Measuring the Efficiency of Private Sector Banks: Evidence from India

摘要

This study examines the profitability of Indian private sector banks using a non-parametric test namely Data Envelopment Analysis (DEA). The study uses Malmquist total factor productivity to examine the shift (inward or outward) of banks’ efficiency frontier during the study period 2011-2013. Only secondary data has been used from the Bankscope database for this study. In this study, emphasis has been given on consolidating the efficiency of Indian private sector banks which is much more expected to the management point of view than the profitability. This study uses three input variables and three output variables to measure bank efficiency. The specific findings of this research shows that the private sector of Indian banks did not achieve progress in all respect during the study period, the banks with higher loan loss reserve and large liquidity reserve have been found as the most regressed banks, and the banks with higher progress have diversified the profit successfully from both interest and not-interest income. The limitations and policy implications of this study have been presented. The scope of future studies has also been addressed.