1. A Report
On
“Analysis of the Profitability and Efficiency of Different Branches of
UCO Bank and Suggest Ways to Augment them”
By
Ashish Agarwal
Roll No-121115
Section A
Organisation: UCO Bank
Date of Joining: 3rd
April, 2013
Faculty Mentor: Prof. Devesh Baid
2. INTRODUCTION
Banking has become a part and parcel of our life. One can’t imagine even a single day without
having to a transaction. Initially banks started off as a safe house where money can be stored and
guarded safely but now banks have other uses like giving out loans and credit facilities which is
very instrumental in driving the businesses of today. It is a major source of revenue for the bank.
Banks have also become instrumental in the upliftment of the economy of any country by fostering
investment and helping the country in the path of development. Globalization gave a new
dimension to the banking industry by increasing the number of players in the market it fostered
competition and forced banks to focus more on the customers’ satisfaction and improving the
operations to improve the profitability of the bank. Also one of the most important aspect to
measure the bank’s performance is to reduce cost of providing services to the customers and also
earn a non interest income which increases the profitability of the bank.
This study will focus on the parameters which are instrumental in determining the profitability of
the bank and we will also benchmark different branches of UCO Bank based on different models of
profitability and efficiency, identify the gaps in performance and find out ways to augment the
performance.
HISTORY OF BANKING IN INDIA
The start of banking can be traced back to the Vedic Period around 1750 B.C. Also in the Mauryan
dynasty there was an instrument called adesha was used which is corresponding to the bills of
exchange as we understand today.
Modern banking started with the establishment of the Bank of Hindustan in 1870. Later, three
presidency banks under Presidency Bank's act 1876 (Bank of Calcutta, Bank of Bombay and Bank
of Madras were set up) which laid foundation for modern banking in India. In 1921 all presidency
banks were amalgamated to form the Imperial Bank of India.
Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was constituted as
an apex body without major government ownership. Banking Regulations Act was passed in 1949.
This regulation brought RBI under government control. Under the act, RBI got wide ranging
powers for supervision & control of banks. In 1955, RBI acquired control of the Imperial Bank of
India, which was renamed as State Bank of India. In 1959, SBI took over control of eight private
banks floated in the erstwhile princely states, making them as its 100% subsidiaries. From 1960 till
1969 RBI reduced the total number of banks from 566 in 1951 to 85. Nationalisation of banks was
to make them play the role of catalytic agents for economic growth. The Narasimha Committee
report suggested wide ranging reforms for the banking sector in 1992 to introduce internationally
3. accepted banking practices. The amendment of Banking Regulation Act in 1993 saw the entry of
new private sector banks.
STRUCTURE OF INDIAN BANKING INDUSTRY
Banking Industry in India functions under the sunshade of Reserve Bank of India - the regulatory,
central bank. Banking Industry mainly consists of:
• Commercial Banks
• Co-operative Banks
The commercial banking structure in India consists of: Scheduled Commercial Banks Unscheduled
Bank. Scheduled commercial Banks constitute those banks which have been included in the Second
Schedule of Reserve Bank of India (RBI) Act, 1934.
For the purpose of assessment of performance of banks, the Reserve Bank of India categorise them
as public sector banks, old private sector banks, new private sector banks and foreign banks. The
figure shows the structure of Indian Banking Industry:
5. HISTORY OF THE ORGANIZATION
The idea of a truly Indian bank was first conceived of by Mr. G.D Birla, the doyen of Indian
Industrial renaissance, after the historic "Quit India" movement in 1942. Soon this nascent idea
came into reality and, on the 6th of January 1943, The United Commercial Bank Ltd. was born with
its Registered and Head Office at Kolkata. The very first Board of Directors was represented by
eminent personalities of the country drawn from all walks of life, and this all-India character of the
Bank has been assiduously maintained till date not only in the composition of its Board but also in
the geographical spread of its 2500 and more branches in the country as well as in its overseas
centres in Singapore and Hong Kong.
