Paper Number :WP/12/2022
Publication Date :Feb. 1, 2022
In a comparative framework, we estimate technical efficiency of Indian banks during 2009-10 to 2017-18. We consider advances and recovery of stressed assets as desirable outputs, while NPA and slippage as undesirable byproducts. Our conjecture (from the prior observations) that public sector banks lag way behind the private sector banks has also been validated. To be specific, an average public (private) sector banks has an opportunity to further expand its recovery by 69.7% (50.4%) while keeping its GNPA and three inputs (viz., total fixed assets, deposits and operating expenses) at their current levels. Our second stage econometric analyses help us drawing inference that positive externalities are predominant for priority sector lending in determining the efficiency of a banks. Moreover, overall competitive scenario within the baking sector, secured loan and economic growth play noteworthy role in improving bank’s operational efficiency and reducing credit risk. Our results also suggest that collateral type might be of more exchangeable to liquid assets to improve the recovery of stressed assets.