Benchmarking with a Dynamic
DEA Model: Evidence from
Indian Banking Sector
-- Ram Pratap Sinha
There was a paradigm shift in the competition scenario of the Indian commercial banking sector as a consequence of the initiation of banking sector reforms and opening up of the banking sector to the foreign participants in a gradual fashion. The present paper benchmarks the performance of public sector, private sector and foreign banks operating in India for the period 2006-07 to 2010-11 through a ‘Dynamic Slacks-Based DEA Model’. The study also computes factor efficiency indicator for the output and link variables.
© 2016 IUP. All Rights Reserved.
Geographic Diversification
in Indian Banking: Assessing the
Impact on Risk and Returns
-- Joyeeta Deb and Gautam Sen
Indian banking sector has undergone sea changes over the years. Much of these changes are the consequences of irreversible process of liberalization, globalization and privatization. Banks in India, to a large extent, have become functionally dynamic and operationally efficient. One of the important developments one can witness in the sector is the growing scale of geographical and revenue diversification over the years. Geographical diversification is expected to bring positive results by way of reduced risks and increased returns for the Indian banks. Against the backdrop of existing literature which renders diverse views about the diversification benefits, the present study examines the manner and the extent to which banks are geographically diversified in the case of both public and private sector banks and analyzes its impact on the performance measured in terms of returns. The study uses a panel dataset of 40 observations for the period 1994-2014. In order to examine the impact of geographical diversification on bank’s risk and returns, a Least Square Dummy Variable (LSDV) regression model is used. The results indicate that public sector banks are more diversified than private sector banks and the geographical diversification has a negative impact on the returns of the banks.
© 2016 IUP. All Rights Reserved.
The Performance of Regional Rural Banks and Non-Banking Institutions
in Priority Sector Lending:
A Study on West Bengal
-- Mahua Bhattacharya and Paromita Dutta
This paper addresses two main questions: Are the Regional Rural Banks (RRBs) and non-banking institutions of West Bengal performing well in the remotest part of rural areas? If so, how pervasive are they in priority sector lending? To address these questions, a study was undertaken by selecting a sample of 125 respondents from different remotest rural areas of West Bengal and the responses collected for each of the five different priority sectors, viz., agriculture, micro and small-scale enterprises, education, housing and others (includes Self-Help Groups (SHGs), joint liability groups, other backward classes, women, etc.), were analyzed. The study involved a two-step empirical procedure: exploratory factor analysis and Structural Equation Modeling (SEM). The findings of this study provide that apart from ‘others’ sector, none of the remaining priority sectors gives a positive indication about the effect of the performance of RRBs and non-banking institutions in priority sector lending. Due to the rising cost of Non-Performing Assets (NPAs), in the near future, operations of RRBs can only be improved if they are merged with sponsor banks or by going through the privatization route.
© 2016 IUP. All Rights Reserved.
The Impact of Acquisition of an Insurance Company on Bank’s Financial Performance:
A Study on the Acquisition of Metlife India Insurance Co. Ltd. by Punjab National Bank
-- N M Leepsa and Ranjit Singh
This paper examines the impact of acquisition of an insurance company on a bank’s financial performance in the light of the acquisition of Metlife India Insurance Co. Ltd. by Punjab National Bank (PNB). The paper aims to study (a) whether positive or negative cumulative excess returns have accrued to PNB shareholders during the acquisition announcement; (b) whether there is any improvement in the financial and operating performance of PNB because of acquiring an insurance company; and (c) what are the reasons for the improvement or deterioration in the performance of the banking and insurance firms that opt for M&A. The present study uses CAMEL model and regression analysis for analyzing the three-year average performance before and after the bancassurance for the period of study, i.e., 2008 to 2014. The results reveal that in the short run, the indifferent behavior shown by the stock market is the cause of concern for the bank. The bank should take appropriate measures to disseminate the information with respect to its acquisition of an insurance company to its investors. But in the long run, the impact of acquisition of an insurance company is felt on the bank’s financial and operating performances.
© 2016 IUP. All Rights Reserved.
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