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Please use this identifier to cite or link to this item: http://repository.iitr.ac.in/handle/123456789/22742
Title: Economic slowdown, NPA crisis and productivity behavior of Indian banks
Authors: Goswami A.
Gulati, Rachita
Published in: International Journal of Productivity and Performance Management
Abstract: Purpose: This paper aims to investigate the productivity behavior of Indian banks in the presence of non-performing assets (NPAs) over the period 1999 to 2017. The study examines whether Indian banks withstand the shocks of the global financial crisis (GFC) of 2007–2009 and sustain their total factor productivity (TFP) levels in the post-crisis economic turbulent period or not. Design/methodology/approach: The robust estimates of TFP and its components: efficiency change and technical change are obtained using the state-of-the-art and innovative sequential Malmquist-Luenberger productivity index (SMLPI) approach. The key advantages of this approach are that it explicitly allows the joint production of undesirable output (NPAs in our case) along with desirable inputs and outputs in the production process and precludes the possibility of spurious technical regress. Findings: The empirical results of the study reveal that the Indian banking system has experienced a (−1) percent TFP regress, contributed solely by efficiency loss during the period under investigation. The GFC has slowed down the growth trajectory of TFP growth in the Indian banking industry. Among ownership groups, the effect of the GFC was pronounced on the public sector banks. Practical implications: The practical implication drawn from the study is that the Indian banks have not been able to successfully transmit the use of installed technology in a way to generate early warning signals and mitigate the risk of defaults so as to maximize their productivity gains in the banking industry. Originality/value: This study is perhaps the first one to understand the productivity dynamics of the Indian banks in response to both endogenous (i.e. NPA crisis) and exogenous (i.e. global financial and economic stress) crises. Moreover, the authors obtain the robust estimates of TFP growth of Indian banks by explicitly accounting for NPAs as an undesirable output and equity as a quasi-fixed input in the bank production process. © 2020, Emerald Publishing Limited.
Citation: International Journal of Productivity and Performance Management
URI: https://doi.org/10.1108/IJPPM-01-2020-0010
http://repository.iitr.ac.in/handle/123456789/22742
Issue Date: 2021
Publisher: Emerald Group Holdings Ltd.
Keywords: Crisis
Indian banks
Non-performing assets
Sequential Malmquist-Luenberger productivity index
Total factor productivity
ISSN: 17410401
Author Scopus IDs: 57202636418
26221190300
Author Affiliations: Goswami, A., Department of Economics and International Business, School of Business, University of Petroleum and Energy Studies, Dehradun, India
Gulati, R., Department of Humanities and Social Sciences, Indian Institute of Technology Roorkee, Roorkee, India
Corresponding Author: Gulati, R.; Department of Humanities and Social Sciences, India; email: rgfhsfhs@iitr.ac.in
Appears in Collections:Journal Publications [HS]

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