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Nonparametric Measurement of Cost Efficiency of a Demand Constrained Branch Network: An Application to Indian Banking

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  • Subhash C. Ray

    (University of Connecticut)

Abstract

In the present study we evaluate the overall cost efficiency of a network of branches of a single large public sector bank in India within the city of Calcutta using the data for the year 2002. Our objective is to determine the optimal number of branches within a postal district that could provide the observed amounts of banking services to the customers in that area at the minimum operating cost. Our DEA results show that while in many cases, consolidating multiple branches would be more cost efficient, there are numerous instances, where increasing the number of branches would be optimal.

Suggested Citation

  • Subhash C. Ray, 2011. "Nonparametric Measurement of Cost Efficiency of a Demand Constrained Branch Network: An Application to Indian Banking," Working papers 2011-03, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2011-03
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    Keywords

    Network Efficiency; DEA; Banking.;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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