Having traversed periods of expansion and consolidation, the Bank was nationalized by the
Government of India on the 19th July 1969 whereupon 100 per cent ownership was taken over by
the government in UNITED COMMERCIAL BANK. This historic event brought about a sea-
change in the entire fabric of the bank's thinking and activities, commensurate with the
government's socio-political approach of mass banking as against class banking hitherto practised.
The Bank had gone for Rs.200 crore of IPO during the year 2003-04 and is now a listed Company.
As on 31.03.2012 Government Share-holding of the Bank was 65.19 per cent. Branch expansion
started at a fast pace, particularly in rural areas, and the bank achieved several unique distinctions in
Priority Sector lending and other social uplift activities. To keep pace with the developing scenario
and expansion of business, the Bank undertook an exercise in organizational restructuring in the
year 1972. This resulted into more functional specialization, decentralization of administration and
emphasis on development of personnel skill and attitude. Side by side, whole hearted commitment
into the government's poverty alleviation programmes continued and the convenorship of State
Level Bankers' Committee (SLBC) was entrusted on the Bank for Odisha and Himachal Pradesh in
1983.
The year 1985 opened a new chapter for the Bank as the name of the Bank changed to UCO BANK
by an Act of Parliament. The customer friendly and socially committed character, however,
remained even with this change in name which has, over the years, been regarded as one of the well
known and vibrant banks in the country. Today, with all its inner strengths, UCO Bank has come a
long way to symbolize friendliness for customers and efficiency in its banking business. Truly,
UCO Bank HONOURS YOUR TRUST.
6. BOARD OF DIRECTORS
Shri Arun Kaul
Chairman & Managing Director
Shri N. R. Badrinarayanan
Executive Director
Shri S.Chandrasekharan
Executive Director
Shri Pravin Rawal
Director
Prof. Sebastian Luckose Morris
Director
CA Manoj Kumar Gupta
Director
Shri B.P.Vijayendra
Director
Shri D.N.Thakur
Director
Mr. Pratha Chanda
Director
7. SIZE OF THE ORGANIZATION
The total staff strength of the Bank as of 31st
March, 2012 stood at 23,529 including 112 employees
serving overseas, 15 of which are expatriate officers. The total domestic staff strength of 23,147
comprises of 9059 officers, 9171 clerks and 4917 subordinate staff. (Source: UCO Bank, Annual
Report 2011-12).
As of March 2012 UCO Bank has 8 Circle Offices, 36 Zones and 2394 branches, which include
four overseas branches, two each in Singapore and Hong Kong. The Bank has strengthened its pan
India network by opening 188 operating branches in 2011-12, which takes the total figures to 2390
as of March, 2012. To have a better and focussed monitoring over the performance of the branches
the Bank had added one more zone, namely PUNE zone which takes the total no of zones of the
bank from 35 in March 2011 to 36 in March 2012. The population category wise classification of
domestic branches is given below:
The bank has a good network of specialized branches catering to the specialized or specific
requirements with specialized skills. The bank has designated 70 Personalized Banking Branches in
2011-12, taking the number to 287 in March, 2012. The bank has also put a serious effort to retail
business by opening 13 new Retail Loan Hubs during the year 2011-12 to increase the total number
39 as of March, 12. There has been 62 ultra-small branches launched, to enhance financial inclusion
in the unbanked regions, during the year 2011-12. Also the growth of alternative delivery channels
has also aided and enhanced the working of UCO Bank.
8. As on
31.03.2011
As on
31.03.2012
Growth in FY 2011-
12
No of ATM's 608 864 256
UCO Visa Debit Cards 13.31 lac 18.93 lac 5.62 lac
Cards Issued / month 42148 50819 8671
e-Banking Users 76561 130497 53936
BUSINESS PROFILE
During the year 2011-12, the Bank showed a respectable growth in all the business parameters.
