Total Factor Productivity of Public Sector Banks in India: A Malmquist

Approach

Dr. VIKAS CHOUDHARY

Lecturer, Dept of Humanities and Social Sciences
NATIONAL INSTITUTE OF TECHNOLOGY, KURUKSHETRA
E-mail: Vikas9291@yahoo.com

Dr. SANJEEV GUPTA**

Assistant Professor in Management
Dr. B.R. AMBEDKAR NATIONAL INSTITUTE OF TECHNOLOGY
AMRITSAR BYE PASS
JALANDHAR
INDIA
E-mail: sanjeevguptaeco@gmail.com

SUMAN TANDON
Research Scholar, National Institute of Technology, Kurukshetra
Sr. Lecturer, MLUDAV College, Phagwara
E-mail: standon_mludav@yahoo.com

** Corresponding Author

1
Total Factor Productivity of Public Sector Banks in India: A Malmquist
Approach

Abstract
This paper attempts to analyze the total factor productivity changes of Indian public
sector banks during the post reforms period from 1991-2007. A non parametric
Malmquist productivity Index was applied to calculate productivity. Total factor
productivity was decomposed into technical efficiency and technological change and
technical efficiency change was further decomposed into pure efficiency change and
scale efficiency change.
Total factor productivity change (TFPCH) in performance of nationalized banks (except
SBI & its associates) averaged at 2.2 percent during 1992-93 to 2006-07. The
decomposition of TFPCH showed that the mean technical progress increased at 1.9
percent whereas mean technical efficiency has shown a marginal increase 0.3 percent
during that period. Whereas TFPCH in productivity of SBI and its associates was 2.1
percent whereas change in technology was 3.8 percent and no change was observed in
PECH. The change in scale efficiency has shown declining trend of 0.7 percent.

Key Words; Malmquist productivity Index, Public sector banks, Total factor
productivity.

2
Total Factor Productivity of Public Sector Banks in India: A Malmquist
Approach

Section I
Introduction

The Banking Sector Reforms in India were initiated in 1992. The objectives of reforms
were to strengthen the Indian banks, make them internationally competitive and
encourage them to play an effective role in accelerating the process of growth. The
reforms process also initiated measures for improving the productivity, efficiency and
profitability of the banking system. The experience of deregulation with respect to the
banking sector has, however, been mixed. For example, empirical studies with respect to
the U.S. showed that measured cost productivity actually decreased following
deregulation (Berger and Mester, 2001, Humphrey and Pulley, 1997, Bauer, Berger, and
Humphrey, 1993). Berger and Mester (2001) estimate that cost productivity worsened by
4.2% annually over the period 1984-91, and by as much as 12.5% annually during 1991-
97. Increased competition following deregulation made banks transfer some of the market
power back to the depositors in the form of higher interests on deposits, which increased
banks' cost of funds. At the same time, reduction in operating costs through pruning the
number of branches did not materialize as banks moved to provide convenient branching
to depositors as a strategy of maintaining their market share (Humphrey 1991). Thus,
measured cost productivity declined following deregulation though the unmeasured
"quality" of banking output in terms of extensive branching and ATM network, and a
wider variety of financial services that helped customers better manage risks, may have
well increased subsequent to deregulation (Berger and Mester, 2001, Humphrey and
Pulley, 1997, Bauer, Berger, and Humphrey, 1993). This increase in quality was probably
reflected in the significant rise in profit productivity (4.3% annually during 1988-91 and
12.2% annually during 1991-97) as banks increased their revenues through higher prices
to endogenize the cost of higher output quality (Berger and Mester 2001).
It was also recognized that the Indian banking system should be placed on par with
international standards in respect of capital adequacy and other prudential norms.
The operational rigidities in credit delivery system were to be removed to ensure
allocation efficiency and achievement of social objectives. So an attempt has been
made to measure the productivity of public sector banks in India.

