Bank Ownership and Financial Liberalization In Public and Private Banking Sectors In India

A study on the efficiency of Indian banks during 1997-2003

Abstract

This paper empirically estimates and analyses various efficiencyscores of Indian banks during 1997-2003 using data envelopment analysis (DEA).In spite of gradual liberalisation aimed at strengthening the operational efficiencyof the financial system in the 1990s, it is observed that Indian banks arestill not much differentiated in terms of input- or output-oriented technicalefficiency and cost efficiency. However, they differ sharply in respect ofrevenue and profit efficiencies. Bank size, ownership, and being listed on thestock exchange are some of the factors that have a positive impact on averageprofit efficiency, and to some extent, revenue efficiency scores. Finally, themedian efficiency scores of Indian banks, in general, and of bigger banks, inparticular, have improved during the post-reform period.