Here are some of the statistics which will show the performance of UCO Bank on a global basis.
There are also charts which show separately its performance in domestic markets as well as
overseas.
GLOBAL FY 11 FY12 Growth in %
Deposits 145278 154003 6.01
Advances 100561 117504 16.85
Total business 245839 271507 10.44
DOMESTIC FY 11 FY12 Growth in %
Deposits 136415 142017 4.11
Advances 93246 107840 15.65
Total business 229661 249857 8.79
OVERSEAS FY 11 FY12 Growth in %
Deposits 8863 11986 35.24
Advances 7315 9664 32.11
Total business 16178 21650 33.82
As per the financial statement given in the website of UCO Bank we have the results of the global
business of UCO Bank as on 31st
March 2013.
GLOBAL FY 12 FY13 Growth in %
Deposits 154003 173431 12.62
Advances 115540 128282 11.03
Total business 269543 301713 11.94
9. Profitability Ratios
The following chart shows the profitability ratios of UCO Bank.
Financial Ratios Mar-11 Mar-12
ROA in % 0.66 0.69
Cost to Income Ratio in % 43.51 42.24
Book value / share in INR 83.16 94.72
EPS in INR 14.29 15.02
NIM in % 3.07 2.77
Performance Indicators
Given below are some of the performance indicators which shows the performance of UCO Bank
for last five years.
10. Apart from all these UCO Bank has taken several initiatives to improve the banks CASA deposits
by launching different schemes like “UCO Suvidha” and attractive RD scheme like “UCO
Sowbhagya” to boost deposit volume.
The bank is also attaching utmost importance to the customer service and is continuosly reviewing
its business practices to provide the best banking facility to its customers. Transperency has been
maintained by hosting on the website a link for customer grievence redressal. UCO Bank has
brought down customer complaints to a very low level by prompt redressal.
VISION AND MISSION STATEMENT
Vision Statement: To emerge as the most trusted, admired and sought-after world class financial
institution and to be the most preferred destination for every customer and investor and a place of
pride for its employees.
Mission Statement: To be a Top-class Bank to achieve sustained growth of business and
profitability, fulfilling socio-economic obligations, excellence in customer service; through up
gradation of skills of staff and their effective participation making use of state-of-the-art
technology.
UCO Bank, with years of dedicated service to the Nation through active financial participation in all
segments of the economy - Agriculture, Industry, Trade & Commerce, Service Sector,
Infrastructure Sector etc., is keeping pace with the changing environment. With a countrywide
network of more than 2500 service units which includes specialised and computerised branches in
India and overseas, UCO Bank has marched into the 21st Century matched with dynamism and
growth.
11. SWOT ANALYSIS
UCO Bank is one of the many banks in the public sector and due to the emergence of private sector
banks there is a lot of competition in the market. To stay in the market an organization should
always conduct a SWOT analysis to see its standing with respect to other players in the industry.
The next figure demonstrates the SWOT analysis of UCO Bank and identifies the strengths,
weaknesses, opportunities and threats pertaining to UCO Bank in the current scenario.
Strengths Weaknesses
1. Improved Net Interest Margin 1. Asset Quality
2. Strong Distribution Network 2. Rising amount of NPA's
3. Low amount of advances
4. Large number of cost centres
Opportunities Threats
1. Support of the Government 1. Changing Interest Rates and RBI Policy
2. Opportunities through financial inclusion 2. Intense Competition
3. Capital Flow Prospects to Developing Countries 3. Global Economic Imbalances
5 FORCES MODEL FOR INDIAN BANKING INDUSTRY
Although the strength of each force can vary from industry to industry, the forces, when considered
together, determine long-term profitability within the specific industrial sector. Collectively, the
five forces affect prices, necessary investment for competitiveness, market share, potential profits,
profit margins, and industry volume. The key to the success of an industry is analyzing the changing
dynamics between and within the five forces. Porter's model depends on the concept of power
within the relationships of the five forces.
