Impact of Camel Variables on Cost Efficiency of Indian Scheduled Commercial Banks

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Published Dec 31, 2019
https://doi.org/10.35737/sjccmrr/V9/i2/2019/151081
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Volume 9, Issue 2, December 2019

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Aparna Bhatia
Assistant Professor, Department of Commerce, Guru Nanak Dev University, Amritsar
Megha Mahendru
Assistant Professor, Department of Commerce and Business Administration, Khalsa College, Amritsar

Abstract

The purpose of this paper is to investigate determinants of Cost efficiency of Scheduled Commercial Banks operating in India. The paper considers all Scheduled Commercial Banks operating in India over the period of 22 years from 1991-92 to 2012-13. Data Envelopment Analysis (DEA) - a non-parametric technique is used to calculate the cost efficiency scores of banks. Due to the censored nature of dependent variable, i.e. Cost efficiency scores range between 0 and 1, Panel Data Tobit regression is employed to identify the determinants. The results indicate that Capital Adequacy Ratio (CAR), Net Non-Performing Assets to Net Advances (NPANA), Total Loans and advances to Total Deposits (TATD), Total Expenses to Total Income (TETI), Return on Assets (ROA), Spread to Total Assets (STA), Liquid Assets to total assets (LATA), Size (LNTA), Private Dummy (PUBD) and Inflation (INF) reveal a negative relationship with cost efficiency scores. Equity to Total Assets (ETA), Total Investments to Total Assets (TITA), Operating Expenses to Total Expenses (OETE), Business per Employee (BPE), and Non-Interest Income to Total Income (NIITI), Cash Deposit Ratio (CDR), Time Dummy (TD), Public Dummy (PUBD) and Log of Gross Domestic Product (LNGDP) disclose positive relationship for cost efficiency. The previous studies consider only limited factors. To overcome the limitation of literature structured framework namely CAMEL have been used in the paper to find strong implications for banks.

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How to Cite
Bhatia, A., & Mahendru, M. (2019). Impact of Camel Variables on Cost Efficiency of Indian Scheduled Commercial Banks. SJCC Management Research Review, 1–28. https://doi.org/10.35737/sjccmrr/V9/i2/2019/151081
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