Efficiency Of Public Sector Banks Research Articles

Loan Portfolio Management and Bank Efficiency: A Comparative Analysis of Public, Old Private, and New Private Sector Banks in India

This comparative study analyzed the impact of loan portfolio composition on the efficiency of different types of banks in India—public sector, old private, and new private banks—in the period between 2013 and 2022. Efficiency was evaluated using data envelopment analysis (DEA). The study considered four loan variables—term lending, working capital, priority sector lending, and secured lending in proportion to the overall loans—as independent factors against the efficiency score as the dependent variable, using a random-effects generalized least squares (GLS) regression framework. The results indicate that there were no significant effects on the efficiency of old private banks, except for working capital, which had a marginally negative impact on bank efficiency. Working capital, priority sector lending, and term lending have been found to significantly impact the efficiency of new private banks. Only term and working capital loans significantly affected the efficiency of public sector banks.

Efficiency of Public Sector Banks in Achieving the Goal of PMJDY and PMMY

Efficiency of Public Sector Banks in Achieving the Goal of PMJDY and PMMY

Efficiency of public sector banks in achieving the goal of PMJDY and PMMY

Efficiency of public sector banks in achieving the goal of PMJDY and PMMY

The Efficiency of Indian Banks: A DEA, Malmquist and SFA Analysis with Bad Output.

In the recent years, the burgeoning non-performing assets (NPAs) have become a matter of concern and scrutiny in India as the surge in NPAs impinge on the credit services of the banks, make the banks vulnerable to external shocks, leave them with less cushion in case of idiosyncratic shocks and thus, leading to the abrasion of their productive capital. In this backdrop, some very normative questions become inevitable. How has the technical efficiency of the banks in India changed over time especially after the asset quality review, 2016? How does undesirable output like non-performing assets (NPA) impact the technical efficiency of banks in India? Does technical efficiency have anything to do with the ownership of banks? These are some of the questions we endeavour to answer through our study by employing three cornerstone methodologies namely DEA, Malmquist productivity index and SFA in the banking sector for the period 2014–2020.The results obtained from employing DEA and SFA both points toward the heterogeneity in the technical efficiency of public sector banks and private sectors banks operating in India. The results obtained from DEA are majorly three-fold. Firstly, private sector banks have fared better than the public sector banks, while the SFA scores show that the public sector ownership promotes efficiency. Secondly, the technical efficiency of public sector banks has consistently been falling from 2014 to 2017 only to rise in the later years, evidence corroborated by the SFA scores also. This trend is in line with the slew of measures adopted by the government and RBI like AQR and mergers of banks subsequently. Although according to the Malmquist productivity decomposition results, we find that productivity of banks have been falling for the period 2014–2020. Thirdly, the non-performing assets are detrimental for the efficiency of the banks. Like DEA, the SFA results also shows the presence of technical inefficiency in the Indian banking sector and a similar trend in the technical efficiency wherein the scores decline from 2014 through 2017 and then they rise subsequently.Supplementary InformationThe online version contains supplementary material available at 10.1007/s40953-021-00247-x.

ECONOMIES OF SCOPE IN THE INDIAN BANKING SECTOR: AN EXAMINATION OF INCOME STRUCTURE

The Indian Banking Sector has exhibited great dynamism in its operations and functions since the introduction of banking reforms in the early 1990s. While the banking reforms have been comprehensive, encompassing several aspects of concern, of particular significance is the entry to private banks, both domestic and foreign, post easing of entry norms that has instilled competition into the system. The entry of new private sector banks and foreign banks in India have led to structural changes in the Indian Banking Sector in terms of ownership pattern, deposit structure, advances and asset-based structure, and so on. On all these dimensions, the degree of privatization of the banking sector in India is rising, even as public sector banks continue to dominate. An important implication of these developments is the increasing thrust of banks on expanding the scope of their operations in order to maintain and increase their profitability, leading to change in the income structure, among other things. Increased use of technology has further enabled delivery of a wider range of financial products and services under the same roof. The present paper seeks to gauge the changes in the bank group-wise income structure in India. The study also compares economies of scope for the three bank groups; viz., public sector banks, private sector banks and foreign banks. The study finds substantial change in the income structure of the three bank groups over two and a half decades post banking reforms. The findings establish the greater scope efficiency of public sector banks in India.

