A Bootstrap Analysis of Indian Commercial Bank’s Efficiency

Abstract

In this study, we are trying to examine the bias-corrected efficiency of selected Indian private sector banks. We collect balanced panel data for 5 fiscal years (2019-2023) from 10 private banks operating in India. A bootstrapping VRS output-oriented efficiency model is considered for estimating the bias-corrected bank’s efficiency. The study employs the intermediation approach, using deposit, interest expense, and operating expenses as inputs, and investment, advance, and net profit as outputs. The study aims to enhance the existing literature on banking efficiency by identifying and addressing the inefficiencies caused by bias factors. Efficiency estimation dominates the banking literature. However, studies addressing the issue of 'bias' in the banking industry are inadequate. None of the Indian studies has been encountered by the author where the bias-corrected efficiency of the Indian private banks is being gauged. The outcome of this study submits that Indian private sector banks on average estimate bias-corrected efficiency of 97 percent, indicating fine management of the resources by the private banks in India. Among the private banks operating in India, reports indicate that City Union Bank, DCB Bank, Yes Bank, and ICICI Bank are highly efficient.