The Role Of Ownership And Reforms In Shaping Bank Efficiency In India: A Two-Stage Dea Approach

This study employs imbalanced panel data for three categories of ownership to assess the effectiveness of India’s commercial financial institutions. To achieve this objective, the Data Envelopment Analysis (DEA) approach is applied. The results reveal that international banks demonstrate superior input–output efficiency compared to both public and private sector banks in India. Analyzing the efficiency variations of commercial banks further indicates that, unlike the first phase of banking sector reforms, the second phase witnessed substantial heterogeneity in bank performance. Over time, reforms have contributed to greater variability in commercial banks’ efficiency levels. Moreover, the findings suggest that inefficient utilization of inputs in public and private sector banks calls for corrective measures to enhance productivity. The second-stage analysis shows that non-performing assets adversely affect efficiency scores, whereas total assets, return on assets, ownership structure, and the capital adequacy ratio exert a positive influence. Overall, foreign banks operate more efficiently than their public and private counterparts, largely due to relatively flexible regulations and more effective resource allocation practices..