Efficiency of Private Banks in India–A Critical Inquiry

The focus of this study is efficiency of fifteen private banks operating in India. The study for 2005-2016 applies the two-input, two-output Data Envelopment Approach (DEA) under the variable returns to scale assumption. The study finds dominance of the three leading banks, namely HDFC Bank, ICICI Bank and Kotak Mahindra Bank. The overall sector shows tremendous resilience during the period with mean efficiency not falling below 90 Percent in any of the years. IndusInd Bank, Karnataka Bank and South Indian Bank are 'poor performers' in the group and have immense scope for improvement. The application of Welch test shows the existence of significant difference in the efficiency score among the three groups of banks (based on their size) which is again confirmed in the pair-wise result obtained through Scheffe test. The conclusive part of the analysis shows lack of σ-convergence of efficiency score during the period.