Evaluating the Performance of Commercial Banks in India Using Malmquist and DEA Approach : Some Evidence

This paper makes an attempt to find out bank productivity in India during the period 2008 to 2013, that is, the period of Internet technology wave. Data Envelopment Analysis (DEA) technique is used to calculate and decompose the Malmquist index of Total Factor Productivity (TFP) growth into technical change and change in scale efficiency. The study found that the whole banking system in India during the period 2008-2013 had a positive growth which was mainly due to the ‘catching-up effect' and the frontier effect. The mean technical efficiency of the in-sample foreign and private banks is somewhat higher than the in-sample public sector banks. Further, public sector banks exhibited decreasing returns to scale, while foreign banks and a majority of private banks exhibited increasing returns or were fully efficient. Finally, the study found that the TFP does not always keep increasing as the technology improved. This suggests that bankers and officials should pay more attention to the strategies taken to assimilate the effect of Internet on the banking sector in order to further improve and sustain their performance in the long run