yang & Wensheng Wu & Ya Chen, 2023. "Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 467-498, June.
    3. K. Ravirajan & K. R. Shanmugam, 2023. "Efficiency of Commercial Banks in India after Global Financial Crisis," Working Papers 2023-254, Madras School of Economics,Chennai,India.
    4. Kishor Hakuduwal, Ph.D., 2018. "Technical Efficiency of Nepalese Banking Sector," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 30(2), pages 1-35, October.

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