EVALUATING ECONOMIES OF SCALE IN INDIAN COMMERCIAL BANKS USING DATA ENVELOPMENT ANALYSIS

D.K. Malhotra

Philadelphia University

Rashmi Malhotra

Saint Joseph’s University

ABSTRACT

This study uses data envelopment analysis to evaluate the economies of scale of

commercial banks in India. This study looks at the variations in the scale efficiency of thirty five

Indian commercial banks with regard to their operating expenses, employee costs, selling and

administrative expenses, and interest costs relative to their total assets and deposits over a period

of 2007 to 2011 to assess their progress. The authors of this study find that scale efficiency of the

Indian commercial banks has been consistently improving with increasing returns to scale.

Furthermore, this study finds that most of the banks are consistently performing well over a period

of 2007 to 2011.