How efficient are public sector banks in India? A non-parametric approach

This study examines the efficiency of Public Sector Banks (PSBs) in India using Data Envelopment Analysis (DEA). Analysis is carried out on a sample of 19 PSBs that are existed during the study period from 2005 to 2018. There are two different aspects deliberated, namely technical efficiency of PSBs and the growth in their productivity. Input variables envisaged for the study are deposits, borrowings, fixed assets, and the number of employees. Loans and advances along with investments act as output variables to measure technical efficiency and productivity. The results indicate that the technical efficiency of PSBs ranges between 97% and 100%. Corporation Bank, Indian Bank, and Oriental Bank of Commerce outperformed their peers with 100% technical efficiency. Productivity growth among the sampled banks during the study period stood between 0.8% and 20%. However, Corporation Bank, Indian Bank, and Oriental Bank of Commerce registered 9.1%, 5.4% and 6.4% productivity growth, respectively. The results reveal that PSBs are working hard to optimize resource utilization. Researchers around the world can use DEA as a tool to measure the efficiency of banks with different input and output variables related to financial, marketing and managerial performance. AcknowledgmentI like to express my profound thanks to Dr Kishore Selva Babu for rendering his language expertise. I also thank all the anonymous reviewers for their valuable comments and feedback that greatly improved the manuscript.

Role of public sector banks towards financial inclusion during pre and post introduction of PMJDY: a study on efficiency review

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.

An Analysis of Revenue Maximising Efficiency of Public Sector Banks in the Post-Reforms Period

Abstract The paper investigates and compares the performance of the Indian public sector banks (PSBs) based on revenue maximising efficiency in the deregulation period from 2001-02 to 2012-13. Several efficiency estimates viz., overall technical efficiency, pure technical efficiency and scale efficiency of individual banks are calculated using Data Envelopment Analysis (DEA). The empirical findings indicate the presence of managerial and scale inefficiencies in the operation of the most of the PSBs. Applying the Tobit regression analysis, the paper also assesses the impact of different environmental factors, like profitability, the level of non-performing assets, size etc. on the efficiency of PSBs. It is observed that banks with high profitability, low level of non-performing assets, and relatively larger size are more technically efficient.

Non-parametric Analysis of Technical Efficiency of Public Sector Banks (PSBs) in India

The aim of the article is to analyze and evaluate technical efficiency scores of public sector banks (PSBs) in India. The study also determines the nature of return to scale (RTS) of individual banks and thereby identifies the leaders and laggards in the PSBs. To measure the extent of overall technical efficiency, pure technical efficiency and scale efficiency (SE), the non-parametric approach, that is, data envelopment analysis (DEA) is used to determine the causes of inefficiency. The sample of the study includes 26 PSBs operating in India during the time period from 2007–2008 to 2011–2012. The results show that although the PSBs have more or less similar efficiency scores, that is, higher than 0.900, still out of 22 banks falling in the category of efficient banks in 2007–2008, only 7 of them were left by the year 2011–2012. Overall analysis of PSBs during the time period of the study explains that a greater part of inefficiency among PSBs is attributed to scale inefficiency. In addition, the number of banks operating at constant return to scale (CRS) came down to 9 in 2011–2012 from 23 in 2007–2008. Simultaneously, there was a reduction in leaders and increase in laggards. It is suggested that banks must optimize their scale of operations and adopt technological innovations.

