Performance dynamics of indian commercial banks: does ownership matter?

Abstract

Indian Commercial banking sector has been subjected to substantial changes in the recent past under financial system reforms. However, except few studies substantial amount of reliable studies focused on bank performance in India cannot be found in the literature. Drawing upon experiences of Indian commercial banks during 2002-2009 this study aims to analyze how state owned, nationalized and domestic private banks are behind foreign banks, using data envelopment analysis together with three supplementary measures of performance. The findings suggest that the performance of domestic banks has not yet reached the level of foreign banks in terms of both cost and revenue efficiencies. Surprisingly, domestic private banks are the least efficient in the market. Though the foreign banks are associated with higher revenue efficiencies, higher returns on assets and less non-performing asset ratios their contribution for extending the branch network and banking services to rural areas is trivial.