Efficiency of Indian banks in fostering financial inclusion: an emerging economy perspective

Financial inclusion paves the path towards inclusive growth. The Government of India launched the Pradhan Mantri Jan-Dhan Yojana (PMJDY) in 2014 with a similar aim. The present study measures efficiency of 25 banks using the data envelopment analysis to ascertain how the banks have functioned under the PMJDY scheme. The study has been conducted for a duration of 7 years beginning from the year the scheme was introduced in 2014-2015 till 2020-2021. Results of the empirical analysis have indicated that the performance of public sector banks has been better than the private banks in expanding financial inclusion under the PMJDY programme. Additionally, measurement of projection and shortfall of the outputs of banks has shown that very few banks have performed efficiently in furthering the objectives of PMJDY scheme. Thus, the overall evidences derived from the analysis suggest that the inefficient banks need to expand their banking services for the deprived. Regular assessment of efficiency would assist in identifying and thereby implementing necessary steps to overcome the obstacles in achieving the financial inclusion goals. This would also improve the efficiency level of the banks having low-efficiency scores. Moreover, banks have a social responsibility to properly implement the schemes initiated by the government.