Efficiency of Indian banks with non-performing assets: evidence from two-stage network DEA

K. Hafsal (), Anandarao Suvvari () and S. Raja Sethu Durai ()
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K. Hafsal: University of Hyderabad
Anandarao Suvvari: Central University of Andhra Pradesh
S. Raja Sethu Durai: University of Hyderabad

Future Business Journal, 2020, vol. 6, issue 1, 1-9

Abstract: Abstract This paper addresses the concerns regarding the sustainability of the banking sector in India prompted by the recent unintended high level of non-performing assets (NPAs). It uncovers the linkage between NPAs and banking efficiency by integrating NPAs into the measurement of bank efficiency to provide a holistic efficiency profile of the Indian banking sector. We apply the general two-stage data envelopment analysis of Kao [16] by incorporating NPAs as an exogenous output from the first stage, and the empirical results identify an efficiency gap of 16.2% due to NPAs in the Indian banking sector for the year 2016. Further, it also documents that the efficiency gap/loss is increasing over the years and differs according to the shareholding pattern of the banks.

Keywords: General two-stage network DEA; Bank efficiency; India; Non-performing assets (search for similar items in EconPapers)
JEL-codes: C14 C44 G21 P42 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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DOI: 10.1186/s43093-020-00030-z

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