An Evaluation of the Technical, Pure Technical and Scale Efficiencies in the Indian Banking Industry using Data Envelope Analysis

Deepak Tandon, Kamini Tandon and Nidhi Malhotra
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Deepak Tandon: Deepak Tandon is a Professor, International Management Institute, New Delhi, India. E-mail: deepaktandon@imi.edu
Kamini Tandon: Kamini Tandon is an Assistant Professor, Banarsidas Chandiwala Institute of Professional Studies New Delhi, India. E-mail: kaminitandon@gmail.com
Nidhi Malhotra: Nidhi Malhotra is an Assistant Professor, Banarsidas Chandiwala Institute of Professional Studies, New Delhi, India. E-mail: malhotra.nidhi6@gmail.com

Global Business Review, 2014, vol. 15, issue 3, 545-563

Abstract: A well-developed and efficient banking sector is the fundamental requirement for smooth functioning of any economy. The present study is an attempt to examine the technical, pure technical and scale efficiencies of the Indian banks across different ownership categories for the period 2009–2012. About 7 out of the 44 banks selected lie on the efficiency frontier and form the reference set for their peers. Further, it is observed that efficiency scores do not vary much across the public sector, private sector and foreign banks. Performance of the public sector and private sector banks is almost at par with respect to technical efficiency whereas in the case of foreign banks, there lays scope for improving scale efficiency. A second stage regression analysis is carried out using Tobit regression to examine the determinants of efficiency. Non-interest income emerges the most important determinant of efficiency of banks in India.

Keywords: Data envelope analysis (DEA); Overall technical efficiency (OTE); Pure technical efficiency (PTE); Scale efficiency (SE); Tobit regression (TR) (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:15:y:2014:i:3:p:545-563

DOI: 10.1177/0972150914535141

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