Efficiency analysis by using Data Envelop Analysis model: evidence from Indian banks

Abstract

The structure of Indian banking has substantially changed over the past decades, partially as a result of adoption of new technologies and process of reforms and accompanying deregulation has embodied an incentive for bank management to focus on improving efficiency, especially given the more competitive banking environment. This study aims to examine the efficiency of Indian commercial banks during 2000 – 2010 by utilizing Data Envelopment Analysis (DEA). Based on the sample of 8 commercial banks, our findings reveal that the mean of cost (economic) efficiency, technical efficiency, and allocative efficiency are 0.991, 0.995, and 0.991 in VRS model and 0.936. 0.969, and 0.958 in CRR model, respectively using DEA approach. Inputs and outputs of this study were analyzed based on intermediation approach. In addition, the results suggest that Bank of India and ICICI bank are more efficient as compare to other banks in India and result confirmed that selected Public Sector Banks are more efficient than Private sectors during the study period in India.