Producing Financial Services: An Efficiency Analysis Of Indian Commercial Banks | H.P. Mahesh & Meenakshi Rajeev

The present study attempts to examine the changes in the productive efficiency of Indian commercial banks after the financial sector reforms initiated in 1992. Using stochastic frontier technique we estimate bank specific deposit, advance and investment efficiencies for the period 1985-2004. Our results show that deregulation has significant impacts on all three types of efficiency measures. While deposit and investment efficiencies have improved, advance efficiency has declined marginally. Public sector banks as a group ranks first in all the three efficiency measures showing that, as opposed to the general perception, these banks are doing better than their private counterparts. Private Banks however have shown marked improvement during the post-liberalisation period in terms of all three types of efficiency measures.