Cost Efficiency of Nepali Commercial Banks in the Context of Regulatory Changes

Sabin Bikram Panta () and Ph.D. Devi Prasad Bedari ()
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Sabin Bikram Panta: Kathmandu University School of Management
Ph.D. Devi Prasad Bedari: Kathmandu University School of Management

NRB Economic Review, 2015, vol. 27, issue 2, 75-90

Abstract: Nepal has witnessed substantial quantitative growth in the banking sector after the regulatory reforms in early 1990s by Nepal Rastra Bank (NRB). The substantial increases in the number of banks have created intense competition among them. This has resulted in a sharp upward trend in the number of financially troubled banks. The study examined the level of cost efficiency of 18 "A" class commercial banks during the period of 2005/06 to 2011/12 by using stochastic frontier analysis. The overall result indicates that the level of cost efficiency has increased substantially over the period of time with small size banks exhibiting higher cost efficiency as compared to the medium size ones. Similarly, result also shows that change in the regulation after 2008 even though is positively related with the cost, but not statistically significant.

Keywords: Cost Efficiency; Regulation; Stochastic Frontier Analysis (search for similar items in EconPapers)
JEL-codes: C73 G18 G28 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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