Productive Performance Evaluation of the Banking Sector in India Using Data Envelopment Analysis

International Journal of Operations Research, Forthcoming

36 Pages Posted: 12 Jan 2007

See all articles by Biresh K. Sahoo

Biresh K. Sahoo

Amrita University - Amrita School of Business

Jati Sengupta

University of California, Santa Barbara (UCSB) - Department of Economics

Anandadeep Mandal

Cranfield University - School of Management

Abstract

This paper attempts to examine, using data envelopment analysis, the productivity performance trends of the Indian commercial banks for the period: 1997-98 - 2004-05. Our broad empirical findings are indicative in many ways. First, the increasing average annual trends in technical efficiency for all ownership groups indicate an affirmative gesture about the effect of the reform process on the performance of the Indian banking sector. Second, the higher cost efficiency accrual of private banks over nationalized banks indicate that nationalized banks, though old, do not reflect their learning experience in their cost minimizing behavior due to X-inefficiency factors arising from government ownership. This finding also highlights the possible stronger disciplining role played by the capital market indicating a strong link between market for corporate control and efficiency of private enterprise assumed by property right hypothesis. And, finally, concerning the scale elasticity behavior, the technology and market-based results differ significantly supporting the empirical distinction between returns to scale and economies of scale, often used interchangeably in the literature.

Keywords: Banks, Efficiency, Scale elasticity, Data Envelopment Analysis

JEL Classification: C14, C61, G21

Suggested Citation

Sahoo, Biresh K. and Sengupta, Jati and Mandal, Anandadeep, Productive Performance Evaluation of the Banking Sector in India Using Data Envelopment Analysis. International Journal of Operations Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=956812

Biresh K. Sahoo

Amrita University - Amrita School of Business ( email )

AIMS CAMPUS
AIMS (PO)PONEKKARA
Ettimadai, Coimbatore, Tamil Nadu 641105
India

Jati Sengupta

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Anandadeep Mandal (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

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