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Labor-Cost Efficiency with Indivisible Outputs and Inputs: A Study of Indian Bank Branches

Listed author(s):
  • Subhash C. Ray

    (University of Connecticut)

  • Abhiman Das

    (Indian Institute of Management)

  • Kankana Mukherjee

    (Babson College)

This study uses Data Envelopment Analysis to examine the efficiency of 536 branches of a major Indian public sector bank across four large metropolitan cities. Unlike previous papers on branch banking in India we model branch operations following the production approach and introduce several methodological extensions to account for the product mix of branches in creating the efficient cost frontier. Our results indicate that there is significant labor cost inefficiency in the operations of the branches. Overall Chennai branches are the most efficient both with respect to their metro specific best-practice frontier as well as the grand frontier. While deposit oriented branches in Kolkata are considerably efficient with respect to their metro specific frontier, branches of other orientations perform quite poorly. Across the three types of labor, attaining efficiency in the number of clerks would have the highest impact in terms of cost savings.

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File URL: http://web2.uconn.edu/economics/working/2017-04.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2017-04.

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Length: 36 pages
Date of creation: Mar 2017
Handle: RePEc:uct:uconnp:2017-04
Note: Subhash Ray is the corresponding author
Contact details of provider: Postal:
University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063

Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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