Consolidation in Indian banking: Does size matter?

Abstract

‘Consolidation in Indian banking’ has been on and off in the realm of deliberations of the policy planners of the country. SBI, the largest commercial bank in the country was ranked 64th in the list of Top 1000 Banks in the world by Banker in 2014 and it moved up to the position of 54th rank in 2015. Present paper aims to search for possible justification for consolidation in the Indian banking space by evaluating the efficiency performances of banks including its drivers. Using DEA technique, the efficiency performances of 54 commercial banks in India during the period 2001–2012 were evaluated. Tobit regression analysis using bootstrap corrected efficiency scores was adopted to decipher drivers of efficiency. Findings clearly indicate that “size” does matter significantly in determining the efficiency profile of banks in India.