Is demonetization really impact efficiency of banking sector-An empirical study of banks in India

Abstract

Efficiency is a matter for continuing a business for long run either it is in public sector or in private sector. Higher efficiency level only can give higher return or profitability. The issue of demonetization is a hot topic for discussion and debate in India from recent past since the announcement of the recent demonetization in November 2016. In this regards the present study has been conducted to analyze the trend in efficiency level during the pre and postdemonetization phase from April 2014 to March 2018 by using data envelopment analysis. To analyze the technical efficiency of banking sector, total assets, total expenses and net NPA consider as input variables and total income as output variable which includes interest income and non-interest income. The study measures efficiency both under CCR model and BCC model for the each four years and for the two periods of pre and post-demonetization with the average data. A comparative study has also been performed with t-test between the two periods and between two banks group of public and private sector. The present study concludes that during post-demonetization period efficiency of banks have been degenerating compare to predemonetization period, though there is no significant difference in efficiency of banks between pre and post-demonetization period. The study also finds that there is significant difference in efficiency of banks between public and private sector under both the models.