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The paper examined the competitiveness of Indian scheduled commercial banks in the deregulated period 1996-2002. The data used for the study has been collected from annual reports of Reserve Bank of India. Efficiency change, scale efficiency and pure technical efficiency change between two periods has been estimated by using data envelopment analysis and window analysis. Bank profitability increased and interest margins decreased in the deregulation period. The results indicate that there is an increase in technical efficiency and scale efficiency of most of the banks. The year-to-year variation in technical efficiency explained by variation in scale efficiency and general economic environment rather than variation in pure technical efficiency. Increasing asset quality and priority sector lending can improve scale efficiency. Most of the banks facing decreasing return to scale especially public sector banks due to wide spread bank branches with little interconnectivity. The foreign banks and new private banks exhibited most productive scale size, as they are new entrances into banking industry with well-interconnected bank branches than old private banks and public sector banks. Tobit analysis reveals that both pure technical efficiency and scale efficiency influenced negatively by number of branches per bank, whereas positively influenced by total assets. Share of priority sector advances and asset quality was having positive influence on scale efficiency.
​ The goal of this book is to assess the efficacy of India’s financial deregulation programme by analyzing the developments in cost efficiency and total factor productivity growth across different ownership types and size classes in the banking sector over the post-deregulation years. The work also gauges the impact of inclusion or exclusion of a proxy for non-traditional activities on the cost efficiency estimates for Indian banks, and ranking of distinct ownership groups. It also investigates the hitherto neglected aspect of the nature of returns-to-scale in the Indian banking industry. In addition, the work explores the key bank-specific factors that explain the inter-bank variations in efficiency and productivity growth. Overall, the empirical results of this work allow us to ascertain whether the gradualist approach to reforming the banking system in a developing economy like India has yielded the most significant policy goal of achieving efficiency and productivity gains. The authors believe that the findings of this book could give useful policy directions and suggestions to other developing economies that have embarked on a deregulation path or are contemplating doing so.
This paper provides a comparative analysis of the evolution of the technical efficiency of commercial banks in India and Pakistan during 1988-1998, a period characterised by far-reaching changes in the banking industry brought about by financial liberalisation. Data Envelopment Analysis is applied to two alternative input-output specifications to measure technical efficiency, and to decompose technical efficiency into its two components, pure technical efficiency and scale efficiency. We also check the consistency of our estimated efficiency scores by examining their relationship with three traditional non-frontier measures of bank performance. In addition, we examine the relationship between bank size and technical efficiency. We find that the overall technical efficiency of the banking industry of both countries improved gradually over the years, especially after 1995. Unlike public sector banks in India, public sector banks in Pakistan witnessed improvement in scale efficiency only. We also find that banks are relatively more efficient in generating earning assets than in generating income. We attribute this to the presence of high non-performing loans. In addition, we find that gap between the pure technical efficiency of different size groups has declined over the years.
This paper provides a comparative analysis of evolution of technical efficiency in commercial banking industry in India and Pakistan during 1988-1998, a period characterised by far-reaching changes in financial sector brought about by financial liberalisation. Data Envelopment Analysis is applied to two alternative input-output specifications to measure technical efficiency, and to decompose technical efficiency into its two components, pure technical efficiency and scale efficiency. We also check the consistency of our estimated efficiency scores by examining their relationship with three traditional non-frontier measures of bank performance. In addition, we examine the relationship between bank size and technical efficiency. Our main findings are: (1) technical efficiency of overall commercial banking industry improved in both the countries; (2) public sector banks in India witnessed improvement in both pure technical efficiency and scale efficiency, (3) public sector banks in Pakistan witnessed improvement in scale efficiency only; (4) pure technical efficiency and scale efficiency of private sector banks, foreign and domestic, in both the countries improved after liberalisation; (5) due to high non-performing loans, banks are more efficient in generating loans and advances than in generating income from these assets, and (6) importance of size has declined after the implementation of financial liberalisation.
This study proposes to examine the technical efficiency of New and Old Private Sector Banks in India in recent years. Many firms in the service industry face the problem of dissimilar results in terms of efficiency. In particular, the last decade has witnessed continuous changes in regulation, technology and competition in the global financial services industry, and Indian Banks are no exception to this change. The efficient operation of banks has become an important issue in India. Rising cost-income ratio and declining profitability reflect the enhanced competitive pressure. An efficient banking system contributes, in an extensive way, to higher economic growth in any country. Hence studies of banking efficiency are important for policy makers, industry leaders and many others. The Data Envelopment Analysis (DEA) Approach has been used to measure the relative technical efficiency. The Efficiency Scores of the banks are also decomposed into Pure Technical Efficiency (PTE) and Scale Efficiency (SE). It has been noticed that the observed technical inefficiency in the Indian private sector banks is due to poor input utilization (i.e., managerial inefficiency) and failure to operate at most productive scale size (i.e., scale inefficiency).
This book deals with the issue of convergence in efficiency levels among Indian public sector banks (PSBs) during the post-reforms. To accomplish the task of measuring technical efficiency for individual PSBs, we have used the increasing popular methodology of Data Envelopment Analysis. Further, we have utilized the traditional cross-sectional regression approach for investigating the presence of sigma- and beta-convergence in efficiency levels of PSBs. The empirical results indicate that the majority of PSBs have observed an ascent in technical efficiency during the post-reforms years. Further, the study confirms a presence of convergence phenomenon in the Indian public sector banking industry. This book will be useful for the research scholars intending to work on the efficiency and productivity analysis.
Regional Rural Banks of India: Evolution, Performance and Management is a one-stop reference book on the genesis, growth, performance, and management of the Regional Rural Banks (RRBs) in India. It is the first book of its kind, which comprehensively examines the development of modern banking in India since the ancient period to 2013 and birth, growth, and performance of Regional Rural Banks from 1975 to 2014. It looks at all the facets of operations like structure, financial management, deposits, advances, NPA management, ALM, and risk management practices prevalent in RRBs. It also describes role of IT in RRBs. The book will fill the long-felt absence of an authentic book on the functioning of RRBs of India. The book is expected to serve as a handbook for the new recruits and also as a reference book for the senior bankers and policy makers. The book, rich with volumes of latest data, provides various regulatory guidelines pertaining to day-to-dayoperations, management, and control of the rural banks. The book is targeted at the professionals, academicians, as well as students.
This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.