Financial Reforms and Technical Efficiency in Indian Commercial Banking: A Generalized Stochastic Frontier Analysis
In this study we estimate technical efficiency of Indian commercial banks from 1989- 2009 using a multiple-output generalized stochastic production frontier, and analyze the effects of financial sector reforms on measured efficiency. This generalized technique 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 and that efficiency declined in both public and private banks during most parts of the post-reform period. The capital adequacy ratios negatively influenced efficiency while the number of branches had no significant effect on bank efficiency. Financial sector reforms, however, have had mixed results on technical efficiency. The initial phase of reform had positive impact on technical efficiency while the later phases adversely affected technical efficiency of commercial banks. Throughout the sample period, public sector banks show higher efficiency levels compared to private sector and foreign banks.
|Date of creation:||Nov 2011|
|Contact details of provider:|| Postal: P O Box 2118, Huntsville, TX 77341-2118|
Web page: http://www.shsu.edu/~eco_www/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barth,James R. & Caprio,Gerard & Levine,Ross, 2008.
"Rethinking Bank Regulation,"
Cambridge University Press, number 9780521709309, March.
- Barth,James R. & Caprio,Gerard & Levine,Ross, 2006. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521855761, March.
- Abiad, Abdul & Oomes, Nienke & Ueda, Kenichi, 2008. "The quality effect: Does financial liberalization improve the allocation of capital?," Journal of Development Economics, Elsevier, vol. 87(2), pages 270-282, October.
- Abdul d Abiad & Nienke Oomes & Kenichi Ueda, 2004. "The Quality Effect; Does Financial Liberalization Improve the Allocation of Capital?," IMF Working Papers 04/112, International Monetary Fund.
- K. R. Shanmugam & A. Das, 2004. "Efficiency of Indian commercial banks during the reform period," Applied Financial Economics, Taylor & Francis Journals, vol. 14(9), pages 681-686.
- Abhiman Das & K. R. Sanmugam, 2004. "Efficiency of Indian commercial banks during the reform period," Industrial Organization 0410005, EconWPA.
- Abhiman Das & Subal C. Kumbhakar, 2012. "Productivity and efficiency dynamics in Indian banking: An input distance function approach incorporating quality of inputs and outputs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(2), pages 205-234, March.
- U.-G. Gerdtham & M. Löthgren & M. Tambour & C. Rehnberg, 1999. "Internal markets and health care efficiency: a multiple-output stochastic frontier analysis," Health Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 151-164.
- Gerdtham, Ulf-G. & Löthgren, Mickael & Tambour, Magnus & Rehnberg, Clas, 1998. "Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis," SSE/EFI Working Paper Series in Economics and Finance 222, Stockholm School of Economics.
- Sensarma, Rudra, 2006. "Are foreign banks always the best? Comparison of state-owned, private and foreign banks in India," Economic Modelling, Elsevier, vol. 23(4), pages 717-735, July.
- Peter Lawrence & Ibotombi Longjam, 2003. "Financial Liberalisation in India: measuring relative progress," Keele Economics Research Papers KERP 2003/08, Centre for Economic Research, Keele University.
- Abhijit V. Banerjee & Shawn Cole & Esther Duflo, 2004. "Banking Reform in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 1(1), pages 277-332.
- Zhao, Tianshu & Casu, Barbara & Ferrari, Alessandra, 2010. "The impact of regulatory reforms on cost structure, ownership and competition in Indian banking," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 246-254, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:shs:wpaper:1104. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Raschke)
If references are entirely missing, you can add them using this form.