Efficiency of Indian Public and Private Sector Banks: A Two-Decade Analysis (2001-2021) Using Data Envelopment Analysis
Keywords:
Technical Efficiency, Scale Efficiency, Data Envelopment Analysis (DEA), Constant Return to Scale (CRS), Variable Return to Scale (VRS), Performance Evaluation, Decision-Making Units (DMUs), Scale Efficiency AnalysisAbstract
The paper assesses India’s public and private sector banks' technical Efficiency (T.E.) over the two-decade period from 2001 to 2021. The relative efficiency of twenty-five banks comprising twelve public and thirteen private sector institutions was studied using efficiency data envelope analysis (DEA) under constant and variable return to scale (CRS and VRS) assumptions. The research uncovers interesting findings about the efficiency rankings of these banks and provides valuable insights into the Indian banking sector landscape. The study identifies three banks, Indian Bank, ICICI Bank Ltd., and City Union Bank Ltd., that consistently emerge as the top-performing decision-making units (DMUs) across all three efficiency measures, boasting perfect scores of 1. Indicates their optimal utilization of inputs to generate outputs throughout the study period. These banks have demonstrated exceptional efficiency in the Indian banking sector. Furthermore, the paper scrutinizes scale efficiency (S.E.) scores and highlights Indian Bank's sustained excellence among public sector banks, while ICICI Bank Ltd. and City Union Bank Ltd. shine brightly among their private sector peers in terms of S.E. These findings underscore the importance of scale efficiency in enhancing overall bank performance.
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