An Analysis of Profitability and Marketability Efficiencies of Indian Public and Private Banks

Abstract

The purpose of this study is to analyze the performance of Indian public and private banks by applying the data envelopment analysis (DEA) on a sample of 34 banks by considering the time period from 2006 to 2010. This study reveals that Indian public (nationalized and State Bank group) and private banks underperformed in terms of marketability and profitability efficiency. However, they were performing relatively better in terms of profitability efficiency as compared to the stock market performance (marketability efficiency). Specifically, these inefficiencies are explained by the ownership of the banks, and not by their size. Furthermore, there is little evidence of any impact of the financial crisis on the Indian banking system as evident from the sudden drop of marketability efficiency levels. However, it got recovered by the end of the study period.