A Fuzzy DEA Approach for Effectively Measuring the Efficiency of Indian Banks

Data Envelopment Analysis (DEA) is widely applied in evaluating the efficiency of banks since it is a method capable of evaluating the efficiency of decision-making units in utilizing multiple inputs to produce multiple outputs. However, some outputs of banks, in fact, possess fuzzy characteristics, while conventional DEA approach can only assess efficiency with a crisp value and is unable to evaluate imprecise data. Theoretically, the fuzzy DEA approach can evaluate banks' efficiency more realistically and accurately since it can take the fuzzy characteristics of inputs and/or outputs into consideration. This study adopts 48 Indian commercial banks as an empirical example to demonstrate the feasibility and the effectiveness in our proposed fuzzy DEA. The results show that the fuzzy DEA approach could not only effectively characterize uncertainty, but may also have a higher capability to discriminate banks' efficiency than the conventional DEA approach