This document summarizes a study that uses Data Envelopment Analysis (DEA) to measure the technical and scale efficiency of commercial banks in India from 2006 to 2010. Two DEA models, the CCR and BCC models, are used to estimate technical and scale efficiency. The results indicate that deregulation of the banking sector has led to an increase in efficiency over time. Private sector banks performed better than public sector banks during this period. The source of inefficiency was mainly due to scale rather than pure technical inefficiency.
International Journal of Engineering Research and DevelopmentIJERD Editor
Electrical, Electronics and Computer Engineering,
Information Engineering and Technology,
Mechanical, Industrial and Manufacturing Engineering,
Automation and Mechatronics Engineering,
Material and Chemical Engineering,
Civil and Architecture Engineering,
Biotechnology and Bio Engineering,
Environmental Engineering,
Petroleum and Mining Engineering,
Marine and Agriculture engineering,
Aerospace Engineering.
Presenting a Pattern for Increasing the Relative Efficiency of the Bank by Us...IOSR Journals
One of the factors in success of the developed countries is considering the efficiency of units. Efficient units not only do not waste the energy but also they obtain the resources properly. As, in every economy, bank are important institutions and essential posts and have a determinant role in developing the economy, their performance assessment has always been important. In todays world, considering the limitation of resources and excessive cost of providing them, proper decisions about the strategy of applying resources are significant. For the time being, domestic banks use transactional mass–based methods and methods based on performance operations, on the amount of equipment, and on obtaining resources in order to assess the performance & ranking of branches. So efficiency index reflects the process of activity between inputs & outputs of a branch which can be a more suitable criterion in assessing the branches performance. Data envelopment analysis is a theoretical framework in assessing, analyzing, & measuring efficiency which do the function of evaluating Decision making units via solving its own models. In this study, for assessing relative efficiency of Agriculture Bank branches in Lorestan Province, two basic models in Data Envelopment Analysis have been used: input–oriented CCR, BCC. The results of this research show that, among 23 branches under evaluation in CCR model, 6 branches are efficient and 17 are inefficient and among 23 branches in BCC model, 15 branches are efficient and 8 are inefficient. By applying AP model, branches have been ranked and a model has been presented for inefficient branches.
The degree of intense competition in banking industry of Bangladesh is going to manifold in the current decade. The competition goes not only to capture market share but also to differentiate in offerings and services. The paper has empirically examined the relationship between implementing SWOT analysis and achieving competitive advantage in the sample banks. The study covered six banks i.e., three govt. and three private commercial banks operating in Chittagong district of Bangladesh. The samples consisted of bank branch executives taking six executives of each branch of the study areas. The technique of purposive sampling was used to select the sample respondents where the questionnaire consisted of 12 items that measure the dimensions of competitive advantage and 13 items that represent the process of SWOT analysis. The result of study showed significant correlation between SWOT analysis and dimensions of competitive advantage i.e., speed, quality, flexibility, and cost-benefit. The Co-efficient of Correlation is 0.69. Again, the competitive advantage is a strategic goal and it is a dependent variable. The paper identified that the good performance of a bank was dependent on internal as well as external variables and it was related to achieve a competitive advantage in the sample banks. Thus, for achieving competitive advantage in competitive market, the sample banks may take care of carrying out SWOT analysis on a continuous basis for facing its threats and weaknesses as well as creating opportunities and strengths. The study suggested some strategies for increasing its strengths, opening new opportunities, on one hand and overcoming weaknesses; and resisting threats through choosing areas of improvement like delivery of banking services to the customers at minimum cost, prompt one stop service, flexibility and adaptability in offering competitive banking products, IT based infra-structural facilities, building leadership skills and personality development of bank executives through training on a continuous basis, for sample banks in particular and banking industry of Bangladesh in general.
International Journal of Engineering Research and DevelopmentIJERD Editor
Electrical, Electronics and Computer Engineering,
Information Engineering and Technology,
Mechanical, Industrial and Manufacturing Engineering,
Automation and Mechatronics Engineering,
Material and Chemical Engineering,
Civil and Architecture Engineering,
Biotechnology and Bio Engineering,
Environmental Engineering,
Petroleum and Mining Engineering,
Marine and Agriculture engineering,
Aerospace Engineering.
Presenting a Pattern for Increasing the Relative Efficiency of the Bank by Us...IOSR Journals
One of the factors in success of the developed countries is considering the efficiency of units. Efficient units not only do not waste the energy but also they obtain the resources properly. As, in every economy, bank are important institutions and essential posts and have a determinant role in developing the economy, their performance assessment has always been important. In todays world, considering the limitation of resources and excessive cost of providing them, proper decisions about the strategy of applying resources are significant. For the time being, domestic banks use transactional mass–based methods and methods based on performance operations, on the amount of equipment, and on obtaining resources in order to assess the performance & ranking of branches. So efficiency index reflects the process of activity between inputs & outputs of a branch which can be a more suitable criterion in assessing the branches performance. Data envelopment analysis is a theoretical framework in assessing, analyzing, & measuring efficiency which do the function of evaluating Decision making units via solving its own models. In this study, for assessing relative efficiency of Agriculture Bank branches in Lorestan Province, two basic models in Data Envelopment Analysis have been used: input–oriented CCR, BCC. The results of this research show that, among 23 branches under evaluation in CCR model, 6 branches are efficient and 17 are inefficient and among 23 branches in BCC model, 15 branches are efficient and 8 are inefficient. By applying AP model, branches have been ranked and a model has been presented for inefficient branches.