Evaluating the efficiency of Indian public sector banks

The present paper examines the efficiency of public sector banks in India. The public sector banks have been deliberately chosen for the study, given the fact that even in the third decade of liberalisation, the dominance of public sector banks is still obvious in terms of market share, impact on economy, number of branches, general perception of the people and overall contribution to the financial system. At present there are 26 public sector banks in India including six State Bank of India and its associate banks. In this paper, the efficiency of the public sector banks has been examined with the help of data envelopment analysis using CCR and BCC models. The study makes use of intermediation approach of output. The study is based on three inputs namely; number of branches, deposits and operating expenses and two outputs viz. loans and advances and non-interest income. The results of the study indicate that in all, only two banks are relatively efficient on the basis of CCR model, i.e., overall technical efficiency and as per BCC model (pure technical efficiency) nine banks are efficient. Further, it has been found that the reason for inefficiency of the public sector banks in India for the year 2012-2013 is due to scale inefficiency.

Dynamics of scale effficiency of Indian banks: A deterministic frontier approach

Indian banking sector is characterized with intense competition, amongst the best regulated in the world and rapid growth. Indian banking sector have undergone rapid reforms and liberalization in last two decades, which resulted into advent of new and strong private sector banks, increased technology adoptions, rapid branch expansion, prudential regulations, focus on financial inclusion, market discipline of public sector banks and demanding customers. With Indian Banking system poised to become the world’s 3 rd largest by 2025 and owing to the dynamism in banking sector the paper examines the bank efficiency. Most past studies focused on the impact of some or other regulatory phase, some segments of banking and under constant return scale assumption. Our study is distinct to the extent that we examine the bank efficiency after the Phase III and IV reforms and subprime crisis, across all ownership segments of Scheduled Commercial Banks and under plausible assumption of variable returns of scale given the dynamic banking environment. We employ non-parametric Data Envelopment Analysis using intermediation approach under of variable return of scale. Our study period consist of 2008-2012 post reform and subprime crisis period and covers 26 public, 19 private and 21 foreign banks operating in India. We further examine the variation in efficiency across different ownership groups and small and large bank sizes over the period. Our findings indicate that Public sector banks’ average efficiency scores were better than that of private sector while foreign banks had the lowest efficiency score. Private sector banks had lower heterogeneity in efficiency compared to public sector banks. The smaller banks showed better efficiency compared to larger banks across the ownership groups. We find that the banking reforms have seen improvement in efficiency of public sector banks as compared to private and foreign banks. Thus our findings differ from studies on other emerging markets indicating efficiency improvement of foreign banks as compared to pubic banks. While banks have shown overall efficiency the lower technical efficiency indicate inefficiency in large banks probably due to sub optimal scale and scope efficiency. Our study point outs management of assets, branch rationalization and use of technology to improve the bank efficiency. The study suggests policy focus on reduction of non-performing assets and rationalization of staff and branches to obtain efficiency gain. Regulatory reforms in Indian Banking sector saw improvement in efficiency of public and private banks and efficiency scores differed across various ownership and large and small bank groups.

Assessment of Technical Efficiency of Public Sector Banks in India Using Data Envelopment Analysis

The main aim of the paper is to analyze technical efficiency of Public Sector Banks (PSBs) in India during the period 1990-91 to 2011-12. The paper also examines whether there is statistically significant difference in efficiency of PSBs in the reformatory era (1990-91 to 2000-01) as compared to the post reformatory era (2001-02 to 2011-12). Using CAMEL framework, the paper also investigates the determinants of efficiency of PSBs. The results show that PSBs exhibit higher mean of the efficiency parameters in post reformatory era (2001-02 to 2011-12) than in the reformatory era (1990-91 to 2000-01). PSBs inefficiency is attributed to Pure Technical Inefficiency in reformatory era whereas the same is accredited to scale inefficiency in the post reformatory era. Paired t test shows that there is significant difference in performance of Public Sector Banks in reformatory era and post reformatory in all the Efficiency parameters. The results of Panel Data TOBIT regression suggest that various CAMEL parameters have significant impact on the technical efficiency of PSBs.

