Bank productivity measurement using Hicks-Moorsteen indices: evidence from Indian public sector banks

Abstract

The aim of this paper is to examine productivity growth in public sector banks (PSBs) in India in post-liberalisation period from 1991–1992 to 2008–2009. Total factor productivity (TFP) in Indian PSBs is computed using Hicks-Moorsteen index numbers as given by O’Donnell (2010a). The paper is perhaps the first study that focuses exclusively on productivity in Indian PSBs. It also compares and contrasts productivity growth results for Nationalised Banks (NBs) and State Bank of India Group (SBIG). Results show that Indian PSBs have experienced positive productivity growth since liberalisation. Also, there exists significant difference in the productivity growth experienced by SBIG and NBs with the latter having experienced higher TFP growth. The difference has been traced to greater technological progress experienced in NBs rather than to the effect of higher efficiency gains.