Evaluating advance efficiency of Bangladeshi online banks using stochastic frontier analysis

Online bank advance efficiency and various factors causing the efficiency level of banks are investigated using stochastic frontier technique for the period 2001-2007. A sample of 20 banks are used following four different groups like NBs (National Banks), ISBs (Islamic Banks), FBs (Foreign Banks), and PBs (Private Banks). A group wise, year wise, and individual banks with their efficiency scores are compared in this study. The significant variations of advance efficiency of banks during this reference period were observed. The year wise average efficiency of banks was estimated (0.516) from the advance frontier model while group wise average technical efficiency was 0.592. Nationalized Commercial Bank had the highest advances producing group compared to others; Private Banks are at the lowest level in producing advances.  ISBs, FBs, and PBs are observed inefficient in producing advances. The most efficient banks are found to be government owned Sonali and Janata Bank with efficiency score (0.94) while lowest efficient bank was experienced by Shahajalal Islamic Bank with efficiency score of 0.34.   Key words: Advance efficiency, translog production function, stochastic frontier analysis.