Productivity of Islamic and Conventional Banks of Malaysia: An Empirical Analysis

--Farhana Ismail and Rossazana Ab. Rahim

The paper presents the productivity change of Malaysian banks for the period 2006-09 by employing Malmquist productivity index. The results reveal that throughout the study period, the productivity of Islamic banks (10.4%) was higher than that of the conventional banks (0.9%). Also, on an average, productivity across Malaysian banking industry increased at an annual rate of 5.4%, which was mainly due to technical change rather than efficiency change. Therefore, this study suggests that Malaysian commercial banking industry can further increase its total factor productivity by improving its efficiency component.

© 2013 IUP. All Rights Reserved.

Banking Sector Development and Economic Growth in OECD Countries: Panel VAR Evidence

--Rudra P Pradhan, Prateek Dasgupta, Bele Samadhan
and Sasikanta Tripathy

The paper examines the causality relationship between banking sector development (BSD) and economic growth (GDP) by using panel VAR model. Using data from selected 34 OECD countries, the study finds Granger causality between BSD and GDP. The paper suggests that banking sector indicators can be considered as the policy variable to accelerate economic growth in OECD countries. The policy implication of this study is that the economic policies should recognize the differences in the banking sector development-growth nexus in order to maintain sustainable economic growth in the region.

© 2013 IUP. All Rights Reserved.

Operational and Market-Based Efficiencies of Indian Commercial Banks: A Comparative Study

--Sanjeev C Panandikar

This paper examines how public, private and foreign banks maintain their efficiencies. The bank-wise data for seven criteria of efficiency for financial years 2001-02 to 2009-10 is decomposed, using factor analysis and multidimensional scaling, to obtain two different measures of efficiencies called operational and market-based efficiency. It is observed that for the study period, the banks differed significantly in terms of market-based efficiencies but not in terms of operational efficiency. It is also observed that the foreign banks have the highest average market-based efficiency.

© 2013 IUP. All Rights Reserved.

Growth, Profitability and Productivity in Public Sector Banks: An Assessment of Their Interrelationship

--Dhananjay Bapat

The study examines the relationship among growth, profitability and productivity for Indian public sector banks. For measuring profitability, Return on Assets (ROA) was selected and for assessing productivity, business per employee and profit per employee were used as measures. We chose Indian public sector banks as they contribute 74.20% to total deposits of scheduled commercial banks and 75.07% to the total credit of scheduled commercial banks. The study intends to assess whether differing growth rates of Indian public sector banks have any impact on profitability and productivity. During the study period (2005-2012), the business of the Indian public sector banks grew at a compounded annual growth rate of 18.7%. The study concludes that change in growth rates does not significantly affect the profitability. The business per employee and profit per employee for public sector banks remained higher for banks with higher growth rates. We observed significant differences for business per employee for all the years and for profit per employee for four out of seven years.

© 2013 IUP. All Rights Reserved.

Analysis of Service Quality Gap in Indian Banking Industry

--Sunayna Khurana

All the banks in India offer similar kind of services, but may vary in terms of service quality. This paper analyzes the gap between customer expectation and customer perception in the service delivery of retail banks. A sample of 200 customers from 10 top performing banks of Hissar city in Haryana were selected for the study. The responses of the customers were analyzed with the help of factor analysis, and seven factors were extracted. The results show that there is a huge gap between perception and expectation in the case of tangibility dimension of service quality and low in the case of competency. The study suggests that the banks should improve their service quality towards tangibility to maximize customer satisfaction.

© 2013 IUP. All Rights Reserved.

International Trade Financing by Banks: Addressing the Risk

--Smita Roy Trivedi

This paper looks at the process of trade financing decisions taken by banks and the inherent risks associated with such decisions for both import and export financing. Non-receipt of payment from the foreign counterparty for export bills financed by banks in India requires the fixation or ‘crystallization’ of the rupee liability of the bill after specified days in accordance with Reserve Bank of India regulations. The amount is then recovered by banks in rupees from the account of the exporter client. Using data on crystallized and/or overdue bills from the two large public sector banks in India, the paper identifies key independent variables which could impact the event crystallization or otherwise of the export bill. Using logistic regression analysis, we examine the significance of these variables and check the viability of the trade finance scoring model, which can help bankers to objectively ascertain risks associated with each trade transaction financed.

© 2013 IUP. All Rights Reserved.