Porters 5 force model can help us determine the factors involved and various market forces that
influence the functioning of the Bank business model. It helps in understanding the level of
competition the banking industry faces, competition is an important factor to determine the level of
profits the banking industry can achieve.
12. Porters Five Forces Model
Bargaining Power of Suppliers: The term 'suppliers' comprises all sources for inputs that are
needed in order to provide goods or services. The suppliers of capital might not pose a big threat,
but the threat of suppliers luring away human capital does. If a talented individual is working in a
smaller regional bank, there is the chance that person will be enticed away by bigger banks,
investment firms, etc.
Threat of New Entrants: New entrants do not pose a considerable threat to the banking industry
because of the high entry barriers which have been imposed. Some of the entry barriers are as
follows:
1. Government regulation: Licenses to new banks have been restricted by RBI which is
currently under revision which may allow new banks to enter but looking as of now there is
a lot of uncertainty in the market.
2. Large risks: Starting a bank is not a very easy task and it requires vast amount of capital
and also needs to face stiff competition from the previously established players. Also a long
incubation period is there to meet break even may also pose a threat and the firm starting a
bank should have a large liquidity to meet the short term liability.
3. Large Investments: Banking is a capital intensive industry and is very sensitive to world
economic conditions so seeing the present scenario starting a bank would be very risky
mainly due to the vast amount of initial capital outlay.
Power of Buyers: The individual doesn't pose much of a threat to the banking industry, but one
major factor affecting the power of buyers is relatively high switching costs. If a person has a
mortgage, car loan, credit card, checking account and mutual funds with one particular bank, it can
be extremely tough for that person to switch to another bank. Corporate clients have a very high
bargaining power just because of the volume of the transactions and money involved and so banks
13. lure in customers by offering better exchange rates, more services, and exposure to foreign capital
markets - work extremely hard to get high-margin corporate clients.
Availability of Substitutes: Some of the banking industry's largest threats of substitution are not
from rival banks but from non-financial competitors. The industry does not suffer any real threat of
substitutes as far as deposits or withdrawals; however insurances, mutual funds, and fixed income
securities are some of the many banking services that are also offered by non-banking companies.
There is also the threat of payment method substitutes and loans are relatively high for the industry.
For example, big name electronics, jewellers, car dealers, and more tend to offer preferred financing
on "big ticket" items. Often times these non-banking companies offer a lower interest rates on
payments then the consumer would otherwise get from a traditional bank loan.
Competitive Rivalry: The banking industry is highly competitive. The financial services industry
has been around for hundreds of years and just about everyone who needs banking services already
has them. Because of this, banks must attempt to lure clients away from competitor banks. They do
this by offering lower financing, preferred rates and investment services. The banking sector is in a
race to see who can offer both the best and fastest services, but this also causes banks to experience
a lower ROA. They then have an incentive to take on high-risk projects. In the long run, we're likely
to see more consolidation in the banking industry. Larger banks would prefer to take over or merge
with another bank rather than spend the money to market and advertise to people.
FUTURE STRATEGIES AND PLAN
The focus of UCO Bank will mainly be on retail banking. However, the bank will focus on recovery
which is a major cost for the bank. The bank will also focus more on technology to make
transactions more user friendly. Apart from that it will focus on generating innovative ways to
increase the non interest income of the bank.
15. INTRODUCTION
Nature of the Problem
Banks have long been in existence. It has been managing the money of the customers, giving them
returns and also have been providing financial support to households, businesses and government
alike and has been instrumental in the development of the economy of a nation as a whole. A nation
with strong banking policy and laws is resilient to all the economic downturn and business cycles
which may occur due to recessionary or inflationary cycles which are so prevalent in the economy
due to changes in the aggregate demand and supply in the global economic market.
