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ANALYSIS OF EFFICIENCY OF BANKS IN A DEVELOPING ECONOMY: A CASE OF INDIA

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Author(s): Dr. Ashish Kumar

Journal: International Journal of Computer Science and Management Studies
ISSN 2231-5268

Volume: 11;
Issue: 3;
Start page: 17;
Date: 2011;
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Keywords: DEA | Technical Efficiency | Scale

ABSTRACT
The efficiency of banking system is very important for the growth of the overall economy of a country. This is because of the reason that sound banking system serves as an important medium for accomplishing economic growth through the mobilisation of fiscal savings andputting them to the productive use. Given the socioeconomic implications of the banking sector the analyses of relative efficiency of banks has gained popularity among people from banking sector, policy makers, researchers and academicians and otherinterested parties. This paper is an attempt to investigate the efficiency of Indian commercial banks with the help of data envelopment analysis (DEA), a deterministic nonparametricapproach. DEA was firstly applied by Sherman and Gold (1985) for assessing the efficiency of banks. It is a very promising tool for measuring the efficiency of banks (Berger and Humphrey, 1997). DEAis a preferred econometric approach of measuring efficiency because of its advantages over other techniques. The results of this study show that only 5 and 17 banks are efficient on the criteria of technical efficiency and pure technical efficiency respectively.Further ANOVA test indicates that there is no significant difference in the mean technical efficiency scores of various banks belonging to various groups defined for the purpose of this study.
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