EFFICIENCY ANALYSIS OF SELECTED PUBLIC AND PRIVATE SECTOR BANKS IN INDIA THROUGH DATA ENVELOPMENT ANALYSIS

Abstract

The banking industry especially Indian public and private sector banks looked upon as the pivot around which the economic activities revolve. Banking system plays an important role in a nation’s economy. Contribution of banking institution is highly remarkable and is indispensable in a modern society. An efficient banking practice plays a crucial role in the economic development of a country and forms the core of the money market in an advanced country as well as developing country like India. An attempt has been made in this study to evaluate the relative performance of selected public and private sector banks (DMUs) in India through Data Envelopment Analysis (DEA) for the period 2011-12. DEA is typically used to measure the technical efficiency (TE) between 0 to 1 ranges. A careful study of DEA analysis of the selected banks under study highlights the fact that by improved handling of operating expenses and interest costs and by boosting banking incomes, the less efficient banks can successfully achieve optimum performance level. Since this study attempts to maximise output, so output oriented Data Envelopment Analysis is used. The result of the study shows that 7, 11 and 8 banks are found efficient when their efficiency is measured under CRS, PTE and SE method respectively.