The degree of intense competition in banking industry of Bangladesh is going to manifold in the current decade. The competition goes not only to capture market share but also to differentiate in offerings and services. The paper has empirically examined the relationship between implementing SWOT analysis and achieving competitive advantage in the sample banks. The study covered six banks i.e., three govt. and three private commercial banks operating in Chittagong district of Bangladesh. The samples consisted of bank branch executives taking six executives of each branch of the study areas. The technique of purposive sampling was used to select the sample respondents where the questionnaire consisted of 12 items that measure the dimensions of competitive advantage and 13 items that represent the process of SWOT analysis. The result of study showed significant correlation between SWOT analysis and dimensions of competitive advantage i.e., speed, quality, flexibility, and cost-benefit. The Co-efficient of Correlation is 0.69. Again, the competitive advantage is a strategic goal and it is a dependent variable. The paper identified that the good performance of a bank was dependent on internal as well as external variables and it was related to achieve a competitive advantage in the sample banks. Thus, for achieving competitive advantage in competitive market, the sample banks may take care of carrying out SWOT analysis on a continuous basis for facing its threats and weaknesses as well as creating opportunities and strengths. The study suggested some strategies for increasing its strengths, opening new opportunities, on one hand and overcoming weaknesses; and resisting threats through choosing areas of improvement like delivery of banking services to the customers at minimum cost, prompt one stop service, flexibility and adaptability in offering competitive banking products, IT based infra-structural facilities, building leadership skills and personality development of bank executives through training on a continuous basis, for sample banks in particular and banking industry of Bangladesh in general.
Evaluating the Effect of Employee Stock Option Plans on the Financial Perform...Dr. Amarjeet Singh
Competitive pressures to improve productivity continue to place significant demand upon organizations globally. To respond to these competitive pressures with the developed countries like USA, ESOPs (Employee Stock Ownership Plans) have also been adopted in developing country like India to increase the firm’s and employee’s performance and productivity by retaining the employees to a large extent. Employee Stock Ownership Plans are majorly utilized by many successful and competent companies across the world. The successes of the ESOP companies in countries like USA, Japan and UK etc. may largely be attributed to enhancement of firm’s performance and Employee productivity. These effects are becoming increasingly noticed across the world in recent years. Thus, this research is an empirical study carried out to evaluate the impact of ESOP on financial performance of ten listed Indian Construction and Infrastructural companies based on for a period of six years. The study analyzes three years pre and post period to the adoption of ESOPs for the selected companies and is based upon secondary data collected from company annual reports of the respective years. Company-wise Pre- and Post- ESOP adoption Analysis and Regression Analysis is carried out in the selected selector.
A STUDY ON PERFORMANCE MANAGEMENT IN BMTC WITH SPECIAL REFERENCE TO DIVISIONSIAEME Publication
A financial performance management is essential for every company to know the position of the business in this competitive world which helps them to analyse their strength and weakness. It analyses four years of data. This research study has been done with regards to divisions of BMTC in Bangalore. For the study purpose, secondary data have been collected from the annual report of these divisions for the period of four years starting from 2017-2020. Data has been analysed by applying one-way ANOVA. From the analysis, it has been concluded that there is a statistically significant difference in financial performance of these divisions based on the components like kilometre per litre top up oil, Total Vehicles, average vehicles on road and staff productivity of different zones. The expenses incurred with different zones have been analysed. It has been found from the study BMTC remains in standing Position compared to all other divisions between East, west, north, south and central zones. This also helps us to analyse the revenue and expenditure of the BMTC which gives information about financial health.
Determinant Cooperatives Business Profits in Indonesia: A Partial Least Squar...inventionjournals
The purpose of this study was to test cooperatives business profits determinant in Indonesia. This study used cooperative profile data in 33 provinces in 2012-2013 published by the Ministry of Cooperatives and Small and Medium Enterprises Indonesia. Data analysis model is path analysis model using Smart. PLS 4.0 to process the data. The study found that cooperatives in Indonesia is very dependent on the employee. This indicates that cooperatives in Indonesia, during its development, are highly dependent on the employee, not a member, manager or capital
AN ANALYSIS OF INCOME AND EXPENDITURE WITH SPECIAL REFERENCE TO BMTC, BANGALOREIAEME Publication
The motivation behind this investigation is to dissect the pay and consumption of BMTC by applying basic normal estimation technique. As far as contrasting its exhibition and proficiency for 3years. It analyzes the data found inside an organization's benefit and misfortune account. The examination depended on optional information from records, reports and profile of the Bangalore metropolitan vehicle enterprise. Basic normal strategy is a technique which can be gotten by the normal pace of earnings and consumption things in the fiscal report and can be determined by duplicating the complete of the units essentially by the quantity of getting factors. A goal of the investigation incorporates examining the productivity, perceiving the feeble functional regions and friends' in general monetary exhibition with appropriate idea for a superior adequacy and to defeat from the frail regions dissected in the organization. Transport is viewed as the existence line of the economy of the country. A productive street transport area, specifically, assumes a pivotal part in a district's financial advancement and development. Uniting both organic market sides, street transport area impacts whole range of social and financial exercises of a country. As of now, BMTC is one of the better run transport frameworks in the country.
