Did efficiency of Indian public sector banks converge with banking reforms?

Kumar, Sunil; Gulati, Rachita

doi:10.1007/s12232-008-0057-2

Cited by 41 publications

(29 citation statements)

References 86 publications

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“…Only banks with minimum of two branches were included in the sample. To reduce the effects of random noise due to measurement error in the inputs and outputs, we followed Denizer et al (2007) and Kumar and Gulati (2009b), and normalized all the input and output variables by number of branches.…”

Section: Trends Of Cost Efficiencymentioning

confidence: 99%

Trends of cost efficiency in response to financial deregulation

Gulati

2015

Benchmarking: An International Journal

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Access to this document was granted through an Emerald subscription provided by emeraldsrm:198285 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine the trends of cost efficiency (CE) of Indian banks in response to financial deregulation programme launched in early 1990s. More specifically, the findings of this paper offer empirical testing of the basic underlined hypothesis that the CE of banks will rise in the more liberal and competitive environment. Design/methodology/approach -The study employs input-oriented data envelopment analysis (DEA) models that incorporate the quasi-fixed inputs to compute the cost, technical, and allocative efficiency scores for individual banks. The unbalanced panel data spanning from the financial year 1992-1993 to 2007-2008 are used for obtaining efficiency measures. In addition, the panel data Tobit model has been applied to investigate the bank-specific factors explaining variations in the CE. Findings -The empirical findings pertaining to the trends of efficiency measures suggest that: first, deregulation programme has had a positive impact on the CE of Indian banks, and the observed increase in CE is entirely due to improvements in technical efficiency (TE); second, the ranking of ownership groups provides that public sector banks are more cost efficient along with the foreign than private banks; and third, there is a strong presence of global advantage hypothesis in the Indian banking industry. The results of post-DEA analysis reveal that size and exposure to off-balance sheet activities are the key determinants of CE. The results also support the existence of bad luck or bad management hypothesis in Indian banking industry. Practical implications -The practical implication of the research findings is that the financial deregulation programme seems to be successful in achieving the CE gains in the Indian banking industry. This explicitly signals that the cautious approach of banking reforms adopted by Indian policy makers has started bearing fruit in terms of the creation of an efficient banking system, which is immune to any sort of financial crisis, and resilient to both internal and external shocks. Originality/value -Th...

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Section: Trends Of Cost Efficiencymentioning

confidence: 99%

Trends of cost efficiency in response to financial deregulation

Gulati

2015

Benchmarking: An International Journal

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“…Similarly, improvement of operational efficiency, quality of customer services, integration of information technology etc. to improve bank profitability and soundness have been the key focus in the later stages commencing in 1998 (see Kumar & Gulati, 2009;Saha & Ravisankar, 2000).…”

Section: Introductionmentioning

confidence: 99%

How Does Ownership Affect Bank Performance?-The Case Of Indian Commercial Banks

Wanniarachchige

Suzuki

2011

IBER

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Financial system reforms in recent decades have significantly reshaped the Indian commercial banking system. Despite substantial changes in the ownership and structure of Indian Banking system, fewer reliable studies have been conducted to empirically investigate the effect of ownership on various performance dimensions. Drawing upon experiences of Indian commercial banks during 2002-2009, this study analyzes how state-owned, nationalized and domestic private banks are behind foreign banks, using data envelopment analysis together with three supplementary measures of performance. The findings suggest that the performance of domestic banks has not yet reached the level of foreign banks in terms of both cost and revenue efficiencies. Surprisingly, domestic private banks are the least efficient in the market. Though foreign banks outperform domestic counterparts in multiple aspects, their contribution for spreading banking services beyond metropolitan cities by establishing new branches is trivial and thus they make the least contribution to countrys financial deepening.

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“…The study finds that medium-sized PSBs are operating with relatively higher levels of technical efficiency and a close relationship has been observed between efficiency and soundness as determined by bank's capital adequacy ratio. The study suggests that banks having less non-performing loans are technically more efficient Kumar and Gulati (2009) analyse and examine the trends of cost efficiency and the issue of convergence in cost, technical and allocative efficiencies levels across PSBs for the period 1992-93 to 2007-08.They find that deregulation has had a positive impact on the cost efficiency levels of PSBs It is also found that the cost inefficiency is mainly attributed by technical inefficiency rather than allocative inefficiency. The findings demonstrate that the inefficient PSBs are gradually improving and catching-up efficient ones in the post reform period.…”

Section: Review Of Literaturementioning

confidence: 98%

An Analysis of Revenue Maximising Efficiency of Public Sector Banks in the Post-Reforms Period

Singh

Bansal

2017

Journal of Central Banking Theory and Practice

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Abstract:The paper investigates and compares the performance of the Indian public sector banks (PSBs) based on revenue maximising efficiency in the deregulation period from 2001-02 to 2012-13. Several efficiency estimates viz., overall technical efficiency, pure technical efficiency and scale efficiency of individual banks are calculated using Data Envelopment Analysis (DEA). The empirical findings indicate the presence of managerial and scale inefficiencies in the operation of the most of the PSBs. Applying the Tobit regression analysis, the paper also assesses the impact of different environmental factors, like profitability, the level of non-performing assets, size etc. on the efficiency of PSBs. It is observed that banks with high profitability, low level of non-performing assets, and relatively larger size are more technically efficient.

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Did efficiency of Indian public sector banks converge with banking reforms?

Abstract: Data envelopment analysis, Public sector banks, Technical efficiency, σ-Convergence, β-Convergence, G21, G15,

Cited by 41 publications

References 86 publications

Trends of cost efficiency in response to financial deregulation

Trends of cost efficiency in response to financial deregulation

How Does Ownership Affect Bank Performance?-The Case Of Indian Commercial Banks

An Analysis of Revenue Maximising Efficiency of Public Sector Banks in the Post-Reforms Period

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