“Perform or Perish” appears to be the new mantra for Indian banking, in tune with the global trends. The entry of private banks in the Indian banking sector in the wake of liberalization has greatly impacted the performance and efficiency of the banking sector. Banks are vying with each other, even those under the same umbrella of government ownership, to improve upon their overall rating through better indicators of performance under different parameters. This is not unique to India, but is part of a global phenomenon, as the boundaries of economy, trade and commerce are gradually vanishing and markets of all categories across the globe are getting integrated, exposing all the players to intense competition.
At the same time, evaluation and assessment of performance and efficiency factors in the global banking in general and the Indian banking in particular have been the focus of attention of academic research in the last two decades, given the increased competition in this era of liberalization, privatization and globalization. Various tools, instruments and models are being used by researchers for analyzing the variables of performance and efficiency. Accordingly, the present issue dwells mainly on the performance and efficiency issues, with special reference to Indian banking.

In this context, the first paper, “A Comparison of the Performance of Commercial Banks: DEA Evidence for India”, by Ram Pratap Sinha, makes an attempt to evaluate the performance of 49 Indian commercial banks for the period 2006-07 to 2010-11 using Seiford and Joe Zhu (2002) approach, which is essentially a variant of the popular Banker-Charnes-Cooper (BCC) model. According to the author, in the last two decades, numerous studies have used parametric and non-parametric techniques to estimate commercial bank productivity and efficiency in the Indian context. However, none of them has considered undesirable outputs in their analytical framework and the author, in his present paper, tries to fill this gap.

The second paper, “Determinants of Cost Efficiency of Commercial Banks in India: DEA Evidence”, by Dalip Raina and Supran Kumar Sharma, examines the cost efficiency of Indian commercial banks using Data Envelopment Analysis (DEA), specifically incorporating interest and non-interest income measures in the estimation. In conformity with the earlier findings, the results show that there is substantial inefficiency among the commercial banks in India over the period of the study (2005-06 to 2010-11). This result suggests that the observed cost inefficiency in the Indian banking industry is primarily due to the regulatory environment in which scheduled commercial banks are operating rather than the managerial problems in using the financial resources. The results further signify that the level of competitive practices and technology in the Indian banking industry during the post-reforms period served as a catalyst in improving the level of cost efficiency.

The third paper, “Performance Appraisal of Indian Banks Using CAMELS Rating”, by Mihir Dash and Annyesha Das, states that the banking sector has undergone a complex but comprehensive phase of restructuring since 1991, with a view to making itself sound and efficient, while forging its links firmly with the real sector for promotion of savings, investment and growth. There has been some improvement in the Indian banking sector after the reforms, and CAMELS framework is a natural framework to analyze this improvement. Under the CAMELS framework, banks are required to enhance capital adequacy, strengthen asset quality, improve management, increase earnings and reduce sensitivity to various financial risks.

The next paper, “Role of HR Practices and KM Tools in Knowledge-Sharing Behavior of Internal Customers at Commercial Banks in Delhi”, by Karishma Gulati and Shikha N Khera, deals with all important Human Resource (HR) practices in banks. The paper focuses on various aspects of HR practices, including team building, empowerment, performance appraisal, pay system, supervisor’s guidance, work environment, reward system, recruitment, training, strategic development of staff and creativity of employees. These HR practices, with the help of Knowledge Management (KM) tools (after-action reports, brainstorming and group discussion, artificial intelligence, database and web-base, and expert system), are perceived to ignite a spark in the employees to share their knowledge with others in the organization.

The last paper, “The Impact of Electronic Banking on Banking Transactions:
A Cost-Benefit Analysis”, by Rimpi Kaur, deals with another burning issue of paperless banking, as banks are increasingly shifting from paper-based to electronic transactions. As of today, 50% of total transactions are electronic-based, and this share is increasing at an incredible rate. Hence, there is a need to explore the effects of electronic banking on business operations of banks. In this context, the paper analyzes the extent of computerization, expenditure on electronic banking and cost-benefit analysis of paper-based and electronic transactions. The paper also evaluates the effect of transactions on cost and value through correlation-coefficient and concludes that electronic banking has positive and significant impact on the cost and value of transactions.

-- S C Bihari
Consulting Editor