Banking in India originated in the first decade of 18 century The General Bank of India,
came into existence in 1786. On 19th July 1969, 14 major commercial banks in the
country were nationalized. Second phase of nationalization Indian Banking Sector
Reform was carried out in 1980 with seven more banks. This step brought 80 percent of
the banking segment in India under Government ownership. The major aim of
nationalization was to give priority to meet the credit requirement of neglected sectors.
This credit facility was supposed to be extended at considerably low rates. With
nationalization there was all-round growth in branch network deposit, credit
disbursement, assets & employment. In this process, profitability & competition has lost
the front seat.

3
Although nationalization of banks helped in the spread of banking to the rural and
hitherto uncovered areas, the monopoly granted to the public sector lead to lack of
competition that resulted into overall inefficiency and low productivity. By 1991, the
country’s financial system was saddled with an inefficient and financially unsound
banking sector. Some of the reasons for this were (I) high reserve requirements, (ii)
administered interest rates, (iii) directed credit and (iv) lack of competition (v) political
interference and corruption. As recommended by the Narasimham Committee Report
(1991) several reform measures were introduced which included reduction of reserve
requirements, de-regulation of interest rates, introduction of prudential norms,
strengthening of bank supervision and improving the competitiveness of the system,
particularly by allowing entry of private sector banks. With a view to adopting the Basel
Committee (1988) framework on capital adequacy norms, the Reserve Bank introduced a
risk-weighted asset ratio system for banks in India as a capital adequacy measure in 1992.
Banks were asked to maintain risk-weighted capital adequacy ratio initially at the lower
level of 4 per cent, which was gradually increased to 9 per cent. Banks were also directed
to identify problem loans on their balance sheets and make provisions for bad loans. The
period 1992-97 laid the foundations for reform in the banking system (Rangarajan, 1998).
The second Narasimham Committee Report (1998) focused on issues like strengthening
of the banking system, upgrading of technology and human resource development. The
report laid emphasis on two aspects of banking regulation, viz., capital adequacy and
asset classification and resolution of NPA-related problems. After adequate skills are
developed, both at the banks and at the supervisory levels, some banks might be allowed
to migrate to the internal rating based (IRB) approach (Reddy 2005). At present, banks in
India are venturing into non-traditional areas and generating income through diversified
activities other than the core banking activities. Strategic mergers and acquisitions were
being explored and implemented. With this, the banking sector is currently on the
threshold of an exciting phase.

The policy initiatives taken in these regards were largely based on the recommendations
of Narasimham Committee I & II on Financial Sector Reforms and Banking Sector
Reforms, respectively. Implementation of the recommendations of these two Committees
were carefully sequenced ensuring that the progress of banking sector reforms takes place
steadily without causing any systemic disruptions.

The paper is organized into five sections: The next section deals with literature review
which focuses on the related work done in the same field. The third section covers the
objectives, the scope of study, various sources of data and research methodology adopted
for analysis of data. The fourth section reports the analysis and findings of the study. The
fifth section presents conclusions of the study.

Section II
Literature Review

The review of literature, in general, guides the researchers for getting a better
understanding of the methodology used, limitations of various available estimation
procedures and data base and lucid interpretation and reconciliation of the conflicting

4
results. . A brief review of some of studies conducted on productivity of banks in foreign
and Indian context are given in this section.

Berg et al. (1992) was first to examine the change in productivity in banking industry.
The research was conducted for the period covering 1980-1989 by taking a sample of 346
banks in Norway. They concluded that the productivity declined at the average bank
before deregulation and productivity has shown increasing trend after deregulation.

Singh (1992) carried out a comprehensive study to analyze the trends in the productivity
of the Indian banking industry. The State Bank of India and its subsidiaries along with
other nationalized banks were considered for analysis. He performed cross sectional and
inter-temporal analysis on the basis of 17 indicators. The results showed that all the banks
under study showed improvement in their productivity except the UCO bank, which
showed decline in productivity from all angles.
Satyanarayana (1996) presented a model for measuring the productivity of banking
industry in India. He was of the opinion that efficiency measurement should be based on
the ‘market share concept’. The banking industry as a whole could be taken as a market.
According to his model the market share should be taken in percentages instead of absolute
terms so that comparison of one bank to the other bank can be done easily. Model was
applied to compare the efficiency of various groups of banks from 1969 to 1994. The State
Bank of India was maintaining the highest level of long-term average productivity i.e. 103
Ramamoorthy (1997) measured the productivity of Indian commercial banks for the period
1991 to 1996 using business per employee as the measure of productivity. He concluded
that measuring productivity as the business per employee did not truly represent the
business in all its facets both from quantitative and qualitative angles. Therefore, the
researchers should keep trying to evaluate productivity on various other alternative criteria.

