Public sector banks more efficient than private banks, finds EAC-PM study
A recent Economic Advisory Council to the Prime Minister (EAC-PM) study reveals government-run banks outperform private banks in terms of efficiency, according to a paper titled 'Reforms, Efficiency, and Productivity of Indian Banking Sector in the Last Decade: A DEA Approach'. Authors Soumya Kanti Ghosh and Tapas Kumar Parida found that public sector banks (PSBs) achieved an efficiency score of 93.12% in 2025-26, while private banks operated at 86.02%.
Foreign banks scored 85.88%. An efficiency score below 100% indicates the ability to produce the same output with fewer inputs. Over the past 12 years (2014-15 to 2025-26), PSBs consistently outperformed private banks, with a score of 88.53% compared to 85.62%. Foreign banks had the highest efficiency score of 88.98%, but it has declined sharply from 95.86% in 2014-15.
The study utilized data envelopment analysis (DEA) to evaluate performance, a method that assesses the relative efficiency of decision-making units producing similar goods or services. The findings, published in the study, contradict common perceptions about bank efficiency and suggest that consolidation of banks could improve overall efficiency.
Data envelopment analysis (DEA) is a tool used to measure the performance of decision-making units that provide identical goods or services.
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