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EFFICIENCY MEASUREMENT OF INDIAN PUBLIC SECTOR BANKS: NON-PERFORMING ASSETS AS NEGATIVE OUTPUT

Purnendu Paul

Birla Institute of Technology, Management, India

 

Swapan K. Bose

Birla Institute of Technology, Management, India

 

Rizwan S Dhalla

Institute for Technology and Management, India

 

ABSTRACT

In this paper we attempt to measure the relative efficiency of Indian PSU banks on overall financial performances. Since, the financial industry in a developing country like India is undergoing through a very dynamic pace of restructuring, it is imperative for a bank to continuously monitor their efficiency on Non-Performing Assets, Capital Risk-Weighted Asset Ratio, Business per Employee, Return on Assets and Profit per Employee. Here, Non-Performing Assets is a negative financial indicator. To prove empirically, we propose a framework to measure efficiency of Indian public sector banks.

Key Words: Efficiency, NPA- Non-Performing Assets, DEA -Data Envelopment Analysis, CAR-Capital Adequacy Ratio, Negative Output, Banking

JEL Code: E5 and E59 (Related to Banking) & D6 and D61- Related to Efficiency and cost benefit analysis