Athma and Srinivas (1997) conducted a study to analyze the productivity in commercial
banks in India group wise i.e., public sector banks, private sector banks and foreign
banks for the period 1982 to 1995 .A negative percentage for foreign banks in the year
1992-1993 was noticed, which was reversed in the very next year. All the three bank
groups made efforts to improve their productivity in 1994-95 and succeeded in earning
profits by recovering the operative costs fully. The study concluded that the efficient
operations prompt recoveries, proper appraisal of credit risks and avoidance of risky
investments were the key to profitability in banking.

Grriffel-Tatje and Lovell (1997) analyzed the various causes of productivity change in
Spanish banking industry for the period 1986-1993 by using Malmquist productivity
Index. They concluded that commercial banks had a lower rate of productivity growth
than saving banks but these banks have a higher rate of potential productivity growth.

Saha and Ravishankar (2000) estimated productivity of twenty five public sector Indian
Commercial Banks for the period 1992 to 1994. They used intermediate approach for about
input and output variables. .The results indicated that the public sector banks had improved
their efficiency scores over the year 1992 to 1995. There were few banks like the United
Bank of India, the UCO Bank, the Syndicate Bank and the Central Bank of India continued
to be at lower end of the efficiency scales during the period under study State Bank of
India, the Oriental Bank of Commerce, the Dena Bank, the Bank of Baroda and the
5
Corporation Bank were found to be the most efficient banks t hose fully tapped the capital
market.

Pal, et al. (2000) examined the productivity of 68 major Indian commercial banks for the
year 1999. The five inputs five output variables were taken to employ CCR Output: The
output variable were: deposits, net profits, advances, non-interest income and spread. The
five input variables taken were: net worth, borrowings, operating expenses, number of
employees in the country and number of bank branches in the country. Output oriented
DEA model to find out the relative efficiency of the 68 Indian banks. The results showed
that 16 banks were CCR efficient (efficiency = 1). The average efficiency figure for the
banks came out to be 0.9. 45 banks had efficiency rating greater than 0.9 and out of these
50 per cent were private banks. They concluded that the privately owned banks performed
better than the foreign owned banks.

Das (2002) examined the interrelationship among risk, capital and productivity change of
the public sector banks in India. Yearly data of Public Sector Banks from 1995-96
through 2000-2001 was taken for 27 public sector banks. The simultaneous equations
system is fitted by pooled time-series, cross-section procedure separately used for each
size class. It was concluded that higher productivity led to a decrease in credit risk; it has
a positive influence on bank capitalization also. Poor performers were more prone to risk
taking than better performing organizations. The positive effect of productivity on capital
is attributed to regulatory especially for pressure banks having fall short of capital
adequacy standards. It supported the fact that productivity, capital and risk taking tend to
be determined jointly and these were compensating each other.
Janki (2002) analyzed the effect of technology on the productivity of employees. There
was no doubt there is utmost need in public sector banks to use technology to improve
operating efficiency and customer services. The focus on technology would increase like
never before to add value to customer services, develop new products, strengthen risk
management etc. Data Envelopment Analysis (DEA) was used and period taken for study
was 1986-91. They found that public sector banks had the highest efficiency followed by
foreign banks. The private banks were found to be the least efficient. They also found a
temporal improvement in the performance of foreign banks.

Sufian Fadzlan (2005) applied Malmquist approach to investigate the productivity change
in Malaysian Banks during the period of 1998-2003. Malaysian Banks have shown
productivity regress of 6.3 percent and that was largely due to Technological Change
(TC) regress (6.1 percent) rather than Technical Efficiency (TE) (0.2 percent).He
concluded that during the period of study, Malaysian Banks have shown slight
improvement in Scale Efficiency particularly during the early years.

