An examination of technical, pure technical and scale efficiencies of regional rural banks in India using data envelopment analysis

The present study attempts to empirically examine the relative efficiency of regional rural banks during the second-generation reform period spanning from 1998–1999 to 2008–09 by using non-parametric technique of data envelopment analysis. The aforementioned conclusions portray that over the period from1998-1999 to 2008–09, regional rural banks have experienced technical efficiency to the tune of about 75 percent. Thus the banks can on an average decrease their inputs by 25 percent and still can produce the same level of output. The decomposition of overall technical efficiency into two components namely pure technical efficiency and scale efficiency provided the evidence that 18 percentage points of overall technical inefficiency is due to managerial in capabilities in utilizing critical inputs, while remaining part of the overall technical inefficiency may be attributed to the choice of sub optimal scale of operation. Besides this, the empirical findings provide the evidence of positive relationship among scale economies and bank size.