Efficiency of Indian Public Sector Banks : An Application of DEA Approach

Since the early 1990s, banks in India have witnessed a series of reforms with a view to improving their efficiency. The reforms have given greater freedom to banks to manage both pricing and quality of resources. With the entry of private banks and liberal branching policy for foreign banks, public sector banks have to face more competition. Unless the efficiency of these banks improves, they may not be able to survive in the new challenging environment. This study assesses the pattern of changes in the efficiency of public sector banks for the period 2003-07, using Data Envelopment Analysis (DEA). It was observed that the efficiency of the banks had not increased over the study period. It was also found that a few banks were better prepared to fight competition as compared to their peers.