Impact of profitability, bank and macroeconomic factors on the market capital...inventionjournals
Panel data has been collected for 44 Middle Eastern banks that are operated during 2005 to 2014 in different Middle Eastern countries. Secondary data has been collected primarily through the DataStream database. The study is conducted to investigate the impact of profitability, bank and macroeconomic factors on the market capitalization of the Middle Eastern banks. Results of Hausman test have explained that fixed effect model is appropriate for the analysis. The result of multiple regression have shown that market capitalization has positive relationship with ROI while negative relationship with credit risk, inflation, and year dummy for the Middle Eastern banks. Furthermore, no relationship has been observed between market capitalization and the ROA, ROE, growth and exchange rate for the Middle Eastern banks.
ANALYSIS OF FACTORS GOVERNING THE MARKET PRICE OF THE SHARES FROM NATIONAL ST...IAEME Publication
Banking systems and financial institutions are integral parts of an economy. Seamless functioning of these sectors is important for an economy to grow. Due to the advent of digital technology, banking and financial services have undergone a massive shift in their mode of operations. New trends are gaining momentum at a fast pace as the customers find it convenient and flexible at the same time. The emergence of financial technology has resulted in the introduction of several technological advancements in the industry. Fintech companies, internet banking and mobile banking are just some examples that mark this shift. The modernization of banking attracted the investors towards banking industry. This paper focuses on the factors governing the market price of the shares in Banking Sector of Companies such as Axis Bank, CUB, Federal Bank, HDFC, ICICI, IndusInd, Karnataka Bank, Kotak, KVB, South Indian Bank. This study has examined the relationship between dependent variables Market Price Per Share (MPS) and independent variables (Dividend Per Share (DPS), Earning per Share (EPS), Net Profit Margin (NPM), Return on Equity (ROE) and Return on Assets (ROA).The study was conducted based on secondary data and the researchers concluded that, there is a significant influence of foresaid factors on the market price of the shares.
MERGERS AND ACQUISITIONS PROSPECTS: INDIAN BANKS STUDYpaperpublications3
Abstract:This research paper looks at Mergers and Acquisitions (M&A’s) that have happened in Indian banking sector to understand the resulting synergies and the long term implications of the merger. The paper also analyses emerging future trends and recommends steps that banks should consider for future. The paper reviews the trends in M&A’s in Indian banking and then impact of M&A’s has been studied in three leading banks of India. The study covers the area of performance evaluation of M&A’s in Indian banking sector during the period from 2000 to 2013. The paper compares pre and post merger financial performance of merged banks with the help of financial parameters like, Net Profit margin, operating Profit margin, Return on Capital Employed, Return on Equity, earnings per share, capital adequacy ratio, dividend per share etc. The findings suggest that to some extent M&A’s has been successful in Indian banking sector. The Government and Policy makers should not promote merger between strong and distressed banks as a way to promote the interest of the depositors of distressed banks, as it will have adverse effect upon the asset quality of the stronger banks.
Keywords:Strategic alliance, capital adequacy, mergers, consolidation, ratios.
Idiosyncratic Effect of Corporate Solvency Management Strategies on Corporate...IOSR Journals
The study identifies and evaluates the association among corporate solvency management strategies and the corporate performance valuation in Chemical industry of Pakistan. The study uses purposive sampling or judgmental sampling for selecting 30 sample companies from the sector; covering 10 years financial statements data ranging from year 2002 to 2011. Balanced panel data is taken for the purpose of study. Levin, Lin & Chu test is used to check the stationarity of data whereas White Test is used to check the heteroskedasticity of data. Panel Least square technique with fixed effects is used to generalize the relationship between studied variables. The study observed that the performance of the chemical sector in terms of market to book value is affected by internal firm and industry specific factors related to solvency management strategic decisions. Findings of the study provide with the overview of historic performance and the potential performance of the selected sector to help policy makers including finance, economics and industry experts for creating value through the idiosyncratic resources.
Determinants of Share Prices of listed Commercial Banks in Pakistaniosrjce
The focus of this paper is to identify the determinants of share prices for the listed commercial banks
in Karachi stock exchange over the period 2007-2013. One of the unique features of this paper is to find out the
impact of both internal and external factors on share price. Linear multiple regression analysis is used to
determine whether the selected independent variables have influence on share prices or not. The results indicate
that earning per share has more influence on share prices and it has positive and significant relationship with
share prices, book to market value ratio and interest rate have also significant but negative relation with share
prices while other variables (gross domestic product, price earnings ratio, dividend per share, leverage) have
no relationship with share prices
Evaluating the Effect of Employee Stock Option Plans on the Financial Perform...Dr. Amarjeet Singh
Competitive pressures to improve productivity continue to place significant demand upon organizations globally. To respond to these competitive pressures with the developed countries like USA, ESOPs (Employee Stock Ownership Plans) have also been adopted in developing country like India to increase the firm’s and employee’s performance and productivity by retaining the employees to a large extent. Employee Stock Ownership Plans are majorly utilized by many successful and competent companies across the world. The successes of the ESOP companies in countries like USA, Japan and UK etc. may largely be attributed to enhancement of firm’s performance and Employee productivity. These effects are becoming increasingly noticed across the world in recent years. Thus, this research is an empirical study carried out to evaluate the impact of ESOP on financial performance of ten listed Indian Construction and Infrastructural companies based on for a period of six years. The study analyzes three years pre and post period to the adoption of ESOPs for the selected companies and is based upon secondary data collected from company annual reports of the respective years. Company-wise Pre- and Post- ESOP adoption Analysis and Regression Analysis is carried out in the selected selector.
