Dynamic Evaluation of Indian Commercial Banking Sector

The authors investigate the Indian commercial banking sector in the dynamic framework. Growth frontiers are derived with the help of Data Envelopment Analysis (DEA) to identify growth-efficient and growth-inefficient banks. The growth theories demand a steady-state growth path for each sector of the economy; on the other hand, the resource-based theory assumes firm-specific growth rates. The analysis shows dismal performance by domestic banks, both public sector and private; most of these domestic banks are growth-inefficient both in the short-run and in the long-run. The short-run as well as long-run findings strongly support the role of learning by doing as an engine to augment growth for all categories of banks. The analysis also exposes that the resource-based view of firm that generates rent generating competitive advantage ultimately drives both the managerial strategies and the performance of the Indian banking sector.