Measurement and evaluation of cost, revenue and profit efficiency of public sector banks in India

The aim of the paper is to analyse and evaluate cost, revenue and profit efficiency scores of public sector banks (PSBs) in India during the period 2007-2008 to 2012-2013 by the application of data envelopment analysis (DEA)-a non-parametric approach. The paper also examines the efficiency of individual PSBs and identifies the most and the least efficient bank. The sample consists of 26 PSBs operating in India. The results show that the level of average cost, revenue and profit inefficiency in PSBs is 4.3%, 2.5% and 12.1%, respectively. State Bank of Hyderabad, IDBI, Oriental Bank of Commerce, Corporation Bank, Indian Bank and State Bank of India are quite efficient ones as suggested by the individual performances of these banks. It is suggested that PSBs should take active steps to control NPAs and also bring technological up gradation. Government too should provide them a free hand in their working.

Technical Efficiency of Public Sector Banks in India Using Data Envelopment Analysis

Technical Efficiency of Public Sector Banks in India Using Data Envelopment Analysis

A Study on Technical Efficiency of Public Sector Banks in India

Banking companies in the service sector exhibit the problem of distinct results in terms of efficiency. This problem is a cause of concern for many big organizations in the service sector like hotels, courier companies, hospitals, banks and so on. In particular, the last decade has observed continuous amendment in regulation, technology and competition in the global financial services industry, and Indian banks are no exception. To measure the stability, sustainability and profitability of the banking system, it is therefore crucial to scale the operations of banks performing in India. A well-organized banking system will provide an extensive way to higher economic growth in any country. Thus, evaluating the technical efficiency is important to depositors, owners, potential investors, managers and to policy makers. The present study investigates the technical efficiency of public sector banks in India by considering the study period between 2008-09 and 2010-11and using the data extracted from RBI website (www.rbi.org.in) and IBA website (www.iba.org.in). For this purpose, the data envelopment analysis (DEA) was used with two input variables (Interest expenses and operating expenses) and two output variables (interest income and other income). The efficiency scores were calculated for a sample of twenty-six public sector banks operating in India. The result shows that Corporation Bank, State Bank of India and IDBI were consistently performed efficiently in all the years under study.

Efficiency of public sector banks operating in India: post-reforms period analysis

The Indian banking sector has witnessed a series of reforms since 1991 with the major objective to promote flexibility, operational autonomy and competition in the system and to raise the banking standards in India to the international best practices. There is a change in the importance of public sector banks because of the entry of foreign and private sector banks. In the recent past, the banking industry has succeeded to draw attention of investors by its steady performance and tremendous prospects to grow and to meet broad challenges like threats of risks from globalisation; implementation of Basel II; improvement of risk management systems; implementation of new accounting standards; enhancement of transparency and disclosures etc. The competitive pressures force banks to improve their efficiency scores, and mapping the progressive pathway is an education tool for investors. In this backdrop, this study evaluates the technical efficiency (TE) of public sector banks (PSBs) operating in India during the...

Income-Generating Efficiency of Public Sector Banks in India: An Application of Data Envelopment Analysis

This paper accomplishes the task of examining the inter-bank differentials in income-generating efficiency across 28 Public Sector Banks (PSBs) operating in India during the financial year 2006-2007. The technique of Data Envelopment Analysis (DEA) has been used to compute the efficiency scores for individual PSBs. The empirical findings reveal that PSBs are generating net-interest and non-interest incomes with high level of efficiency which is reflected by the mean efficiency score of 0.918. The study suggests that for improving their performance, the inefficient PSBs should concentrate more on generating non-interest income from the off-balance sheet activities (i.e., nontraditional activities) rather than interest income from the traditional activities like advancing loans and investments in other earning assets.