There has been a lot of ways to measure the profitability of the bank as a whole. Some of the
common ways include evaluating the Return on Assets (ROA), Capital Adequacy Ratio (CAR),
Operating profit, Net Interest Margin. All these methods do measure the profitability of the bank as
a whole but there are some limitations of using these methods. For example, a bank that defers
marketing and new product development costs can appear to be performing well based on
accounting ratios even though these actions may impair future performance. Another limitation is
that accounting ratios aggregate many aspects of performance such as financing, marketing and
operations. A bank may appear to be performing well even if it is poorly managed on certain of
these dimensions, as long as it compensates by performing particularly well on other dimensions.
For management to identify and develop ways to improve branch performance, other bank
management tools that compensate for the weaknesses in accounting ratios are needed. Data
Envelopment Analysis (DEA) as one approach to help improve bank branch productivity.
Need To Improve Profitability and Efficiency
With the advent of globalization, competition from other banks and NBFC’s and volatile markets
have forced banks to look upon how to impart maximum value to the customers by incurring
minimum cost. The empowerments of the customers have also increased the need to improve the
performance otherwise they end up losing some valuable customers to their competitors. “What are
the drivers of performance?” is the prime question which is in the minds of the managers. This is
the first step to improve the performance of any bank. We need to identify the gaps in performance
and then fix them. Efficiency measurements, of course, imply an a priori knowledge of the inputs
and outputs of a bank. The need of the hour is to develop a competitive edge over other competitors,
banks in this case, in order to woo customers. It also enhances the brand image of the bank and also
enhances the market share of the bank with respect to the volume of transactions undertaken.
16. Objective of Study
1. To identify the inputs and the outputs that determines the bank performance.
2. Develop an operational performance measurement that enables banks (a) to avoid wasting
resources and to (b) identify the best practices at an individual branch level
3. Help banks to gain competitive advantage by suggesting methods to improve efficiency by
managing each Decision Making Units(DMU) in the case of banks it’s the branches.
METHODOLOGY
For identifying the gap between optimal performance and the current performance we are going to
use a technique known as data envelopment analysis (DEA) technique. The dimensions of
performance considered are internal service quality, operating efficiency, and profitability.
Approach-The DEA Framework
DEA is a linear programming-based technique for evaluating the performance of productive units. It
can handle multiple inputs and multiple outputs as opposed to the other techniques such as ratio
analysis or regression. The ratio analysis technique suffers from a drawback that different ratios
may indicate the performance of a unit ambiguously in different directions. The regression analysis
technique does not suffer from this drawback. However, it assumes a priori a form of functional
relationship between inputs and outputs, and it can handle only one output at a time (Manandhar &
Tang, 2001).
From a given set of branches, the DEA technique constructs an empirical production frontier
defined by relatively efficient branches. For example, let us say 5 branches use different mix of two
inputs: I1and I2 to produce one unit of output in each case. The branches A, B, and C, which are
relatively efficient in the use of inputs, define the production frontier. The efficiency of a branch is
evaluated as a radial distance from the frontier. For example, the ratio of OF to OE represent the
efficiency of branch E. It is the potential proportionate reduction in the inputs of the branch to make
it efficient.
The following linear programming formulation (Model A) is used for evaluating the efficiency ZE
of any branch E in a set of n branches (Charnes, Cooper, & Rhodes, 1978).
17. Minimize ZE such that;
Where yrj is observed at the rth
output and xij is observed at the ith
input of branch j. The inputs and
the outputs are specified according to a desired context of performance such as operating efficiency,
profitability etc. The performance dimensions need to be defined by us as the inputs provided and
the outputs generated for different branches based on the appropriate context are it operating
efficiency or profitability etc.
The model contains a set of inputs or resources provided and the set of outputs are measured which
is then used to measure the efficiency. The inputs identified by management were labor, office
space and supply costs. All inputs were directly associated with each branch and no allocations of
head office costs were included. Labour was comprised of a measure of full-time equivalent
personnel per branch (FTE's). This includes tellers, customer service representatives and branch
management. Office space was identified as space used by each branch (in square feet). Output
referred to amount of transactions done by the bank in that quarter in terms of advances and fixed
deposits undertaken and no of accounts opened during the period.
