Technical Efficiency of Banking Industry in India: A Longitudinal Analysis

This paper examines technical efficiency and its correlates in respect of the banking industry in India during 1995-2016. Using Data Envelopment Analysis to the RBI dataset for 51 banks, it revealed that technical efficiency score for all the banks measured at 0.8949,in turn, meant that the inputs of these banks were required to be reduced by 10.51 per cent. Managerial under-performance (pure technical inefficiency) accounted for 5.27 percentage points and the remaining amount by scale inefficiency. Thus, both managerial and scale inefficiencies contributed almost equally in the technical inefficiency. Public sector banks, private sector banks and foreign banks were found to operate at 89.33, 87.64 and 97.76 per cent level of overall technical efficiency respectively.