'Cost and Revenue Efficiency of State Cooperative Banks in India : Evidence from North-East Using Data Envelopment Analysis'

Abstract: In today's world dominated by globalization, technological and communications advances, expanding world trade, and investments, there seems to be a resurgence of the application of basic principles of resource utilization competency in all financial transactions, particularly in banking sector. The SCBs in India with a substantial asset base plays pivotal role in intermediation process between savers and investors. The mobilization of resources at the lowest cost and deployment of funds ensuring higher yield are the essential factors that underpins efficiency gain for economic growth and development. This study adopts a new set of variables and applies Data Envelopment Analysis (DEA) and Mann-Whitney Test to assess the comparative cost efficiency and revenue efficiency of the SCBs before and after the Badyanathan Committee revamping package. It evaluates efficiency score of the SCBs operating in the north eastern region based on their size, age, and periodic segments using static and dynamic panels and ranked them through means for groups in homogeneous subsets by means of the R-E-G-W Range Test. The results show that though the banks are not fully efficient in all respects, but they maintained productive capacity in the same order as the averages in All India SCBs and all are better in utilizing inputs more than generating optimal outputs. The analytical results validates and corroborates with the earlier and latest Audit observations on overall audit classification on financial performance of the State Cooperative Banks in India wherein Tripura SCB in a short period of time is upgraded as {A} from {C} and that the most competent banks are ranked by the magnitude of their average cost efficiency and revenue efficiency scores comprising the SCBs of Tripura, Meghalaya, and Sikkim