18. Note: Many of these data are confidential and hence will not be shown in this report.
Sources of Data
The data that we have collected is of 2012-13 and the data has been collected as a secondary data.
For this analysis we are taking five different branches of UCO Bank. The branches are selected
based on convenience. The type of sampling is called convenience sampling. The number of
branches is selected based on convenience due to the nature of data involved and the ease with
which the data could be retrieved.
Model Inputs
The model inputs that is being considered to measure the efficiency and profitability of each branch
are:
1. No of managerial personnel
2. No of clerical personnel
3. No of computer terminals
4. Area of the branch in sq. feet
5. Expenditure in lighting and stationery
6. Expenditure in salary of the employees.
Effort of the managerial and clerical personnel has been measured in number of hours with average
daily effort being assumed to be 8 hours.
Model Outputs
The output which has been used to measure the performance and profitability are:
1. Volume of deposits.
2. Volume of advances
3. Commission earned by the bank for undertaking the transaction.
ANALYSIS AND DISCUSSIONS
The software that has been used to do the analysis is named as ‘DEAP’. This software takes into
account all the inputs and the outputs generated to find out the technical efficiency of the business
process. The software uses three different option but the CRS model has been used to calculate the
19. efficiency of the branches. The method is oriented in input and output orientation. The input
orientation identifies the slacks in input with a given level of outputs. If the firm uses quantities of
inputs defined by point P, to produce a unit of output, the technical inefficiency will be shown by
the distance PQ(shown in the figure below), which is the amount by which a firm can reduce the
inputs without reduction in the output. The technical efficiency is measured by the ratio:
TE= 0Q/0P
A value of 1 will denote that the firm is fully technically efficient.
Results
After using the data and running the CRS model using the software the TE of all the branches were
calculated. Here are the results of the software:
We see from this result that branch 1, 3 and 4 are technically efficient and which forms a
benchmark based on which we can estimate the technical inefficiency of the remaining branches in
terms of input. Based on the TI value we can conclude that branch 2 can reduce its input by a
whopping 46.1% without having any effect on the outputs. We also see that branch 5 can reduce its
inputs by 14.4% without having any effects on its current output.
Branch
Technical
Efficiency
B1 1
B2 0.539
B3 1
B4 1
B5 0.856
20. Branch λ1 λ2 λ3 λ4 λ5
B2 0.169 0.343
B5 0.856
The branch 2 and 5 are inefficient and to make it match to the efficient frontier which represents the
optimal level of input output combination we need the lambda values. For branch 2 we have for its
peers as branch 1 and branch 4 as when it is projected to the efficient frontier its lies on the line
joining branch 1 and 4(the reason why we call them peers). The point 2 is the linear combination of
point 1 and 4 and weights of that combination are given by the lambda values. Since the number of
inputs and outputs are large to draw a graph and denote the values will be infeasible which could
have been easily done for 2 inputs and 1 output.
Slack Analysis
Output Slacks
Branch Amt of commission earned Volume of deposits Volume of Advances
B1 0 0 0
B2 0 55,932,461.18 0
B3 0 0 0
B4 0 0 0
B5 86,463.111 0 35,484,815.99
Input Slacks
Branc
h
No of managerial
personnel
No of clerical
personnel
No of computer
terminals Area
Stationery
& Light Exp Salary Exp
B1 0 0 0 0 0 0
B2 2.025 1.125 0 126.022 30,475.016 1,607,833.674
B3 0 0 0 0 0 0
B4 0 0 0 0 0 0
B5 0 0 0 256.713 88,123.442 164,426.98
Based on the values of input and output slacks we can determine what needs to be done to optimize
the performance of the branch in concerned. There are some points to be noted:
We see that the branches which are performing in efficiently have a slack value whereas other
branches which are efficient have 0 as the slack. Now we need to understand what we mean by
slack. A slack represent only the leftover portions of inefficiencies; after proportional reductions in
inputs or outputs, if a Decision Making Unit (DMU) cannot reach the efficiency frontier (to its
efficient target), slacks are needed to push the DMU to the frontier (target). Each branch is a DMU.
