Assessment of Technical Efficiency of Public Sector Banks in India Using Data Envelopment Analysis
Keywords:Technical Efficiency, Public Sector Banks (PSBs), India, Data Envelopment Analysis (DEA), Panel Data Tobit Regression
The main aim of the paper is to analyze technical efficiency of Public Sector Banks (PSBs) in India during the period 1990-91 to 2011-12. The paper also examines whether there is statistically significant difference in efficiency of PSBs in the reformatory era (1990-91 to 2000-01) as compared to the post reformatory era (2001-02 to 2011-12). Using CAMEL framework, the paper also investigates the determinants of efficiency of PSBs. The results show that PSBs exhibit higher mean of the efficiency parameters in post reformatory era (2001-02 to 2011-12) than in the reformatory era (1990-91 to 2000-01). PSBs inefficiency is attributed to Pure Technical Inefficiency in reformatory era whereas the same is accredited to scale inefficiency in the post reformatory era. Paired t test shows that there is significant difference in performance of Public Sector Banks in reformatory era and post reformatory in all the Efficiency parameters. The results of Panel Data TOBIT regression suggest that various CAMEL parameters have significant impact on the technical efficiency of PSBs.