Regulatory Reform And Productivity Change In Indian Banking

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Executive Summary

This paper examines the impact of regulatory reform on TFP growth and its sources and on the relationship between ownership and cost efficiency for Indian banks in 1992-2004. The methodology consists of the joint use of parametric and non-parametric techniques to estimate efficiency frontiers. Both approaches show that the Indian banking industry, after an initial adjustment phase, experienced sustained productivity growth driven mainly by technological progress. Results also indicate a changing relationship between cost efficiency and ownership structure along with the reform processes, and decreasing mean cost efficiency at the aggregate industry level.

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