It means that the reduction/increase in that quantity (in case of input slack increase in the same
quantity in case of output slack) will help in attaining the efficient performance by the DMU or the
branch in question.
21. Analysis and Recommendation for Branch 2
Present condition
The branch is working under 53% efficiency and need to increase its efficiency by almost 47%
some serious measures need to be taken. Now looking at the slack values we see that branch 2
should reduce the effort of managerial personnel and clerical personnel by 2 and 1 hour a day also it
should increase the utilization of the bank more efficiently. It also needs to cut its cost of stationery
and lighting by 30000 INR approximately and reduce expenses in salary of staff by 16 lacs which
means it must transfer some employees from branch 2 to some other branch in which he could be
productively used as idle time of the employees is a loss and additional expense to the organisation.
In spite of doing that it also needs to increase its deposits by a whopping 5 crore to reach the
maximum level of technical efficiency.
Recommendations
1. Increase the amount of customer and the amount of deposits by effective marketing of the
branch and increasing its customer base. It may hire a marketing person who can do that or
maybe assign the additional responsibility to an employee already working.
2. It needs to effectively save on electricity expenses by proper organisation which may reduce
the consumption of electricity without affecting the minimum lighting requirements of the
employees.
3. It may also reduce one clerical personnel and transfer the person to some different branch
where the no of customers coming to branch is more.
Analysis and Recommendation for branch 5
Present condition
The branch is currently working under 85% efficiency and needs to increase its efficiency by only
15% to become 100% efficient branch. Now looking at the slack values of the branch we find out
that the branch is not making optimal use of the area which it occupies. It may be due to the placing
of the counters and needs to work on that. Another way of increasing the utilization of area is to add
a new counter which may increase the commission earned as the counter may provide some
innovative services which would increase the commission as well as add value to the customer. It
may also increase the amount of advances which is short by 3.5 crores and also increase the amount
of commission earned by around 90000 to become fully efficient.
Recommendations
22. 1. Improve the organisation of the branch by effectively placing the counters to facilitate
maximum use of the area and minimize the electricity costs.
2. Provide some innovative services in the branch like say for example aid in filing tax returns
and other services and earn some commission on that which would increase the customer
satisfaction and may also help in increasing the amount of advances by wooing customers
with their superior service quality.
Conclusion
Thus we see that DEA analysis is very instrumental in determining the gap in efficiency of the
organisation and by using it we can not only identify the gaps but also it provides some insight into
how to fill those gaps. The managerial implications regarding these gaps is that it provides an in
depth insight as to what is wrong. It helps us identify the managerial problems which may not be
visible directly. There may be misconceptions that a branch is performing well by seeing the
outputs but we need to also see the inputs and also benchmark these inputs and outputs of other
branches so as to find out the real scenario.
Limitations of the Study
Every study has its bottlenecks and this is no exception. Some of the potential bottlenecks of this
study are:
1. Scope of the study: The scope of the study was only 5 branches in Ahmadabad which is a
very limited. The more the number of branches studied the more effective will be the
frontier generated and which will lead to a better analysis and more accurate results.
2. Input Parameters: The input parameters have their own limitations. I have taken 6 inputs
for this study but more inputs can be taken into account and based on that a more detailed
analysis can be conducted and some hidden insights can be gained.
3. Output Parameters: The output parameters have their own limitations. This study
incorporates 3 output parameters which are among the very few ways in which output of the
banks can be quantified. Some more output parameters would give us more insight into the
efficiency of the banks.
