Efficiency change, technological progress and productivity growth of private, public and foreign banks in India: evidence from the post-liberalization era

Rasoul Rezvanian, Narendar Rao and Seyed Mehdian

Applied Financial Economics, 2008, vol. 18, issue 9, 701-713

Abstract: This study uses a nonparametric frontier approach to examine the effects of the ownership on the efficiency, efficiency change, technological progress and productivity growth of the Indian banking industry over the period 1998 to 2003. A host of best practice frontiers are constructed relative to which the performance of foreign-owned banks, private-owned banks and public-owned banks operating in India are assessed. The results indicate that foreign banks are significantly more efficient when compared to other banks, i.e. the privately-owned and publicly owned-banks. The findings also provide evidence to indicate that a large number of Indian banks operate below their optimal scale. Specifically, the Indian banking industry can be characterized by the existence of very few large, but inefficient publicly-owned banks along with many small size banks that would be able to improve their cost efficiency by expanding their scale of operations. Therefore, in order to assist the Indian banking system to function more efficiently and be more competitive in the global marketplace, the Indian policy makers should create policies to encourage private ownership of banks, facilitate the entry of foreign banks and promote mergers and acquisitions among Indian banks. Such policies will help Indian banks increase their scale of operations and improve their cost efficiency.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603100701222317 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:18:y:2008:i:9:p:701-713

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603100701222317

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().