Global Financial Crisis vis-à-vis NPL Crisis: Impacts on Efficiency of Indian Banking Industry

Abstract

The study aims to assess the impact of both the global financial crisis (2007 to 2009) and the non-performing loan (NPL) boom (2013 to 2017) on bank efficiency in India. The study also looks into the evolution of efficiency before the NPL boom (2009 to 2013) and during the NPL boom (2013 to 2017). For this purpose, the study calculated the technical efficiency scores of the Indian banks over the period 2007 to 2018. The study follows a non-parametric approach of the data envelopment analysis (DEA) and Tobit regression models. The findings demonstrate that the global financial crisis (GFC) has a significant negative impact on the banks’ efficiency. Also, a slight improvement in the efficiency score was observed during the NPL boom. In addition, foreign banks have performed better than their public and private counterparts.