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This study examines the cost efficiency performance of 111 commercial banks in Bangladesh, India, Pakistan and Sri Lanka over 1997-2004. The primary focus is to assess whether bank size, state ownership and stock exchange listing have significant effects on South Asian banks' efficiency performance. To this end, a translog-form composite-error cost efficiency model, which allows for exogenous environmental influences, is estimated. The results indicate that the overall efficiency of South Asian banks declined over 1997-2004. Larger banks and banks with widespread ownership through stock exchange listings were found to be relatively more cost efficient. In contrast, state-owned banks were less efficient.

This paper examines the nature of competition and structure in South Asian banking markets. It also assesses whether traditional interest-based product market segments are more competitive than those that also include fee- and commission-based products. The reduced form Panzar-Rosse specification tests show that bank revenues appear to be earned under conditions of monopolistic competition during the period 1995 to 2003. In Bangladesh and Pakistan competition is greater in the traditional interest-based product markets while Indian and Sri Lankan domestic commercial banks seem to face more competitive pressure in the fee-based product market from other financial intermediaries.

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