Efficiency of Foreign Banks Operating in India: DEA Analysis

Abstract

Indian financial sector has observed various modifications in the policies and prudential norms to raise the banking standards in India to the international strength. Various financial reforms have taken place in 1991 which improved flexibility and operational autonomy in the banking sector. In 1992, on the recommendation of Narasimham committee, a series of developments were instigated. In 1993-94, the approval was accepted for the entry of new private banks and foreign banks in Indian banking sector. After the post reform era, the operations of Foreign Banks (FBs) received a considerable boost. The Reserve Bank of India liberalized its policy for foreign banks implying new opportunities for growth and different representations in India. The present study makes an attempt to measure and compare the efficiency scores of Public Sector Banks (PSBs), Private Sector banks and FBs operating in India during 2008-2013 using frontier based non-parametric technique, i.e., DEA, the result demonstrates that the efficiency of FBs has shown continuous improvement in comparison with PSBs and Private Banks following the route of deregulation with modest drifts.