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Efficiency of Indian Banking Industry in the Post-Reform Era

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  • Dwivedi Amit Kumar
  • Charyulu Kumara D.

Abstract

One of the major objectives of Indian banking sector reforms was to encourage operational self-sufficiency, flexibility and competition in the system and to increase the banking standards in India to the international best practices. The second phase of reforms began in 1997 with aim to reorganization measures, human capital development, technological up-gradation, structural development which helped them for achieving universal benchmarks in terms of prudential norms and pre-eminent practices. This paper seeks to determine the impact of various market and regulatory initiatives on efficiency improvements of Indian banks. Efficiency of firm is measured in terms of its relative performance that is, efficiency of a firm relative to the efficiencies of firms in a sample. Data Envelopment Analysis (DEA) has used to identify banks that are on the output frontier given the various inputs at their disposal. The present study is confined only to the Constant-Return-to-Scale (CRS) assumption of decision making units (DMUs). Variable returns to scale (VRS) assumption for estimating the efficiency was not attempted. It was found from the results that national banks, new private banks and foreign banks have showed high efficiency over a period time than remaining banks.

Suggested Citation

  • Dwivedi Amit Kumar & Charyulu Kumara D., 2011. "Efficiency of Indian Banking Industry in the Post-Reform Era," IIMA Working Papers WP2011-03-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:9998
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    References listed on IDEAS

    as
    1. Tim J. Coelli, 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 39(3), pages 219-245, December.
    2. Ray, Subhash C. & Das, Abhiman, 2010. "Distribution of cost and profit efficiency: Evidence from Indian banking," European Journal of Operational Research, Elsevier, vol. 201(1), pages 297-307, February.
    3. Abhiman Das & Saibal Ghosh, 2006. "Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period," Review of Financial Economics, John Wiley & Sons, vol. 15(3), pages 193-221.
    4. Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 7-38.
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    Cited by:

    1. K. Ravirajan & K. R. Shanmugam, 2023. "Determinants of Efficiency of Commercial Banks in India after Global Crises," Working Papers 2023-250, Madras School of Economics,Chennai,India.
    2. Muneer Babu M. & Praveen Kulshreshtha, 2014. "Productivity Change and Technical Efficiency in Indian Microfinance Institutions," Studies in Microeconomics, , vol. 2(2), pages 165-200, December.
    3. Bhagwan Jagwani, 2012. "Efficiency Measurement in the Indian Banking Industry: An Application of Data Envelopment Analysis," Vision, , vol. 16(4), pages 315-331, December.
    4. 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 - AGER, vol. 0(3(628), A), pages 65-82, Autumn.
    5. 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.

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