Efficiency evaluation of public and nationalized Indian banks using data envelopment analysis

Banking system is the backbone of any nation's financial system. It lays down foundation for the establishment and expansion of most business and other organisations by providing them with funds in the form of loans and credit. The smooth functioning and consistency in performance of such banks over a period defines their success. A bank cannot be declared efficient just based on its performance in one year alone, a continuous assessment and evaluation over years needs to be done to address it as efficient. Higher the efficiency score of a bank and lower its variation in the efficiency score over a period, better its performance. This paper evaluates the performance of 21 public and nationalised Indian banks during the period 2007-18, using data envelopment analysis (DEA), which ranks the banks based on their efficiency scores. Ranking the banks for their consistent performance during the subjected time-period by using DEA followed by computing the coefficient of variation of the efficiency scores proves to be a much more reliable technique than many others.