Article: Evaluating the efficiency of Indian public sector banks Journal: International Journal of Indian Culture and Business Management (IJICBM) 2016 Vol.13 No.2 pp.226 - 242 Abstract: The present paper examines the efficiency of public sector banks in India. The public sector banks have been deliberately chosen for the study, given the fact that even in the third decade of liberalisation, the dominance of public sector banks is still obvious in terms of market share, impact on economy, number of branches, general perception of the people and overall contribution to the financial system. At present there are 26 public sector banks in India including six State Bank of India and its associate banks. In this paper, the efficiency of the public sector banks has been examined with the help of data envelopment analysis using CCR and BCC models. The study makes use of intermediation approach of output. The study is based on three inputs namely; number of branches, deposits and operating expenses and two outputs viz. loans and advances and non-interest income. The results of the study indicate that in all, only two banks are relatively efficient on the basis of CCR model, i.e., overall technical efficiency and as per BCC model (pure technical efficiency) nine banks are efficient. Further, it has been found that the reason for inefficiency of the public sector banks in India for the year 2012-2013 is due to scale inefficiency. Inderscience Publishers - linking academia, business and industry through research

Title: Evaluating the efficiency of Indian public sector banks

Authors: Ashish Kumar; Sanjay Dhingra

Addresses: University School of Management Studies, GGSIP University, Dwarka, New Delhi – 110078, India ' University School of Management Studies, GGSIP University, Dwarka, New Delhi – 110078, India

Abstract: The present paper examines the efficiency of public sector banks in India. The public sector banks have been deliberately chosen for the study, given the fact that even in the third decade of liberalisation, the dominance of public sector banks is still obvious in terms of market share, impact on economy, number of branches, general perception of the people and overall contribution to the financial system. At present there are 26 public sector banks in India including six State Bank of India and its associate banks. In this paper, the efficiency of the public sector banks has been examined with the help of data envelopment analysis using CCR and BCC models. The study makes use of intermediation approach of output. The study is based on three inputs namely; number of branches, deposits and operating expenses and two outputs viz. loans and advances and non-interest income. The results of the study indicate that in all, only two banks are relatively efficient on the basis of CCR model, i.e., overall technical efficiency and as per BCC model (pure technical efficiency) nine banks are efficient. Further, it has been found that the reason for inefficiency of the public sector banks in India for the year 2012-2013 is due to scale inefficiency.

Keywords: bank efficiency; data envelopment analysis; DEA; pure technical efficiency; PTE; scale efficiency; CCR model; Charnes-Cooper-Rhodes; BCC model; Banker-Charnes-Cooper; India; public banks; banking industry; scale inefficiency; bank branches; bank deposits; operating expenses.

DOI: 10.1504/IJICBM.2016.078041

International Journal of Indian Culture and Business Management, 2016 Vol.13 No.2, pp.226 - 242

Received: 24 Jul 2015
Accepted: 19 Sep 2015
Published online: 31 Jul 2016 *

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Title: Evaluating the efficiency of Indian public sector banks

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