Efficiency Analysis of Indian Commercial Banks: A DEA Approach

Abstract

The banking industry is a vital part of the economy and is continually facing intense competition with changing bank reforms. An efficient and stable banking industry is todays demand and essential for productivity of the economy. This paper examines the efficiency of 46 Indian private and public sector banks from 2010 to 2014 using non-parametric DEA methodology. The study reveals that private banks are relatively more efficient than public banks and form a major part of the efficient frontier. The study also reveals that managerial inefficiency is the main cause for overall technical inefficiency of private banks than scale inefficiency. On the other hand, public banks have suffered more from scale inefficiency for some years than managerial inefficiency. Moreover, on an average, the difference between efficiency scores of private and public banks is found to be statistically insignificant except scale efficiency, significant for three years continuously i.e. 2010, 2011 and 2012.

Keywords: Indian Banks, Data Envelopment Analysis, Efficiency

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