What is Cost Efficiency

The chapter aims to analyze and compare the cost and profit efficiency of public sector banks (PSBs) in India after the post-banking sector reforms of 1991. The data was gathered and analyzed from 1995 to 2017, i.e., from the post-liberalization period until the significant State Bank of India merger in 2017. Average profit efficiency (PE) and cost efficiency (CE) scores were analyzed year-wise for each PSB in India. The distribution and median of efficiency scores in two sub-periods were also assessed using non-parametric Friedman's two-way ANOVA and Wilcoxon signed-rank test. The results revealed profit inefficiencies among PSBs in the selected period. Over the whole period, PE is less than the CE scores. The findings also revealed wide variations across public sector banks from 1995 to 2017. Moreover, the PE of PSBs has declined since the banking sector reform in 1991 in India.