A STUDY ON PERFORMANCE MANAGEMENT IN BMTC WITH SPECIAL REFERENCE TO DIVISIONSIAEME Publication
A financial performance management is essential for every company to know the position of the business in this competitive world which helps them to analyse their strength and weakness. It analyses four years of data. This research study has been done with regards to divisions of BMTC in Bangalore. For the study purpose, secondary data have been collected from the annual report of these divisions for the period of four years starting from 2017-2020. Data has been analysed by applying one-way ANOVA. From the analysis, it has been concluded that there is a statistically significant difference in financial performance of these divisions based on the components like kilometre per litre top up oil, Total Vehicles, average vehicles on road and staff productivity of different zones. The expenses incurred with different zones have been analysed. It has been found from the study BMTC remains in standing Position compared to all other divisions between East, west, north, south and central zones. This also helps us to analyse the revenue and expenditure of the BMTC which gives information about financial health.
Determinant Cooperatives Business Profits in Indonesia: A Partial Least Squar...inventionjournals
The purpose of this study was to test cooperatives business profits determinant in Indonesia. This study used cooperative profile data in 33 provinces in 2012-2013 published by the Ministry of Cooperatives and Small and Medium Enterprises Indonesia. Data analysis model is path analysis model using Smart. PLS 4.0 to process the data. The study found that cooperatives in Indonesia is very dependent on the employee. This indicates that cooperatives in Indonesia, during its development, are highly dependent on the employee, not a member, manager or capital
AN ANALYSIS OF INCOME AND EXPENDITURE WITH SPECIAL REFERENCE TO BMTC, BANGALOREIAEME Publication
The motivation behind this investigation is to dissect the pay and consumption of BMTC by applying basic normal estimation technique. As far as contrasting its exhibition and proficiency for 3years. It analyzes the data found inside an organization's benefit and misfortune account. The examination depended on optional information from records, reports and profile of the Bangalore metropolitan vehicle enterprise. Basic normal strategy is a technique which can be gotten by the normal pace of earnings and consumption things in the fiscal report and can be determined by duplicating the complete of the units essentially by the quantity of getting factors. A goal of the investigation incorporates examining the productivity, perceiving the feeble functional regions and friends' in general monetary exhibition with appropriate idea for a superior adequacy and to defeat from the frail regions dissected in the organization. Transport is viewed as the existence line of the economy of the country. A productive street transport area, specifically, assumes a pivotal part in a district's financial advancement and development. Uniting both organic market sides, street transport area impacts whole range of social and financial exercises of a country. As of now, BMTC is one of the better run transport frameworks in the country.
Impact of profitability, bank and macroeconomic factors on the market capital...inventionjournals
Panel data has been collected for 44 Middle Eastern banks that are operated during 2005 to 2014 in different Middle Eastern countries. Secondary data has been collected primarily through the DataStream database. The study is conducted to investigate the impact of profitability, bank and macroeconomic factors on the market capitalization of the Middle Eastern banks. Results of Hausman test have explained that fixed effect model is appropriate for the analysis. The result of multiple regression have shown that market capitalization has positive relationship with ROI while negative relationship with credit risk, inflation, and year dummy for the Middle Eastern banks. Furthermore, no relationship has been observed between market capitalization and the ROA, ROE, growth and exchange rate for the Middle Eastern banks.
ANALYSIS OF FACTORS GOVERNING THE MARKET PRICE OF THE SHARES FROM NATIONAL ST...IAEME Publication
Banking systems and financial institutions are integral parts of an economy. Seamless functioning of these sectors is important for an economy to grow. Due to the advent of digital technology, banking and financial services have undergone a massive shift in their mode of operations. New trends are gaining momentum at a fast pace as the customers find it convenient and flexible at the same time. The emergence of financial technology has resulted in the introduction of several technological advancements in the industry. Fintech companies, internet banking and mobile banking are just some examples that mark this shift. The modernization of banking attracted the investors towards banking industry. This paper focuses on the factors governing the market price of the shares in Banking Sector of Companies such as Axis Bank, CUB, Federal Bank, HDFC, ICICI, IndusInd, Karnataka Bank, Kotak, KVB, South Indian Bank. This study has examined the relationship between dependent variables Market Price Per Share (MPS) and independent variables (Dividend Per Share (DPS), Earning per Share (EPS), Net Profit Margin (NPM), Return on Equity (ROE) and Return on Assets (ROA).The study was conducted based on secondary data and the researchers concluded that, there is a significant influence of foresaid factors on the market price of the shares.
