Bank-specific, industry-specific and macroeconomic determinants of bank efficiency in India: Does ownership matters?

Using Data Envelopment Analysis (DEA) and panel Tobit regression model, this study investigates the determinants of the Indian Commercial Banks Efficiency for the period of 1992–2011.The overall mean efficiency estimates are 47%, 68%, and 71% respectively under Constant Returns to Scale (CRS), Variable Returns to Scale (VRS) and Scale efficiency assumptions for the full sample period. The panel Tobit results indicate that the determinants of the bank efficiency are not common either under bank ownership type or under the Scale assumptions. In the case of full sample under all banks category, under VRS assumption the bank liquidity, profitability, cost, loan concentration variables are key determinants and from macroeconomic variables only GDP growth rate shows some impact. On the other hand under CRS assumption, the liquidity risk, concentration indices and inflation are the key determinants. Finally, under Scale Efficiency assumption, except liquidity and profitability variables, rests of the measures are the key determinants of the bank efficiency. In the case of domestic category, except the profitability, rests of the measures are the key determinants in both under VRS and CRS assumption. On the contrary, the profitability variables are the key determinants in the case of foreign banks. Under the Scale Efficiency assumption in both domestic and foreign banks category, the concentration measures are the only key determinants.