IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2011-27.html
   My bibliography  Save this paper

Impact of Liberalization and Globalization on Productivity in Indian Banking: A Comparative Analysis of Public Sector, Private, and Foreign Banks

Author

Listed:
  • Subhash Ray

    (University of Connecticut)

Abstract

Although dominated by public sector banks, India already had a significant presence of private domestic banks and foreign banks. What the banking reforms have done is to create a more level playing field where banks of different ownership types compete within a new set of broad (and far more relaxed) regulations. Data on the performance of the three different categories of banks over the past two decades offer an opportunity to assess to what extent the regulatory changes have improved the productive efficiency of the banking sector in India. Apart from analyzing the standard descriptive measures of performance, this paper uses the nonparametric approach of Data Envelopment Analysis to measure total factor productivity growth and its components to assess the impact of liberalization on different ownership categories of banks in India. The broad conclusion is that it is possible to promote financial soundness by introducing proper prudential norms and to improve operational efficiency without wholesale privatization by allowing competition between public, private and foreign banks. This can be a valuable lesson for other developing countries. JEL Classification: G21, C61 Key words: Banking Reforms, Data Envelopment Analysis, Efficiency Analysis

Suggested Citation

  • Subhash Ray, 2011. "Impact of Liberalization and Globalization on Productivity in Indian Banking: A Comparative Analysis of Public Sector, Private, and Foreign Banks," Working papers 2011-27, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2011-27
    Note: This paper was prepared for the WTO-UNCTAD Conference in Delhi in November 2011. The author is grateful to Abhiman Das for providing him the data in a readily usable form and also for valuable comments.
    as

    Download full text from publisher

    File URL: https://media.economics.uconn.edu/working/2011-27.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Abhiman Das & Saibal Ghosh, 2006. "Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period," Review of Financial Economics, John Wiley & Sons, vol. 15(3), pages 193-221.
    2. TT Ram Mohan, 2007. "Productivity and Efficiency at Public and Private Sector Banks in India," Working Papers id:991, eSocialSciences.
    3. Silva Portela, Maria Conceicao A. & Thanassoulis, Emmanuel, 2005. "Profitability of a sample of Portuguese bank branches and its decomposition into technical and allocative components," European Journal of Operational Research, Elsevier, vol. 162(3), pages 850-866, May.
    4. Zhao, Tianshu & Casu, Barbara & Ferrari, Alessandra, 2010. "The impact of regulatory reforms on cost structure, ownership and competition in Indian banking," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 246-254, January.
    5. Kumbhakar, Subal C & Sarkar, Subrata, 2003. "Deregulation, Ownership, and Productivity Growth in the Banking Industry: Evidence from India," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 403-424, June.
    6. Sensarma, Rudra, 2006. "Are foreign banks always the best? Comparison of state-owned, private and foreign banks in India," Economic Modelling, Elsevier, vol. 23(4), pages 717-735, July.
    7. Ram Mohan, T. T. & Ray Subhash C, 2003. "Productivity and efficiency at public and private sector banks in India," IIMA Working Papers WP2003-06-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    8. Sarkar, Jayati & Sarkar, Subrata & Bhaumik, Sumon K., 1998. "Does Ownership Always Matter?--Evidence from the Indian Banking Industry," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 262-281, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mostak Ahamed, M., 2017. "Asset quality, non-interest income, and bank profitability: Evidence from Indian banks," Economic Modelling, Elsevier, vol. 63(C), pages 1-14.
    2. Fujii, Hidemichi & Managi, Shunsuke & Matousek, Roman, 2014. "Indian bank efficiency and productivity changes with undesirable outputs: A disaggregated approach," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 41-50.
    3. Subhash C. Ray & Abhiman Das & Kankana Mukherjee, 2018. "Measures of Labor Use Efficiency from a Cost-Based Dual Representation of the Technology: A Study of Indian Bank Branches," Working papers 2018-17, University of Connecticut, Department of Economics.
    4. Tzeremes, Nickolaos G., 2015. "Efficiency dynamics in Indian banking: A conditional directional distance approach," European Journal of Operational Research, Elsevier, vol. 240(3), pages 807-818.
    5. Saibal Ghosh, 2015. "Macroprudential regulation and bank behaviour: theory and evidence from a quasi-natural experiment," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 8(1-2), pages 138-159, July.
    6. Zaman, Mohammad Shahid & Valiyattoor, Vipin & Bhandari, Anup Kumar, 2022. "Dynamics of total factor productivity growth: An empirical analysis of Indian commercial banks," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    7. Subhash C. Ray & Abhiman Das & Kankana Mukherjee, 2017. "Labor-Cost Efficiency with Indivisible Outputs and Inputs: A Study of Indian Bank Branches," Working papers 2017-04, University of Connecticut, Department of Economics.
    8. Ghosh, Saibal, 2013. "Macroprudential Regulation and Bank Performance: Evidence from India," MPRA Paper 51226, University Library of Munich, Germany.
    9. Bhattacharyya, Aditi & Pal, Sudeshna, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, Elsevier, vol. 22(3), pages 109-117.
    10. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
    11. Aditi Bhattacharyya & Sudeshna Pal, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, John Wiley & Sons, vol. 22(3), pages 109-117, September.
    12. Hsiao, Hsing-Chin & Chang, Hsihui & Cianci, Anna M. & Huang, Li-Hua, 2010. "First Financial Restructuring and operating efficiency: Evidence from Taiwanese commercial banks," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1461-1471, July.
    13. Ghosh, Saibal, 2013. "Macroprudential regulation and bank performance:Does ownership matter?," MPRA Paper 65212, University Library of Munich, Germany.
    14. Rudra Sensarma, 2008. "Deregulation, ownership and profit performance of banks: evidence from India," Applied Financial Economics, Taylor & Francis Journals, vol. 18(19), pages 1581-1595.
    15. Jaffry, Shabbar & Ghulam, Yaseen & Cox, Joe, 2008. "Labour use efficiency in the Indian and Pakistani commercial banks," Journal of Asian Economics, Elsevier, vol. 19(3), pages 259-293, June.
    16. Aadil Ummar Zaman & Nisar Ahmad Khan, 2023. "Decomposition of productivity growth among the cooperative banks in Jammu and Kashmir (India)," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    17. Ghosh, Saibal, 2017. "Why is it a man’s world, after all? Women on bank boards in India," Economic Systems, Elsevier, vol. 41(1), pages 109-121.
    18. Gulati, Rachita, 2022. "Global and local banking crises and risk-adjusted efficiency of Indian banks: Are the impacts really perspective-dependent?," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 23-39.
    19. Muneer Babu M. & Praveen Kulshreshtha, 2014. "Productivity Change and Technical Efficiency in Indian Microfinance Institutions," Studies in Microeconomics, , vol. 2(2), pages 165-200, December.
    20. Sushanta Mallick & Aarti Rughoo & Nickolaos G. Tzeremes & Wei Xu, 2020. "Technological Change and Catching-Up in the Indian Banking Sector: A Time-Dependent Nonparametric Frontier Approach," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 217-237, June.

    More about this item

    Keywords

    banking reforms; data envelopment analysis; efficiency analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2011-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark McConnel (email available below). General contact details of provider: https://edirc.repec.org/data/deuctus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.
    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy