Rating of Indian commercial banks: A data envelopment analysis approach

Significant changes have been taking place in the Indian banking scenario under the financial sector reform initiatives of the Government of India and the Reserve Bank of India since the early 1990s. As the country's banking system, which is still dominated by the Public Sector Banks, is on the threshold of the new millennium, efficiency issues are gradually emerging as the touchstone of success. There is an emergent need for a comprehensive framework for measuring efficiency of Indian banks both from the point of view of the investors as also the regulators. The present paper, based on empirical analysis, suggests that Data Envelopment Analysis could be a suitable approach towards measuring the relative efficiency of banks in the Indian context.