MERGERS AND ACQUISITIONS PROSPECTS: INDIAN BANKS STUDYpaperpublications3
Abstract:This research paper looks at Mergers and Acquisitions (M&A’s) that have happened in Indian banking sector to understand the resulting synergies and the long term implications of the merger. The paper also analyses emerging future trends and recommends steps that banks should consider for future. The paper reviews the trends in M&A’s in Indian banking and then impact of M&A’s has been studied in three leading banks of India. The study covers the area of performance evaluation of M&A’s in Indian banking sector during the period from 2000 to 2013. The paper compares pre and post merger financial performance of merged banks with the help of financial parameters like, Net Profit margin, operating Profit margin, Return on Capital Employed, Return on Equity, earnings per share, capital adequacy ratio, dividend per share etc. The findings suggest that to some extent M&A’s has been successful in Indian banking sector. The Government and Policy makers should not promote merger between strong and distressed banks as a way to promote the interest of the depositors of distressed banks, as it will have adverse effect upon the asset quality of the stronger banks.
Keywords:Strategic alliance, capital adequacy, mergers, consolidation, ratios.
Idiosyncratic Effect of Corporate Solvency Management Strategies on Corporate...IOSR Journals
The study identifies and evaluates the association among corporate solvency management strategies and the corporate performance valuation in Chemical industry of Pakistan. The study uses purposive sampling or judgmental sampling for selecting 30 sample companies from the sector; covering 10 years financial statements data ranging from year 2002 to 2011. Balanced panel data is taken for the purpose of study. Levin, Lin & Chu test is used to check the stationarity of data whereas White Test is used to check the heteroskedasticity of data. Panel Least square technique with fixed effects is used to generalize the relationship between studied variables. The study observed that the performance of the chemical sector in terms of market to book value is affected by internal firm and industry specific factors related to solvency management strategic decisions. Findings of the study provide with the overview of historic performance and the potential performance of the selected sector to help policy makers including finance, economics and industry experts for creating value through the idiosyncratic resources.
Determinants of Share Prices of listed Commercial Banks in Pakistaniosrjce
The focus of this paper is to identify the determinants of share prices for the listed commercial banks
in Karachi stock exchange over the period 2007-2013. One of the unique features of this paper is to find out the
impact of both internal and external factors on share price. Linear multiple regression analysis is used to
determine whether the selected independent variables have influence on share prices or not. The results indicate
that earning per share has more influence on share prices and it has positive and significant relationship with
share prices, book to market value ratio and interest rate have also significant but negative relation with share
prices while other variables (gross domestic product, price earnings ratio, dividend per share, leverage) have
no relationship with share prices
Epidemiology is a basic discipline essential to both clinical and community medicines. It also helps to develop the way of thinking about health and disease.
A COMPARATIVE STUDY ON FINANCIAL PERFORMANCE OF PUBLIC SECTOR BANKS IN INDIA:...kishoremeghani
Banking sector is one of the fastest growing sectors in India. Today’s banking sector becoming more complex. The objective of this study is to analyze the Financial Position and Performance of the Bank of Baroda and Punjab National Bank in India based on their financial characteristics. This study attempts to measure the relative performance of Indian banks. For this study, we have used public sector banks. We know that in the service sector, it is difficult to quantify the output because it is intangible. We have chosen the CAMEL model and t-test which measures the performance of bank from each of the important parameter like capital adequacy, asset quality, management efficiency, earning quality, liquidity and Sensitivity.
Financial sector plays a pivotal role in the economic development, but, in recent time, it has witnessed that the World Economy is passing through some intricate circumstances as bankruptcy of banking & financial institutions, debt crisis in major economies of the world and euro zone crisis. The scenario has become very uncertain causing recession in major economies like US and Europe. The tempo of development for the Indian banking industry has been remarkable over the past decade. It is evident from the higher pace of credit expansion, expanding profitability and productivity similar to banks in developed markets, lower incidence of non- performing assets and focus on financial inclusion have contributed to making Indian banking vibrant and strong. Indian banks have begun to revise their growth approach and re-evaluate the prospects on hand to keep the economy rolling. It is generally agreed that a strong and healthy banking system is a prerequisite for sustainable economic growth. The banking sector has always been one of the important sectors for investment. In the time of uncertainty, some are arguing that the economies are in the process of recovery, and while others are opining that the world is set for another recession soon. In order to resist negative shocks and maintain financial stability, it is important to identify the Performance of Indian Banking Sector. The current study is mainly concerned with the analysis of Performance Of banking sector in India, that reflects the impact of new competitive environment on the bank’s performance in terms of various selected parameters. The article considered the variables like balance sheet operations, efficiency, profitability ,Capital Adequacy, Asset Quality, Sect oral deployment of bank credit, Technological Development, Customer services and Financial Inclusion for a period of 6 years from 2011 to 16. The Data was collected through secondary sources from Statistical Tables relating to banks in India. The results have found strong evidence poor profitability and inefficiency of managing the assets in the year 2016.
Analysis of Financial Health of the New Private Sector Banks in India throug...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
A Comparison of Key Determinants on Profitability of India’s Largest Public a...Rajveer Rawlin
The banking sector in India has come under the scanner following some key changes in monetary policy. With
the Reserve bank of India (RBI) raising interest rates to support the falling Indian currency the Rupee, the cost of
funds of banks has increased significantly. This could manifest itself in rising non-performing assets (NPAs) and
declining profitability. The profitability of banks is impacted by both internal and external factors. This paper is
an attempt to compare the key drivers of profits at India’s largest public and private sector banks. Bank specific
metrics and risk factors were important drivers of profits at both banks. Productivity measures were key drivers
of profits at India’s largest public sector bank SBI but had no effect on profits at India’s largest private sector
bank, HDFC bank. Asset usage efficiency measures were key determinants of profitability at HDFC bank but not
at SBI. The single most important determinant of SBI proved to be business per employee, a productivity
measure while advances and bank size which are traditional bank metrics were key drivers of profits at HDFC
bank. Managers at both banks and their share holders thus can look at these drivers to develop a broad
understanding of profitability at the two banks.
