“An Analysis on Design of Financial Proficiency In Indian Banking Industry In the Post-Deregulation Knowledge” |
This paper analyses the trends of cost efficiency and its componentsacross Indian public sector banks (PSBs) during the post-deregulation periodspanning from 1992/93 to 2007/08. The study also examines the issue ofconvergence in cost, technical and allocative efficiencies levels of IndianPSBs. The empirical results indicate that deregulation has had a positiveimpact on the cost efficiency levels of Indian public sector banking industryover the period of study. Further, technical efficiency of Indian public sectorbanking industry followed an upward trend, while allocative efficiency followeda path of deceleration. We note that, in Indian public sector banking industry,the cost inefficiency is mainly driven by technical inefficiency rather thanallocative inefficiency. The convergence analysis reveals that the inefficientPSBs are not only catching-up but also moving ahead than the efficient ones,i.e., the banks with low level of cost efficiency at the beginning of theperiod are growing more rapidly than the highly cost efficient banks. In sum,the study confirms a strong presence of s - and b - convergence in costefficiency levels of Indian public sector banking industry. One of the major objectives of Indian banking sector reforms was toencourage operational self-sufficiency, flexibility and competition in thesystem and to increase the banking standards in India to the international bestpractices. The second phase of reforms began in 1997 with aim to reorganizationmeasures, human capital development, technological up-gradation, structuraldevelopment which helped them for achieving universal benchmarks in terms ofprudential norms and pre-eminent practices.