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Efficiency and profitability of commercial banks in the pre and post crisis periods: The case of the Indian banking sector

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posted on 13.09.2022, 10:18 authored by Mukta Rani

The data used for the research project is secondary  panel data which has been collected from Reserve bank of India database. The technical efficiency and performance of 26 commercial banks of India have been analysed. The technical efficiency scores of banks have been calculated employing the non-parametric frontier method DEA i.e. Data Envelopment Analysis. The inputs and outputs of banking activity used in the DEA method are determined using the intermediation approach. Loan loss provisions, operating expenses, deposits and borrowings are used as inputs and; investments, advances, net interest income and total other income are considered as outputs of the banking activity. After this, the relationship of technical efficiency with profitability of banks has been tested in the two periods. Return on equity (ROE) has been taken as a measure of profitability of banks. Lastly, micro and macro determinants of ROE have been tested in the pre and post crisis periods using regression methods. The internal determinants researched in the thesis are capital adequacy, market share, bank size, bank age, liquidity, non-performing assets and net interest margin and; the external variables are GDP, Inflation, exchange rate and real interest rate. 



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