Ready (2006) in his paper examined total factor productivity, technical and scale
efficiency changes in regional rural banks by using DEA approach for his study he
empirically evaluated 192 banks for the period 1996 to 2002. The paper concluded with
result that technical efficiency of rural banks was higher in service provision than in the
parent public sector banks. The efficiency of rural banks is higher in economically and
socially developed regions as well as in low banking density regions. Total factor
productivity growth of rural banks was higher in profitability than service provision
during the liberalization period. There was also a case of mergers and enlargement of
6
asset base as well as the number of branches under each rural bank as there was existence
of economies of scale.

Ramakrishna Ramanathan (2007) attempted to examine the performance of banks in

countries of Gulf Cooperation Council. The performance of 55 banks operating in the
countries of Gulf Cooperation Council was evaluated by using Data Envelopment
analysis (DEA) and Malmquist productivity Index (MPI). In this study, fixed assets,
deposits and short term funding, equity, personal expenses were used as inputs and loans
and other earning assets were used as outputs. MPI was used to patterns of efficiency
change over the period 2000-2004, whereas DEA efficiencies were calculated.

Shabbar Jaffry, et al. (2007) studied to measure changes in productivity and technical
efficiency levels within banking sectors of the Indian sub-continent: specifically India,
Pakistan and Bangladesh, over the period 1993–2001. A Malmquist index of total factor
productivity (TFP) change over the time period in question was employed, along with a
Tobit regression, in order to determine whether these measures of regulatory and
financial reform has had the desired effect upon the Indian sub-continent in terms of
productivity and efficiency levels. It was found that technical efficiency both increases
and converges across the Indian sub-continent in response to reform. India and
Bangladesh experienced immediate and sustained growth in technical efficiency, whereas
Pakistan endured a reduction in efficiency during the middle years of the study, before
rebounding to levels comparable to the rest of the sub-continent in the latter years of the
study.

By thorough review of literature, it was concluded that in case of Indian commercial

banks, partial productivity was analyzed in the most of the cases and only a few studies
have used Malmquist productivity index for calculating TFP in Indian context. So there
was need to analyze TFP of commercial banks. Where as Public Sector Banks have major
share in total banking, so an attempt has been made to measure Total Factor Productivity
of Public Sector Banks.

Objectives of the study: Specific objectives of the study were

1. To measure total factor productivity of public sector banks in India based on

Malmquist Index.

2. To analyze the trend in total factor productivity of public sector banks in India.

Section III

Methodology & Data Base

Productivity is generally defined in terms of the efficiency improvement and technical

change with which inputs are transformed into outputs in the production process (Coelli
et al., 1998). Farrel (1957), mentioned in Forsund and saarafogulu (2000), defined two
7
types of production efficiency: technical efficiency (TE), which evaluates a firm’ ability
to obtain the maximum possible output from a given set of inputs, and allocative
efficiency (AE) which measures a firm’s ability to maximize its profits by comparing
marginal revenue product with marginal costs of inputs. However, this econometric
approach requires the specifications of production function technology. Recently,
mathematical programming approaches, such as Data Envelopment Analysis (DEA) are
developed to measure TE by combining the firm’s production to the best production
frontier (Seiford and Thrall, 1990).

Specifically, the productivity can be measured by using narrow measures like partial
productivity indices or a more comprehensive Total Factor Productivity (TFP). Partial
Productivity Indices refer to ratios of output to each of categories of input for which
separate data exist. Total factor productivity (TFP) is an overall indicator of how well an
organization uses all of its resources to create its products and services. Moreover, TFP is
a broader measure of economic and technical efficiency reflecting a diversity of factors
including managerial efficiency, economies of scale, R & D, market structure and human
capital utilization. TFP can be split up into two major components viz: technological
progress and improvement in technical efficiency. It is important at the outset to
distinguish between technological progress and improvement in technical efficiency.
Technological progress may be attributed to the introduction of new technology, which
leads to an expansion of the best production frontier and hence gives higher output even
with given input of resource. The other component is improvement in technical efficiency
which yields higher output being the result of improved management practices, better
industrial relationships, and diffusion of new technological knowledge as well as short
run adjustments to shocks, external to the enterprise as technical efficiency change.

