Abstract
The main aim of the paper is to analyze technical efficiency of Public Sector Banks (PSBs) in India during the period 1990-91 to 2011-12. The paper also examines whether there is statistically significant difference in efficiency of PSBs in the reformatory era (1990-91 to 2000-01) as compared to the post reformatory era (2001-02 to 2011-12). Using CAMEL framework, the paper also investigates the determinants of efficiency of PSBs. The results show that PSBs exhibit higher mean of the efficiency parameters in post reformatory era (2001-02 to 2011-12) than in the reformatory era (1990-91 to 2000-01). PSBs inefficiency is attributed to Pure Technical Inefficiency in reformatory era whereas the same is accredited to scale inefficiency in the post reformatory era. Paired t test shows that there is significant difference in performance of Public Sector Banks in reformatory era and post reformatory in all the Efficiency parameters. The results of Panel Data TOBIT regression suggest that various CAMEL parameters have significant impact on the technical efficiency of PSBs.
Highlights
Efficiency measures a firm’s performance relative to a benchmark at a given point of time (Rammohan & Ray, 2004)
The CCR model is based on Constant Return to Scale (CRS) when enveloping the actual data to determine the shape of the production frontier
The financial sector reforms initiated in early 1990s have revolutionized the entire banking industry in India
Summary
Efficiency measures a firm’s performance relative to a benchmark at a given point of time (Rammohan & Ray, 2004). Since 1991, Public sector banks accounted for 91% of the total assets as against their counterparts in the private sector with just 3%, and foreign sector with 6% only (Reserve Bank of India, 1991). Assessment of Technical Efficiency of Public Sector Banks in IndiaUsing Data Envelopment. Share of assets of the Public Sector Banks to 73% and increased that of Private and Foreign sector banks to 20% and 7% respectively (Reserve Bank of India, 2012). It became imperative for the Public Sector Banks to remain efficient in the production process so that they could survive and sustain in the changing environment and remain dominating as before, as compared to their counterparts in private and foreign sector.
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