Deregulation and Technical Efficiency of Commercial Banks in India

Abstract

This paper examines empirical findings pertaining to commercial banks in India for the period 2001 to 2011. To calculate technical efficiency; a non-parametric data envelopment analysis approach has been applied. Banks have been classified into four groups on the basis of ownership. Technical efficiency has been calculated using two models based on different variables. Overall, it has been observed that during the deregulation period public sector banks have done well and adjusted during this period. SBI group have emerged leader among public sector banks. Results of the study are similar to the earlier studies conducted by various researchers. A policy implication of the analysis is that although efficiency of banks have improved during this period yet there are certain areas which need to be reviewed by the policy makers. In this inefficient use of scarce resources and managerial irregularities are found to be major cause of concern. Lastly contrary to the general belief, public sector banks have performed well as compared to their private counterparts. The policy of privatization of banking sector needs to be reviewed in the light of these findings.