Impact of Crises on Efficiency, Effectiveness and Performance of Indian Banks: A Network Directional Distance Approach

Abstract

Purpose: The purpose of the study is to evaluate how the exogenous crises like the Global
Financial Crisis (GFC) and the COVID-19 pandemic have impacted the efficiency,
effectiveness and performance of the Indian banking system.
Design/Methodology/Approach: A two-stage directional distance function-based
network data envelopment analysis (DDF-NDEA) model is employed to calculate
efficiency, effectiveness, and overall bank performance scores of each bank. The second
stage employs bootstrapped truncated regression to study the impact of the crises on bank
performance.
Findings: Empirical results highlight a notable difference in the impact of crises across
ownership groups. In particular, public-sector banks exhibit a significant rebound in
their overall performance following the GFC. Furthermore, no adverse impact of the
COVID-19 pandemic overall bank performance was observed.
Originality: To the best of our knowledge, few studies have yet evaluated the impact of
the GFC and COVID-19 pandemic on the efficiency, effectiveness and performance of
Indian commercial banks.
Paper Type: Empirical Research Paper