Comparison of Indian Public Sector Banks' Cost and Profit Efficiencies in the Post-Reform Period

Abstract

The chapter compares and analyzes the cost and profit efficiency of India's public sector banks (PSBs). The information was obtained and examined between 1995 and 2017, or from the start of the post-liberalization era until the big State Bank of India merger in 2017. For each PSB in India, the average profit efficiency (PE) and cost efficiency (CE) ratings were examined year by year. Using non-parametric Friedman's two-way Annova and Wilcoxon signed rank tests, the distribution and median of efficiency scores in two subperiods were also evaluated. The findings showed that PSBs in the chosen time period had profit inefficiencies. PE scores are lower than CE scores for the whole time period. The results also showed significant variances amongst public sector banks between 1995 and 2022. In addition, since India's 1991 banking sector reform, the PE of PSBs has been falling.