Gaining insights into the efficiency of the Indian banking sector

This research paper aims to study the efficiency of around 50 Indian Banks in the period 2009-2014, comparing state banks, nationalized banks, private banks and foreign banks. Banks are key players in, and enablers of, a healthy national financial system, and their efficiency, efficacy and profitability help to pave a country's economic growth and support its population's welfare. Previous studies report two opposite trends: on the one hand that public banks exhibit more efficiency than private/ foreign banks: and on the other hand that private/ foreign banks are more efficient than public ones. This paper uses Data Envelopment Analysis with an intermediation approach and an input-oriented model, to analyse the sample. Two models are developed to account for the classic approach to banking and the new electronic banking model. The main findings are: (a) "foreign" banks appear to be more oriented towards electronic banking for intermediation purposes, (b) "private" banks showed the greatest efficiency in the period 2009-2012 whereas in the period 2013-2014 state banks were the most efficient in terms of the classic intermediation approach.