Technical Efficiency and Its Determinants: A DEA and Tobit Analysis of Indian Public Sector Banks (2015–16 to 2024–25)

This paper examines the technical efficiency of Indian Public Sector Banks during 2015–16 to 2024–25 using a two-stage Data Envelopment Analysis (DEA)–Tobit regression framework. In the first stage, DEA estimates overall technical efficiency (CCR), pure technical efficiency (BCC), and scale efficiency (SE), while the second stage employs Tobit regression to identify the determinants of bank efficiency. The DEA results indicate a gradual improvement in bank efficiency over the study period. The BCC model identifies more efficient banks than the CCR model, suggesting that scale inefficiency, rather than managerial inefficiency, was the primary source of inefficiency. Furthermore, the scale efficiency results indicate that banks progressively moved towards their optimal scale of operation. The Tobit regression results reveal that Bank Size [Ln (Total Assets)] has a significant negative effect on efficiency, whereas Capital Adequacy Ratio (CAR), Net NPA Ratio, Return on Assets (ROA), and Cost-to-Income Ratio (CIR) do not have statistically significant effects. Overall, the findings suggest that improving resource utilization and operating at an optimal scale are essential for enhancing the efficiency and long-term performance of Indian Public Sector Banks.