Performance of Indian Commercial Banks (1995-2002): An Application of Data Envelopment Analysis and Malmquist Productivity Index

31 Pages Posted: 1 Sep 2004

See all articles by Don U. A. Galagedera

Don U. A. Galagedera

Monash University - Department of Econometrics and Business Statistics

Piyadasa Edirisuriya

Monash University; Financial Research Network (FIRN)

Date Written: August 2004

Abstract

This paper investigates efficiency using data envelopment analysis (DEA) and productivity growth using Malmquist index in a sample of Indian commercial banks over the period 1995-2002. Using total deposits and operating expenses as input and loans and other earning assets as output in the DEA analysis we observe no significant growth in productivity during the sampled period. The rate of increase in technical efficiency though small is likely to be due to scale efficiency compared to managerial efficiency. In general, smaller banks are less efficient and highly DEA-efficient banks have a high equity to assets and high return to average equity ratios. There has been no growth in productivity in private sector banks where as the public sector banks appears to demonstrate a modest positive change through 1995-2002. Technological change in the public sector banks reveals a growth while the private sector banks experienced a negative growth of almost the same magnitude.

Keywords: Indian banks, productivity change, DEA, Malmquist index

JEL Classification: G21

Suggested Citation

Galagedera, Don (Tissa) U. A. and Edirisuriya, Piyadasa, Performance of Indian Commercial Banks (1995-2002): An Application of Data Envelopment Analysis and Malmquist Productivity Index (August 2004). Available at SSRN: https://ssrn.com/abstract=577922 or http://dx.doi.org/10.2139/ssrn.577922

Don (Tissa) U. A. Galagedera

Monash University - Department of Econometrics and Business Statistics ( email )

900 Dandenong Road
Caulfield East, VIC 3145
Australia
+61 3 9903 1578 (Phone)
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Piyadasa Edirisuriya (Contact Author)

Monash University ( email )

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Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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