This study attempts to measure the financial performance of selected Bangladeshi commercial banks for the period 2010-2016 through using the DuPont model which is an important tool for measuring profitability and judging the financial performance of any financial entity. The modified DuPont model disaggregates ROE (which is an indication of the earning power of the firm) into five components: tax burden, interest burden, profit margin, total asset turnover, and equity multiplier ratios. Empirical results exhibit that Dhaka Bank has performed best in every aspect and secured the first position due to highest average ROE. On the other hand, AB Bank is the least performer among all the banks due to its lowest average ROE. Finally, this study suggests that a company can have high ROE if it has high operating margin, lower interest, lower income tax, efficient use of assets and high use of debt in its capital structure.
Analysis of Internal, Market & Economic Based Financial Performance Measureme...IOSRJBM
The aim of this study is to investigate the financial performance of 10 commercial banks listed on Dhaka Stock Exchange. In this paper, financial performance has been measured by using three indicators. Internal–based performance measured by Return on Assets, Market-based performance measured by Tobin’s Q model (Price / Book value of Equity) and Economic–based performance measured by Economic Value adds. The correlation and multiple regression of annual time series data is used to find the impact of bank size, credit risk, operational efficiency and asset management on financial performance measured by the three indicators, The study rejected the null hypothesis and it is found that there exist statistically significant impact of bank size, credit risk, operational efficiency and asset management with ROA and Economic Value Added. On the other hand Tobin’s Q has insignificant impact on financial performance of commercial banks
Similar to Measuring Technical and Scale Efficiency of Banks in India Using DEA (20)
An Examination of Effectuation Dimension as Financing Practice of Small and M...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Does Goods and Services Tax (GST) Leads to Indian Economic Development?iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Childhood Factors that influence success in later lifeiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Emotional Intelligence and Work Performance Relationship: A Study on Sales Pe...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Customer’s Acceptance of Internet Banking in Dubaiiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
A Study of Employee Satisfaction relating to Job Security & Working Hours amo...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Consumer Perspectives on Brand Preference: A Choice Based Model Approachiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Student`S Approach towards Social Network Sitesiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
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Measuring Technical and Scale Efficiency of Banks in India Using DEA
1. IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 17, Issue 1.Ver. II (Jan. 2015), PP 66-71
www.iosrjournals.org
DOI: 10.9790/487X-17126671 www.iosrjournals.org 66 | Page
Measuring Technical and Scale Efficiency of Banks in India Using
DEA
Nand kumar1
, Archana Singh2
1
Assistant Professor, Department of Humanities. DTU,
2
Assistant Professor, Delhi School of Management. DTU,
Abstract: This study uses CRR model and BCC model to estimate the technical and scale efficiency of
commercial banks in India during the periods 2006-2010. The results indicate that deregulation of banking
sector has led to an increase in the efficiency of commercial banks in India. This increase in efficiency of banks
in India is not only because of increase in pure technical efficiency but also due to increase in its scale
efficiency. The results show large spread of technical efficiency between companies during the period. The
estimated results also shows that performance of private sector banks has been better than public sector banks
during the period and source of inefficiency is mainly due to its scale rather than pure technical inefficiency.
Keywords: DEA; Efficiency; DMU; CCR model; BCC model
I. Introduction
A sound and strong banking system contributes in an extensive way to economic growth in any
country. Thus, study of banking efficiency is important for policy makers, industry leaders and many others who
rely on banking sector. Several studies have been carried out in the area of measuring efficiency of firms,
companies, banks and other decision making units. Studies in the past used conventional ratios such as return
on assets to evaluate efficiency. Most of these studies which look at the efficiency concentrate on cost, profit
income or revenue efficiencies. Later research in the area used various measures of performance which include
financial index (Wu et. al 2006), a non parametric approach- Data Envelopment Approach (DEA) (Wu, 2005),
parametric approach and Stochastic Production Approach (SPA) (Radam et. al 2008). DEA is frequently used
to measure relative efficiency of decision making units. DEA is defined by Charnes et al (1978) as a
mathematical programming model applied to observations data that provide a new way of obtaining empirical
estimate of relations such as the production functions or efficient production possibility surface which are
considered to be the corner stone of modern economics. It is a non-parametric multiple input output efficiency
technique that measures the relative efficiency of decision making units.
The CRS assumption in CCR model limits its application to efficiency studies. It is appropriate only
when all the firms are operating at optimal scale. However, in a market driven economy where competition,
price differences and constraints with resources are present, all firms may not be operating at optimal scale.
