Efficiency, Stability, and Outliers: A Data Envelopment Analysis and Tobit Regression of Indian Banks

This study evaluates the efficiency of Indian public and private sector banks using Data Envelopment Analysis (DEA) and examines its determinants through Tobit regression, with implications for financial stability. Cost, allocative, and technical efficiency are used to assess resource utilisation. The study also identifies efficiency outliers and examines variations across banks. The findings indicate that public sector banks exhibit relatively more consistent efficiency levels, while private sector banks display greater variability across efficiency measures. Non-performing assets (NPAs) and market share show a negative association with efficiency, while capital adequacy and return on assets (ROA) display mixed effects. The results highlight the importance of operational improvements, technological adoption, and risk management in enhancing bank performance. Policy implications emphasise strengthening financial stability and efficiency through targeted reforms.