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Relevance of Non-traditional Activities on the Efficiency of Indian Banks

In: Deregulation and Efficiency of Indian Banks

Author

Listed:
  • Sunil Kumar

    (South Asian University)

  • Rachita Gulati

    (Indian Institute of Technology Roorkee)

Abstract

This chapter investigates the relevance of the inclusion of non-traditional activities in the specification of banks’ output on the efficiency of Indian banks. The empirical results indicate that the exclusion of non-traditional activities not only understates the cost, technical and allocative efficiencies of individual banks, but also affects the ranking of ownership groups in the industry. In particular, when a proxy for non-traditional activities is accounted for in the output specification, the foreign banks appear to be more efficient than public and private sector banks. Overall, the results reinforce the prevailing view in the extant literature that the exclusion of non-traditional activities causes misspecification of banks’ output, and may distort the efficiency estimates.

Suggested Citation

  • Sunil Kumar & Rachita Gulati, 2014. "Relevance of Non-traditional Activities on the Efficiency of Indian Banks," India Studies in Business and Economics, in: Deregulation and Efficiency of Indian Banks, edition 127, chapter 0, pages 167-200, Springer.
    • Handle: RePEc:spr:isbchp:978-81-322-1545-5_5
    DOI: 10.1007/978-81-322-1545-5_5
    as

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