| Pub. Date | : May, 2018 |
|---|---|
| Product Name | : The IUP Journal of Bank Management |
| Product Type | : Article |
| Product Code | : IJBM21805 |
| Author Name | : Aparna Bhatia and Megha Mahendru |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 13 |
The main aim of this paper is to assess the revenue efficiency scores of scheduled commercial banks in India categorized across bank ownership. The nature of Return to Scale (RTS) of public, private and foreign banks is also analyzed. The paper further identifies the number of banks operating as leaders and laggards in the banking sector according to revenue efficiency and its components. Revenue efficiency of banks is calculated by employing the non-parametric approach, namely, Data Envelopment Analysis (DEA). The efficiency scores have further been decomposed into technical and allocative efficiency. The differences in the efficiency scores across bank ownership pattern have also been examined by applying Panel Tobit Regression both over the reformatory as well as post-reform years of banking industry. Indian scheduled commercial banks, in all three sectors—public, private and foreign—have never achieved full revenue efficiency score of 1 in any of the years under study. The ownership-wise results for revenue efficiency and its components reveal that public sector banks are in the first position in reformatory era, followed by foreign banks and then private sector banks. In the post-reform period, private sector banks seemed to have picked up their performance in comparison to public and foreign banks, but the differences were insignificant as depicted by the results of Panel Tobit Regression.
Efficiency is defined as the choice of alternatives which produces the largest outputs with the application of given resources or which uses the minimum inputs to produce the given outputs (Mckevitt and Lawton, 1994). A majority of the research papers have focused on technical efficiency, i.e., reducing inputs to the maximum possible extent with the given level of outputs or maximizing the outputs with the given level of inputs without considering their prices like Yue (1992), Bhattacharyya et al. (1997), Saha and Ravisankar (2000), Khanam and Nghiem (2006), Ketkar and Ketkar (2008), Bala and Kumar (2011), Uddin and Suzuki (2011), Gulati (2011), Sharma et al. (2012), Zeitun and Benjelloun (2013), Bhatia and Mahendru (2015) and Bhatia and Mahendru (2016). Merely considering inputs and outputs does not provide much useful information as it does not lead banks to earn financial benefits unless and until their prices are also taken into consideration.
Bank Management Journal, Nature of Return to Scale (RTS) of public, Measurement of Revenue Efficiency of Scheduled Commercial Banks, Private and Foreign Banks, Data Envelopment Analysis (DEA).