Efficiency of Indian commercial banks during the reform period

This article contributes to the banking efficiency literature by measuring technical efficiency of banks in four different ownership groups in India during the reform period, 1992-1999. It employs the stochastic frontier function methodology for panel data. The results indicate that the efficiency of raising interest margin is time invariant while the efficiencies of raising other outputs-non-interest income, investments and credits are time varying. The state bank group and foreign banks are more efficient than their counterparts. The reform period witnessed a relatively high efficiency for augmenting investments, which is consistent with economic growth objective of the reform measures. However, there are still larger gaps between the actual and potential performances of banks.