Hence, Banker, Charnes and Cooper (1984) came out with a DEA model for firms operating under variable
returns to scale (VRS) popularly known as BCC model. In the CCR model, the technical efficiency calculated
is composed of both pure technical efficiency and scale efficiency. The BCC model decomposes the technical
efficiency obtained from CCR model into components of pure technical efficiency and scale efficiency by
relaxing the CRS assumption in the model. The BCC model can be applied to multiple inputs and multiple
output situations also. The objective of this paper is to estimate the relative efficiency of major Indian
commercial banks over the years 2006-2010. The data on various inputs and outputs has been taken from RBI
website, www.rbi.org.in. This study uses CRR model and BCC model to estimate technical and scale efficiency
of commercial banks in india.
II. Literature Review
In India , several studies have been carried out on Efficiency Analysis using DEA approach. Noulas
and Ketkar (1996) measured the efficiency of public sector banks of India by using the Data Envelopment
Analysis. The study considered 18 public sector banks and the necessary information for analysis have been
collected from the RBI publications for the year 1993. The study identified that pure technical efficiency was
1.5 percent and scale inefficiency was 2.25 percent and none of the banks were operating under decreasing
returns to scale.
Bhattacharya et al (1997) used DEA to measure the productive efficiency of Indian commercial banks
in the late 80s to early 90s and studied the impact of policy on liberalizing measures taken in 1980s on the
performance of various categories of banks. They found that Indian Public banks were the best performing
banks as the banking sector was overwhelmingly dominated by Indian public sector banks while the new private
sector banks were yet to emerge fully in the Indian banking scenario. Sathye (2001) studied the relative
2. Measuring Technical and Scale Efficiency of Banks in India Using DEA
DOI: 10.9790/487X-17126671 www.iosrjournals.org 67 | Page
efficiency of Indian banks in late 1990s and compared the efficiency of Indian banks with that of banks of other
countries. He found that public sector banks have a higher mean efficiency score as compared to the private
sector banks in India, but found mixed results when comparing public banks and foreign commercial banks in
India. He also found that most banks on efficient frontier are foreign owned. Rammohan and Ray (2004)
compared the revenue maximizing efficiency of public, private and foreign banks in India using physical
quantities of inputs and outputs in 1990s with deposits and operating costs as input and loans, investment and
other income as outputs. They found that public sector banks were significantly better than private banks on
revenue maximization efficiency, but between public and private sector banks the difference in efficiency was
not significant. Sanjeev (2006) studied efficiency of private, public and foreign banks operating in India during
the period 1997-2001 using DEA. He also studied if any relationship can be established between the efficiency
and non-performing assets of the bank. He found that there is an increase in efficiency in post reform period and
that non-performing assets and efficiency are negatively related.
Avkiran used DEA model, taking interest expense and non-interest expense as input variable and
interest income and non-interest income as output variables to examine the efficiency of Australian trading
banks for the period 1986 to 1995 and found that their efficiency rose in the post regulation period and acquiring
banks were more efficient than target banks. Chen and Yeh (1998) calculated the operating efficiencies of 34
commercial banks of Taiwan’s banks using the DEA model where in input variables included staff employed,
interest expense and output variables include loans investment and interest revenue, non-interest revenue and
bank assets. The author concluded that a bank with better efficiency does not always mean that it has better
effectiveness. In the case of Turkish Banks, (Mehmet Hasan Eken Suleyman Kale, A J B M vol. 5(3) PP 889-
901, 4 Feb, 2011), it is apparent that branch size and scale efficiency are related to each other. As branch size
increases scale efficiency increases too and after the most productive scale size, however, as the size increases
efficiency decreases.
Al-Shammari and Salimi (1998) have examined the comparative operating efficiency of Jordanian
commercial banks from 1991-1994 using a modified version of DEA and found that the majority banks were
fairly inefficient over the period 1991-1994. Noulas (2001) employed both DEA model and the traditional
approach to study the effect of banking deregulation on private and public owned banks. The interest expense
and non-interest expense were the input variable and interest revenue and non-interest revenue were the output
variables. The result reveals that the state banks were less efficient than the private banks and the gap widened
during the study period. Shanmugam and Das (2004) studied banking efficiency using a Stochastic Frontier
Production function model during the reform model period 1992-99. The study considers the input variables (viz
deposits, borrowings, labour and fixed assets) and four output variables (viz net interest income, non-interest
income, credits and investments). They found that deposits are dominant in producing all outputs and technical
efficiency of raising interest margin is varied across the banks. In particular they found that reform measures
introduced since 1992 have not helped the banks in raising their interest margin. Also, in general, they found
that private foreign banks performed better than public banks.
III. Research Methodology
The present study considers ten commercial banks as decision making units. Out of these, five are
public sector banks and other five are private sector banks. Selecting various inputs and outputs is a challenging
task in the model because they can be misleading in nature. The three inputs considered in the study are
deposits, number of employees, operating expenses and the three outputs are investments, other income and
advances. In this study the data related to various input and outputs over the period 2006 - 2010 have been
taken from RBI website (www.rbi.org.in). The ten decision making units (banks) considered in the present study
are as follows:
Public Sector Banks Private Sector Banks
State Bank of India(A) HDFC Bank(F)
Punjab National Bank(B) Axis Bank(G)
Canara Bank(C) ICICI Bank(H)
Vijaya Bank(D) Yes Bank(I)
Allahabad Bank(E) Kotak Mahindra Bank(J)
CCR Model
CCR-Model was introduced by Charnes, Cooper and Rhodes (1978). This model measures the
efficiency of each DMU which is obtained as a maximum of the ratio of total sum of weighted outputs to total
sum of weighted inputs. Consequently, the efficiency can be defined as follow.
