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    Simon H. Kwan: Operating Performance of Banks in Indian Economy

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    Nikhil Boggarapu
    This document summarizes two research papers on bank operating efficiency and performance in Asian countries and India. The first paper finds that bank operating costs vary significantly across Asian countries from 1992 to 1999. Costs declined before 1997 but increased during the Asian financial crisis as banks dealt with problem loans. The second paper measures the productive efficiency of banks in India using data envelopment analysis, finding that private sector banks have paradoxically lower efficiency than public sector and foreign banks. It recommends continued efforts to reduce non-performing assets and rationalize staffing to improve efficiency.

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    Simon H. Kwan: Operating Performance of Banks in Indian Economy

    Uploaded by

    Nikhil Boggarapu
    38 views2 pages
    This document summarizes two research papers on bank operating efficiency and performance in Asian countries and India. The first paper finds that bank operating costs vary significantly across Asian countries from 1992 to 1999. Costs declined before 1997 but increased during the Asian financial crisis as banks dealt with problem loans. The second paper measures the productive efficiency of banks in India using data envelopment analysis, finding that private sector banks have paradoxically lower efficiency than public sector and foreign banks. It recommends continued efforts to reduce non-performing assets and rationalize staffing to improve efficiency.

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    This document summarizes two research papers on bank operating efficiency and performance in Asian countries and India. The first paper finds that bank operating costs vary significantly across Asian countries from 1992 to 1999. Costs declined before 1997 but increased during the Asian financial crisis as banks dealt with problem loans. The second paper measures the productive efficiency of banks in India using data envelopment analysis, finding that private sector banks have paradoxically lower efficiency than public sector and foreign banks. It recommends continued efforts to reduce non-performing assets and rationalize staffing to improve efficiency.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    38 views2 pages

    Simon H. Kwan: Operating Performance of Banks in Indian Economy

    Uploaded by

    Nikhil Boggarapu
    This document summarizes two research papers on bank operating efficiency and performance in Asian countries and India. The first paper finds that bank operating costs vary significantly across Asian countries from 1992 to 1999. Costs declined before 1997 but increased during the Asian financial crisis as banks dealt with problem loans. The second paper measures the productive efficiency of banks in India using data envelopment analysis, finding that private sector banks have paradoxically lower efficiency than public sector and foreign banks. It recommends continued efforts to reduce non-performing assets and rationalize staffing to improve efficiency.

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    Simon H.

    Kwan(2003)1After controlling for loan quality, liquidity, capitalization, and output


    mix, per unit bank operating costs are found to vary significantly across Asian countries and over
    time. Further analysis reveals that the country rankings of per unit labor and physical capital
    costs are highly correlated, suggesting that there exist systematic differences in bank operating
    efficiency across Asian countries. However, this measure of operating efficiency is found to be
    unrelated to the degree of openness of the banking sector. Asian bank operating costs were found
    to decline from 1992 to 1997, indicating that banks were improving their operating performance
    over time. Since 1997, the run-up in operating costs coincided with the Asian financial crisis,
    suggesting that banks were incurring additional costs in dealing with their problem loans while
    output was declining simultaneously. Moreover, the labor cost share is found to decline
    significantly between 1997 and 1999, indicating that banks were able to cut their labor force after
    the financial crisis but were less flexible to reduce physical capital input. Furthermore,
    significant differences in labor cost share are detected across countries, suggesting that different
    countries have different bank production functions. The variations in labor cost share are
    significantly positively related to the countrys financial services wage rate, suggesting that
    banks using relatively more labor in a particular country is due to the labor force productivity,
    rather than labor being cheap. Milind Sathye (2001)2 The objective of this paper is to measure
    the productive efficiency of banks in a developing country, that is, India. The measurement of
    efficiency is done using data envelopment analysis. Two models have been constructed to show
    how efficiency scores vary with change in inputs and outputs. The efficiency scores, for three
    groups of banks, that is, publicly owned, privately owned and foreign owned, are measured. The
    study shows that the mean efficiency score of Indian banks compares well with the world mean
    efficiency score and the efficiency of private sector commercial banks as a group is,
    paradoxically lower than that of public sector banks and foreign banks in India. The study
    recommends that the existing policy of reducing non-performing assets and rationalization of
    staff and branches may be continued to obtain efficiency gains and make the Indian banks
    internationally competitive which is a declared objective of the Government of India

    Operating Performance of Banks in Indian Economy


    Efficiency of banks in a developing economy: The case of India

    Methodology
    Sources of Data
    The study is primarily based on secondary data. The required data have been collected from
    carious websites and relevant data available in the Internet.
    Sampling Framework
    Annual Reports of the company has taken into consideration and has analyzed the companies
    over a period of years

    References
    Sathye, M. (2005). Privatization, performance, and efficiency: A study of Indian banks. Vikalpa, 30(1), 716.
    Nazir, T. (2010). Analyzing Financial Performance of Commercial Banks in India: Application of CAMEL
    Model. Pakistan Journal of Commerce & Social Sciences, 4(1).
    Shanmugam, K. R., & Das, A. (2004). Efficiency of Indian commercial banks during the reform
    period. Applied Financial Economics, 14(9), 681-686.
    Dash, M., & Charles, C. (2009). A study of technical efficiency of banks in India. Available at SSRN
    1417376.
    Nazir, T. (2010). Analyzing Financial Performance of Commercial Banks in India: Application of CAMEL
    Model. Pakistan Journal of Commerce & Social Sciences, 4(1).

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