Performance of Indian Banks-Stochastic Frontier Approach
25 Pages Posted: 4 Jan 2005
Date Written: December 2004
Using bank-level data from Indian Banking sector for 1995-2001 I show that Ordinary least squares technique is not suitable for measuring a bank's performance. In this paper, I have used Stochastic frontier technique to measure performance of a bank. Our results suggest that ownership significantly affects a bank's performance. Also it argues against the argument that Public banks are always worse than the privately owned banks. The income from fee-based services is also found to be an inefficiency factor among banks. We can also say that after the opening of banking sector to competition the sector has become more efficient as a whole.
Keywords: Indian Banking, Performance, Ownership, Stochastic Frontier
JEL Classification: D21, G21, G28, L33
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