Relevance of Non-traditional Activities on the Efficiency of Indian Banks

Sunil Kumar and Rachita Gulati ()
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Sunil Kumar: South Asian University

Chapter Chapter 5 in Deregulation and Efficiency of Indian Banks, 2014, pp 167-200 from Springer

Abstract: Abstract This chapter investigates the relevance of the inclusion of non-traditional activities in the specification of banks’ output on the efficiency of Indian banks. The empirical results indicate that the exclusion of non-traditional activities not only understates the cost, technical and allocative efficiencies of individual banks, but also affects the ranking of ownership groups in the industry. In particular, when a proxy for non-traditional activities is accounted for in the output specification, the foreign banks appear to be more efficient than public and private sector banks. Overall, the results reinforce the prevailing view in the extant literature that the exclusion of non-traditional activities causes misspecification of banks’ output, and may distort the efficiency estimates.

Keywords: Data Envelopment Analysis; Efficiency Score; Data Envelopment Analysis Model; Private Bank; Allocative Efficiency (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-81-322-1545-5_5

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DOI: 10.1007/978-81-322-1545-5_5

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