Three different indices are frequently used to evaluate technological changes; the Fisher
(1922), Tornqvist (1936), and Malmquist (1953) indexes. According to Grifell-Tatje and
Lovell (1996), the Malmquist indexes have three main advantages relative to the Fisher,
Tornqvist indices. Firstly, it does not require the profit maximization, or cost
minimization assumption. Secondly, it does not require information on the input and
output prices. Finally, if researcher has panel data, it allows the decomposition of
productivity changes into two components (technical efficiency change, and technical
change or changes in the best practice).Its main disadvantage is the necessity to compute
the distance functions. However, the Data Envelopment Analysis can be used to solve
this problem. Following Fare et al. (1994) the Malmquist (output oriented) TFP change
index The Malmquist TFP index calculates the change in productivity between two points
by estimating the ration of the distances of each point relative to a common technology.
The Malmquist input oriented TFP change index between the base period t & the
following period t+1 is defined as:
1/ 2
d t +1 (Yt +1, X t +1 ) d (Y , X t +1 ) 
M ( y t , xt , y t +1, xt +1 ) =  X t t +1 
 d t (Yt , , X t )
 d t +1 (Yt +1 , X t +1 


A value of M greater than unity implies a positive TFP growth from period t to period
t+1.Otherwise, a value of M less than one indicates a TFP decline. Equation (1) is

8
geometric mean of two TFP indices. The first index is calculated with respect to period t
technology, while the second index is evaluated with respect to period t+1 technology.

The advantage of the Malmquist index is that it allows the researcher to distinguish
between shifts in the production frontier (technological change, TC) and movements of
firms towards the frontier technical efficiency change, TEC).. The measure of technical
efficiency must be between 0 & 1.

Total Factor Productivity Change Index =

1/2
D t ( y t , xt )  D t +1 ( yt +1, xt +1 ) Dt +1 ( yt , xt ) 
×  × 
D t +1 ( y t +1 , xt +1 )  Dt ( yt +1 , xt +1 ) Dt ( yt , xt ) 

1/2
 D t +1 ( y x ) D t +1 ( y t , xt ) 
Technological Change Index =  t t +t1+1, tt++11 × t t t 
 D (y , x ) D (y , x ) 

 D t +1 ( CRS ) ( yt +1, xt +1 ) 
Technical Efficiency Change Index =  
 D ( CRS ) ( y , x ) 
t t t

 D t +1 ( VRS ) ( yt +1, xt +1 ) 
Pure Technical Efficiency Change Index =  
 D ( VRS ) ( y , x ) 
t t t

 D t +1 ( CRS ) ( yt +1, xt +1 )   D t +1 ( VRS ) ( y t +1, xt +1 )

Scale Efficiency Change Index =    /  ... (1)
 D ( CRS ) ( y , x )   D ( VRS ) ( y , x ) 
t t t t t t

For analysis data is taken for the period 1991-92 to 2006-2007 for public sector banks in
India. In the present study public sector banks are divided into two groups: Nationalized
Banks and State Bank Group. The input considered were: Number of Employees,
Operating Expenses and Interest Expended. The outputs were: Loans, Advances and
Total Investment. For the purpose of analysis data was collected from the Reserve Bank
on India‘s Website (www.rbi.org.in) and Statistical Tables Relating to Banks in India
from 1979-2007.Data collected has been deflated with price index taking 2000 as base
year.

However, there is also some disagreement on what banks produce and how to measure
bank production. The final decision depends on the underlying concept of a bank, the
problem at stake and the availability of information. The approach of input and output
definition used in this study is a variation of the intermediation approach, which was
originally developed by Sealey and Lindley (1977). The intermediation approach posits
total loans and interest income as outputs, whereas deposits along with physical capital
are defined as inputs. According to Berger and Humphrey (1997), the intermediation
approach might be more suitable for studying efficiency of the entire financial
institutions. Furthermore, Sathye (2001) also noted that this approach is more relevant to

9
financial institutions as it is inclusive of interest expenses, which often accounts for one-
half to two-thirds of total costs depending on the phase of the interest rate cycles.
Following Isik and Hassan (2003) and Sathye (2001) among others, the intermediation
approach or asset approach to define bank inputs and outputs would be adopted.
Accordingly, three inputs: Number of Employees, Operating Expenses, Interest
Expended and three outputs: Total loans, Total Deposits, Total Investments are used .

