Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis

In this study we estimate technical efficiency of Indian commercial banks from 1989 to 2009, using a multiple- output generalized stochastic production frontier and analyze the effects of financial reforms on estimated efficiency. The generalized method estimates technical efficiency in the presence of multiple outputs, filling a gap in the existing literature. Our results show that Indian commercial banks were operating with 64% efficiency on average during the sample period. The initial phase of reform had a positive impact on while the later phase adversely affected technical efficiency of banks. Public sector banks show higher efficiency levels compared to private and foreign banks. (C) 2013 Elsevier Inc. All rights reserved.