Premium
Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period
Author(s) -
Das Abhiman,
Ghosh Saibal
Publication year - 2005
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2005.06.002
Subject(s) - data envelopment analysis , capital adequacy ratio , intermediation , tobit model , benchmarking , nonparametric statistics , deregulation , economics , financial ratio , capital allocation line , inefficiency , econometrics , net interest margin , non performing loan , financial system , loan , finance , statistics , macroeconomics , microeconomics , mathematics , incentive , management
The paper investigates the performance of Indian commercial banking sector during the post reform period 1992–2002. Several efficiency estimates of individual banks are evaluated using nonparametric Data Envelopment Analysis (DEA). Three different approaches viz., intermediation approach, value‐added approach and operating approach have been employed to differentiate how efficiency scores vary with changes in inputs and outputs. The analysis links the variation in calculated efficiencies to a set of variables, i.e., bank size, ownership, capital adequacy ratio, non‐performing loans and management quality. The findings suggest that medium‐sized public sector banks performed reasonably well and are more likely to operate at higher levels of technical efficiency. A close relationship is observed between efficiency and soundness as determined by bank's capital adequacy ratio. The empirical results also show that technically more efficient banks are those that have, on an average, less non‐performing loans. A multivariate analysis based on the Tobit model reinforces these findings.