Section IV

Results & Analysis

Malmquist Productivity indices have been compared for productivity of PSB’s. Table 1
depicts the yearly average and decomposed results of productivity of Nationalized Banks.
In this study, Malmquist Productivity Index (MPI) was decomposed into the technical
change index (TECHCH) and Efficiency change (EFFCH) index. In order to identify the
Changes in scale efficiency, EFFCH were further classified into pure efficiency change
(PECH) and scale efficiency change (SECH).

INSERT TABLE 1 HERE

Table 1, indicated that total factor productivity change (TFPCH) in performance of banks
averaged at 2.2 percent during 1992-93 to 2006-07. The decomposition of TFPCH
showed that the mean technical progress increased at 1.9 percent whereas mean technical
efficiency has shown a marginal increase 0.3 percent during that period.

INSERT TABLE 2 HERE

Glance at table 2, the highest growth rate has been observed in case of Corporation Bank
(9.4 percent), which was followed by Oriental Bank of Commerce (8.9 percent). This
growth was entirely due to technical changes in these banks. Central Bank of India,
Indian Bank, Syndicate Bank, United Bank of India and Vijay Bank has shown declining
trend in growth of productivity of nationalized banks in India.

However, among two components of TFPCH, the change in technical efficiency was very
low and PECH was remaining unchanged in all nationalized banks.Whereas change in
technical efficiency was highest incase of Bank of Maharashtra (1.1 percent) this was
followed by United Bank of India (1 percent). Bank of India, corp. bank and UCO Bank
have shown declining trend in EFFCH. The change in scale efficiency has also shown the
same trend as in case of EFFCH. In fact change in TFP was mainly due change in
technology. Corp. Bank has shown highest TECHCH (9.4 percent) and Oriental Bank of
Commerce has shown 8.9 percent change in technology which would have impact on
change in TFP. Whereas Central Bank of India, Indian Bank. Syndicate Bank, Union
Bank of India and Vijay bank have shown declining trend in TECHCH which led to
decline in TEPCH of these banks.
INSERT TABLE 3 HERE

10
Table 3 indicated that TFPCH in productivity of SBI and its associates was 2.1 percent
whereas change in technology was 3.8 percent and no change was observed in PECH.

INSERT TABLE 4 HERE

The change in scale efficiency has shown declining trend of 0.7 percent. Glance at table
4, State Bank of Indore has shown the highest growth in productivity (9.1 percent) which
was followed by State Bank of Hyderabad (6.4 percent). State Bank of India and State
Bank of Saurashtra have shown negative growth of TFPCH. Decomposition of TFPCH
into the technical change index (TECHCH) and Efficiency change (EFFCH) index. In
order to identify the changes in scale efficiency, EFFCH was further classified into pure
efficiency change (PECH) and scale efficiency change (SECH).EEFCH was maximum
in case of State Bank of Bikaner & Jaipur(0.5 percent) and State Bank of India ,State
Bank of Maysore and State Bank of Travancore has shown negative growth in terms of
technical efficiency change. Where as TECHCH was highest in case of State Bank of
Indore (9.1 percent) which was followed by State Bank of Hydrabad (6.4 percent) .Only
State Bank of Saurashtra has shown declining trend in TECHCH which was 2 percent.
There State Bank of Hyderabad (6.4 percent) was no Change in pure efficiency in case of
SBI & its associates also. It has been observed that SECH was maximum in case of State
Bank of Bikaner & Jaipur (0.5 percent) and State Bank of India, State Bank of Maysore
and State Bank of Travancore has shown negative growth in terms of scale efficiency
change.
It has been analyzed that change in TFP was mainly due to change in technology and
change in efficiency and scale efficiency was very negligible whereas pure efficiency has
remained unchanged.
Section V
Conclusion

