Abstract
The facilitation of economic transactions and friendly investor environment is undertaken through effective performance of financial systems. Mobilization of savings and funding the profitable business opportunities are essential in improving the efficiency of intermediation. The study aims to evaluate the effects of nationalization and privatization on Indian banks. Various factors have been considered to examine the effects of privatization and nationalization, including sources of public sector inefficiency, measures of firm performance, econometric issues, and the mode of privatization. The data was collected for the period of 1998 to 2016 from Indian banks. Data Envelopment Analysis (DEA) was used to evaluate the financial reports of the banks selected to evaluate the efficiency of input and output variables. Positive results were observed, concerning the efficiency and profitability of banking industry after banks’ privatization. Performance of private banks has been observed effective and efficient as compared to the public sector banks. Privatization of banks must be increased and maintained to sustain the efficiency of the banks and implement strategies to maintain the assets. Future studies may recruit more appropriate sample size to evaluate the privatization and nationalization effects of Indian banking industry. Greater number of banks will provide more precise results, using data envelopment analysis.
Highlights
The performance of financial system is an essential aspect in the development of economy for any country
The study intends to examine the consequences of privatization and nationalization for Indian banking industry
The results obtained from Data Envelopment Analysis (DEA) analysis have shown an increasing pattern for IDBI Bank Ltd, Centurion Bank Ltd, and Indian Overseas Bank
Summary
The performance of financial system is an essential aspect in the development of economy for any country. The existence of established financial system can be used to promote the financial stability of a country. Privatization and nationalization of banks are undertaken to sustain the financial performance of banks (Chaudhary & Arshad, 2016). Privatization of the banks owned by government and other measures introduced were the main financial reforms, commenced in the early years to invigorate the country’s financial system (Khalid, 2006). Due to efficiency of privatization, there is an influence on balancing the budgets in the capital markets of developing countries, especially. The effect of nationalization and privatization of banks has been focused to determine the financial efficiency of Indian banking system
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