Benchmarking Indian banks using DEA in post-reform period: a progressive time-weighted mean approach

Mukesh Kumar () and Charles Vincent

The Service Industries Journal, 2010, vol. 31, issue 14, 2455-2485

Abstract: The ranking of banks based on single period data could mislead the management as well as customers, as many one-time influences may wrongly portray banks with lasting strategy. This study uses data envelopment analysis (DEA) models to rank Indian banks based on their performance over 13 years of post-reform period by using the progressive time-weighted means of variable benchmarking super-efficiency scores. Furthermore, the relative performances of these banks are evaluated against the ‘best practice’ bank by using the fixed benchmarking DEA model. The results show no statistical evidence of dominance of either public sector banks over private sector banks or vice-versa when their efficiencies are evaluated with the common frontier. However, the variations in efficiency across the public sector banks are comparatively less as compared with private sector banks. The efficiency based on the ownership frontier further supports our argument that the public sector banks are relatively more consistent in their performance over the years as well as across the banks. The results show a huge difference in the ranking of some of the banks when the usual method of ranking is compared with progressive time-weighted mean approach, where the performance of the banks over the years is taken into account.

Date: 2010
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DOI: 10.1080/02642069.2010.504818

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The Service Industries Journal is currently edited by Eileen Bridges, Professor Domingo Ribeiro, Ronald Goldsmith, Barry Howcroft and Youjae Yi

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