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Are Private Sector Banks More Sound and Efficient than Public Sector Banks? Assessments Based on Camel and Data Envelopment Analysis Approaches

Author Affiliations

  • 1BITS, Pilani-K.K. Birla Goa Campus, Goa, INDIA
  • 2 Indian School of Business (ISB), Hyderabad, A.P, INDIA
  • 3 Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar, Odisha, INDIA

Res. J. Recent Sci., Volume 2, Issue (4), Pages 28-35, April,2 (2013)

Abstract

The objectives of this paper are two-fold: first to analyze the soundness and the second is to measure the efficiency of 12 public and private sector banks based on market cap. As far as the first objective is concerned, CAMEL approach has been used over a period of twelve years (2000-2011), and it is established that private sector banks are at the top of the list, with their performances in terms of soundness being the best. Public sector banks like Union Bank and SBI have taken a backseat and display low economic soundness in comparison. On the other hand, the present study makes an attempt to measure the efficiency change of these selected banks operating in India during 2010-2012. By using frontier based non-parametric technique, Data Envelopment Analysis (DEA), provides significant insights on efficiency of different banks and places private sector ones at an advantage situation and thereby hints out the possibility of further improvisation of most of the public sector banks. DEA results exhibit that among the public sector banks, the performance of Bank of India, Canara Bank and Punjab National Bank got dampened in the last two years under study where as among the private sector banks, except the case for Axis Bank which was not found to be satisfactory at all, the remaining private sector banks shows marked consistency at their efficiency level during the period under study.

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