From the above analysis it was concluded that total factor productivity change (TFPCH)
in performance of nationalized banks (except SBI & its associates) averaged at 2.2
percent during 1992-93 to 2006-07. The decomposition of TFPCH showed that the mean
technical progress increased at 1.9 percent whereas mean technical efficiency has shown
a marginal increase 0.3 percent during that period. Whereas TFPCH in productivity of
SBI and its associates was 2.1 percent whereas change in technology was 3.8 percent and
no change was observed in PECH. The change in scale efficiency has shown declining
trend of 0 .7 percent.

11
 References

1. Berg, SA, Forsund, FR & Jansen, ES 1992, ‘Malmquist Indices of Productivity

Growth during the Deregulation of Norwegian Banking 1980-1989’.
Scandinavian Journal of Economics 94, Supplement,pp. 211-228.
2. Berger, AN& Humphrey, DB 1997, ‘Efficiency of Financial Institutions:
International Survey and Directions for Future Research’, European Journal of
Operational Research 98, pp. 175-212.
3. Grifell–Tatje, E & Lovell, C AK 1997, ‘The Sources of Productivity Change in
Spanish Banking’, European Journal of Operational Research 98,pp. 364-380.
4. Singh & Sampat P ‘Cost of Bank Credit & prices’, The Journal of Indian Institute
of Bankers, October- November 1979, pp. 25.
5. Ramamoorthy 1997. ‘Profitability and Productivity in Indian Banking-
International Comparison and Implications for Indian Banking’, Proceeding of
Bank Economists’ Conference 1997, IBA pp. 222-236.
6. Sarkar & Subrata 2003, ‘Deregulation, Ownership, and Productivity Growth in
the Banking Industry: Evidence from India,’ Journal of Money, Credit &
Banking, June 2003.
7. Das & Abhiman 1997. ‘Technical, Allocative and Scale Efficiency of Public
Sector Banks in India’, Reserve Bank of India Occasional Papers, vol. 18, No.2
and 3, pp. 279-301.
8. Saha, A & Ravishankar TS 2000, ‘Rating of Indian Commercial Banks: A DEA
Approach’, European Journal of Operational Research, 124(1): pp.187-203.
9. Das, Prasant 2000, ‘Sustainability through Outreach – The Malbar Lighthouse
Shows the Way’, National Seminar on Best Practices in RRBs, BIRD, India -A
Re-Examination" Economic and Political Weekly, September 7.
10. Mukherjee, A, Nath, P & Pal, MN 2002, ‘Performance Benchmarking and
Strategic Homogeneity of Indian Banks’, International Journal of Bank
Marketing, vol. 20, No.3 pp. 122-139.
11. Janki B 2002, ‘Unleashing employ productivity; A need for a paradigm shift’,
Indian Banking association bulletin, vol. XXIV No.3 March, pp. 7-9.
12. Satyanarayana 1996,’Measuring the Productivity of Banks’,
http://unpan1.un.org /intradoc, viewed on November5, 2009.

13. Athma and Srinivas 1997, ‘Analyzing the Productivity of Commercial Banks’,
http://www.newsschool.edu ,viewed on November5,2009.

14. Shabbar Jaffry & et al. 2007 ‘Regulatory Changes and Productivity of the
Banking Sector in the Indian Sub-continent’ The Pakistan Development Review
44: 4 Part II (Winter 2005) pp. 10

12
Table1.Malmquist index Annual summary of Means of Nationalized Banks
(excluding SBI & its associates)

Year EFFCH(1) TECHCH(2) PECH(3) SECH(4) TFPCH(5)

