Efficiency of Public Sector, Private and Foreign Banks in India

Abstract: This paper examines the technical efficiency (TE) and its components namely scale efficiency (SE) and pure technical (PTE) of the 65 banks (comprising of public, domestic private and foreign) using non-parametric Data Envelopment Analysis (hereafter DEA) within intermediation and operating approach functioning in India over the period 2004–05 (hereafter, 2005) to 2019 –20 (hereafter, 2020). Average TE, PTE and SE scores of the overall sample over the entire period within intermediation approach are 67.69, 82.51, and 83.08 percent respectively. However, average TE, PTE and SE for the overall sample during the study period under operating approach is 81.51, 92.25 and 88.40 percent respectively. Moreover, public sector banks follow better organization than foreign banks and local private under both strategies. Thus, bank management should formulate necessary policy guidelines to further improve their efficiency scores either by lower their input level or increasing their output to make these banks more efficient. Keywords: DEA, Technical Efficiency, Bank, India JEL Classification Number: G21