Weightedsumof outputs
Efficiency=
Weightedsumof inputs
3. Measuring Technical and Scale Efficiency of Banks in India Using DEA
DOI: 10.9790/487X-17126671 www.iosrjournals.org 68 | Page
The weights for the ratio are determined by the restriction that the
similar ratios for every DMU have to be less than or equal to unity, thus reducing multiple inputs and outputs to
a single “virtual” input and single “virtual” output without requiring pre-assigned weights. Therefore, the
efficiency score is a function of the weights or the “virtual” input-output combination. Suppose that there are n
DMUs, each with n inputs and s outputs, relative efficiency score of a given DMU0 is obtained by solving the
following linear programming model.
max (θ =
uryr0
s
r=1
vixi0
m
r=1
)
subject to
uryrj
s
r=1
vixij
m
r=1
≤ 1 ; j = 1,2, … , n
where
vi ≥ 0; i = 1,2, … , m
ui ≥ 0; r = 1,2, … , s
and
xij= the amount of input i utilized by the jth DMU
yrj = the amount of output r produced by the jth DMU
vi= weight given to input i
ur= weight given to output r
Following the Charnes – Cooper transformation (1962), one can select a representative solution (v,u) for which
vixi0
m
r=1
= 1
Hence, the denominator in the efficiency score θ shown above is set equal to one, the transformed linear
programming model for DMU0can be written as follow.
Max θ = uryr0
s
r=1
Subject to
uryrj −
s
r=1
vixij
m
r=1
≤ 0 ; j = 1,2, … , n
vixi0
m
r=1
= 1
vi ≥ 0; i = 1,2, … , m
ui ≥ 0; r = 1,2, … , s
BCC Model
Max output (y)
Subject to: output constraint
ynλn −
N
n=1
θyi ≥ 0
input constraint
znλn −
N
n=1
θzi ≥ 0
forλn > 0, n = 1,2, … , N
𝛌 represents the Lagrange multiplier and in the solution it indicates the efficient peer DMUs.
𝚹 represents the factor by which the current levels of input constraints are solved for overall TE (CSRTE ) =
1
ϴ
under CRS assumption.
Pure TE(VRSTE ) of DMU can be arrived at by relaxing CRS assumption and new ϴ value (ϴ∗
) is computed by
imposing assitional constraints i.e.
λn = 1
N
n=1
Scale efficiency is given by SE =
CRS TE
VRS TE
=
ϴ
ϴ∗
Whether the DMUs are operating under DRS, IRS or CRS all previously mentioned constraints are solved
forϴ∗∗
with additional constraints λn ≤ 1N
n=1 at NIRSTE =
1
ϴ∗∗
4. Measuring Technical and Scale Efficiency of Banks in India Using DEA
DOI: 10.9790/487X-17126671 www.iosrjournals.org 69 | Page
if NIRSTE and VIRSTE ≠ 0 ⇒ IRS and
if NIRSTE and VIRSTE = 0 ⇒ DRS
IV. Results and conclusion
The Data considering the various inputs and outputs is written in the form of linear programming
equations. Then, the equations are solved using DEA technique. Analysis is presented in a descriptive statistical
format using the graphs and tables. The linear programming model shown above will be run n times in
identifying the relative efficiency score of all the DMUs. Each DMU selects input and output weights that
maximize its efficiency score. Generally, a DMU is considered to be efficient if it obtains a score of 1.00,
implying 100% efficiency; whereas a score of less than 1.00 implies that it is relatively inefficient.
Table 1: Technical and Scale Efficiency Scores,2006-2010
Table 2 Average Efficiency scores,2006-2010
2006 2007 2008 2009 2010
PTE 0.9352 0.9885 0.9956 0.9703 0.963
SE 0.9753 0.9808 0.9932 0.9778 0.9738
TE 0.912 0.9695 0.9889 0.9488 0.9376
Figure 1: Efficiency trend Graph 2006 - 2010
5. Measuring Technical and Scale Efficiency of Banks in India Using DEA
DOI: 10.9790/487X-17126671 www.iosrjournals.org 70 | Page
Figure 2: Efficiency scores 2006 - 2010
V. Conclusion
This paper attempts to investigate the technical as well as Scale efficiency of Indian commercial banks over
the period 2006-2010. The BCC and CCR models have been used to obtain the various efficiency scores
for ten Indian commercial banks (DMUs).
The efficiency trend graph in fig.1 shows that the mean technical and Scale efficiency improved from 2006
to 2008 and then declined during the period 2008 to 2010. The result also shows that the banks like
SBI,PNB and ICICI have higher pure technical efficiency as compared to their scale efficiency where as
banks like Allahabad bank, HDFC and AXIS banks have higher Scale efficiency.
The low efficiency scores obtained in the study by the DMUs like SBI, PNB and HDFC during the
reference period is due to their huge amounts of deposits and operating expenses.
The fact that the performance of private sector banks is better than public sector banks during the period of
investigation, 2006-2010,(Nand kumar and Archana Singh,2014) is vindicated in terms of Scale efficiency
as well.
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