Productive efficiency, service quality and profitability: a comparative analysis of foreign and private banks in India

The objective of this paper is to compare the productive efficiency and service quality of major foreign banks operating in India with that of the new private banks and also to study the linkages between efficiency, service quality and financial performance. Data envelopment analysis (DEA) methodology has been employed for benchmarking of productive efficiency while SERVQUAL framework was used for service quality analysis. The linkages between productive efficiency, service quality and financial performance of a selected subset of both foreign and private banks were investigated. Results of the analysis have clearly indicated that though both efficiency and service quality are extremely important they need not necessarily result in superior profitability of a bank. This study contributed to the emerging need for a comprehensive framework for measuring efficiency, service quality and financial performance as well as their inter linkages for the Indian banks of different ownership structure.