Branch Level Efficiency and its Decomposition of Meghalaya Co-Operative Apex Bank Ltd

Co-operative banking, in most of the countries mainly in developing and transitional economies, has gained renewed importance mainly following the major thrust on financial inclusion and inclusive growth. These Institutions are considered as a potential instrument to bring people from far-flung areas under the formal banking network. In our country, several reform measures are initiated for the banking sector in order to make them competitive, operationally efficient and functionally independent and in its response, the post reform era have displayed enormous growth and progress on the part of commercial banks counted on measures like CD ratio, ROA etc. But the co-operative banks are yet to report similar results. Most of these banks are still characterized by poor returns, outreach, CD ratio etc. But importance of these banks can hardly be over emphasized in a region like North-East India where co-operative banks and commercial banks are the major tools for financial intermediation. Ensuring healthy performance of such banks is crucial for the overall economic development of the region. Thus, the present study intends to evaluate the level of efficiency at the branch level of one of the State Co-operative Banks having its presence through a wide network of bank branches in one of the states of the region, i.e.; The Meghalaya Co-operative Apex Bank Limited having its presence in the state of Meghalaya. Besides, the study also intends to identify the major factors responsible for efficiency/inefficiency at the branch level. The study is based on five years data from 2008 to 2012. The Data Envelopment Analysis (DEA) is used to estimate the efficiency scores and further the efficiency scores are regressed using the Tobit model to identify the determinants of efficiency/inefficiency.