Bank Ownership and Financial Liberalization In Public and Private Banking Sectors In India: Analyzing the Efficiency Scores of Indian Banks in the Post-Reform Period

Abstract

This paper empiricallyestimates and analyses various efficiency scores of Indian banks during1997-2003 using data envelopment analysis (DEA). In spite of gradualliberalisation aimed at strengthening the operational efficiency of thefinancial system in the 1990s, it is observed that Indian banks are still notmuch differentiated in terms of input- or output-oriented technical efficiencyand cost efficiency. However, they differ sharply in respect of revenue andprofit efficiencies. Bank size, ownership, and being listed on the stockexchange are some of the factors that have a positive impact on average profitefficiency, and to some extent, revenue efficiency scores. Finally, the medianefficiency scores of Indian banks, in general, and of bigger banks, inparticular, have improved during the post-reform period.