Fund-based Activity of Indian Small Finance Banks: A Fuzzy DEA Approach

Abstract

The objective of this article is to promote financial inclusion in the niche market for the less privileged class of the society by allowing small finance banks that are specialized in terms of activity with a regional focus and the target population. The present study makes an efficiency evaluation of the small finance banks operating in India for the period 2017–2020. In view of the smallness of the sample size, the study estimates efficiency, not by the conventional data envelopment analysis (DEA)-based point estimates. Instead, it estimates efficiency by applying the Guo–Tanaka fuzzy DEA model. In the second stage, efficiency is explained in terms of three contextual variables: return on asset, capital adequacy and net non-performing asset ratio. JEL Classifications: C61, D21, G21