Abstract
Purpose An inclusive financial system is essential to develop the country’s economy. A massive shift in financial inclusion was observed by the initiative of government to include financially excluded into the formal financial system by launching Pradhan Mantri Jan Dhan Yojana (PMJDY) in 2014. This paper aims to attempt to examine the efficiency of public sector banks in financial inclusion during pre and post introduction of PMJDY. Design/methodology/approach The data envelopment analysis is used to measure the efficiency of the banks towards financial inclusion for the periods, 2010–2011 to 2013–2014 as pre-introduction and 2014–2015 to 2017–2018 as post-introduction phase. For this study, supply-side parameters of financial inclusion considered as input variables and demand-side parameters as output variables. Findings The study finds that overall average efficiency towards financial inclusion increases significantly during post-phase, though all the public sector banks are not performing equally. There is a significant variation in efficiency level between them and even between the two periods. Further, there is a huge opportunity to enhance technical efficiency with the same quantity of input which will help to achieve the target of financial inclusion. Originality/value A comparative study between the two phases has taken place to analyse the impact of the scheme on the technical efficiency of banks. One of the notable innovativeness of this study is that, unlike most of the previous studies which are mostly theoretical and conceptual, the present study may place itself as a unique inquiry in the domain of efficiency review of public sector banks during pre and post introduction of PMJDY.
Highlights
The study on financial inclusion is extremely momentous for society, as outcomes of financial exclusion have quite a negative impact on the economic development of a country
People who are unable to obtain services from mainstream financial service providers are regarded as the financially excluded, because there are no branches of the bank or other financial institution in their community and because they are excluded or unable to use services offered by different financial institutions
The results further reveal that selected public sector banks (PSBs) operate at 97.48% and private sector banks (PVBs) operate at
Summary
The study on financial inclusion is extremely momentous for society, as outcomes of financial exclusion have quite a negative impact on the economic development of a country. Financial inclusion implies bringing low income and disadvantaged groups under the coverage of banking by providing them access to banking services at an affordable cost. Banking industry plays an important role in the growth and development of an economy. It is very much essential in the Indian economy, which comprises rural, semi-urban and urban zones. Financial inclusion provides formal financial services with improved range, looks for availability and quality of financial services for those who are financially excluded in urban areas and in rural areas. The banks or formal financial institutions provide a wide variety of financial services to their customers, like deposits, withdrawal, loans, payment services, remittance facilities and insurance products to low-income and poor households and their business entities
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