1992-93 1.04 1.066 1 1.04 1.019
1993-94 1.002 1.035 1 1.002 1.037
1994-95 0.974 1.06 1 0.974 1.032
1995-96 1.004 1.025 1 1.004 1.029
1996-97 1.024 0.996 1 1.024 1.02
1997-98 1.008 0.96 1 1.008 0.968
1998-99 0.957 1.069 1 0.957 1.023
1999-2000 1.026 1.023 1 1.026 1.05
2000-2001 1.02 1.009 1 1.02 1.029
2001-2002 1.006 0.989 1 1.006 0.996
2002-2003 1.003 0.974 1 1.003 0.977
2003-04 0.999 1.023 1 0.999 1.022
2004-05 0.985 1.039 1 0.985 1.024
2005-06 1.012 0.997 1 1.012 1.009
2006-07 0.989 1.032 1 0.989 1.021
Mean 1.003 1.019 1 1.003 1.022

13
Table 2.Malmquist index Summary of Means of Nationalized Banks (excluding SBI
& its associates)

S.No Name of the EFFCH(1 TECHCH(2 PECH(3) SECH(4) TFPCH(5)

Bank ) )
1 Allahabad 1.001 1.01 1 1.001 1.011
Bank
2 Andhra Bank 1.001 1.035 1 1.001 1.036
3 Bank of 1 1.021 1 1 1.021
Baroda
4 Bank of India 0.997 1.012 1 0.997 1.009
5 Bank of 1.011 1.025 1 1.011 1.036
Maharashtra
6 Canara Bank 1.006 1.028 1 1.006 1.034
7 Central Bank 1.006 0.985 1 1.006 0.991
of India
8 Corporation 0.998 1.094 1 0.998 1.091
Bank
9 Dena Bank 1.007 1.041 1 1.007 1.049
10 Indian Bank 1.006 0.987 1 1.006 0.993
11 Indian 1.007 1.008 1 1.007 1.014
Overseas
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 Bank
12 Oriental Bank 1 1.089 1 1 1.089
of Commerce
13 Punjab & 1.004 1.041 1 1.004 1.045
Sind Bank
14 Punjab 1.002 1.003 1 1.002 1.005
National
Bank
15 Syndicate 1.004 1.005 1 1.004 1.009
Bank
16 UCO Bank 1.002 0.997 1 1.002 0.998
17 Union Bank 0.998 1.031 1 0.998 1.029
of India
18 United Bank 1.01 0.98 1 1.01 0.99
of India
19 Vijaya Bank 1 0.986 1 1 0.986
Mean 1.003 1.019 1 1.003 1.022

Table 3.Malmquist Index Summary of Annual Means of SBI Group

year EFFCH(1) TECHCH(2) PECH(3) SECH(4) TFPCH(5)

1992-93 1.014 1.151 1 1.014 1.167
1993-94 0.99 1.091 1 0.99 1.08
1994-95 1.002 1.027 1 1.002 1.03
1995-96 0.995 1.035 1 0.995 1.03
1996-97 0.997 1.02 1 0.997 1.017
1997-98 1.002 0.951 1 1.002 0.953
1998-99 1.014 1.036 1 1.014 1.051
1999-2000 1 1.051 1 1 1.051
2000-2001 0.994 1.069 1 0.994 1.062
2001-2002 0.998 1.018 1 0.998 1.016
2002-2003 1 1.004 1 1 1.003
2003-04 0.998 1.016 1 0.998 1.014
2004-05 1.006 1.041 1 1.006 1.047
2005-06 0.973 1.064 1 0.973 1.036
2006-07 0.791 1.012 1 0.791 0.8
Mean 0.983 1.038 1 0.983 1.021

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 Table 4.Malmquist Index Summary of Mean of SBI group

S. Name of the EFFCH(1) TECHCH(2 PECH(3) SECH(4) TFPCH(5)

No. Bank )
1 State Bank of 0.87 1.04 1 0.87 0.905
India
2 State Bank of 1.005 1.016 1 1.005 1.021
Bikaner &
Jaipur
3 State Bank of 1 1.064 1 1 1.064
Hyderabad
4 State Bank of 1 1.091 1 1 1.91
Indore
5 State Bank of 0.999 1.014 1 0.999 1.013
Mysore
6 State Bank of 1.001 1.056 1 1.001 1.057
Patiala
7 State Bank of 1 0.98 1 1 0.98
Saurashtra

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8 State Bank of 0.999 1.048 1 0.999 1.047
Travancore
Mean 0.983 1.038 1 0.983 1.021

17