Analysing Bank Productivity Using Malmquist Approach: A Case of Karnataka and Undivided Andhra Pradesh Regional Rural Banks (RRBs)

The paper endeavours to analyse the intertemporal variations in total factor productivity (TFP) in regard to financial efficiency and financial inclusion among the Regional Rural Banks (RRBs) in Karnataka and undivided Andhra Pradesh (AP) across the period of their amalgamation (1999-2011). Considering suitable proxies for financial efficiency (FE) and financial inclusion (Incl) from the annual RRB balance sheet(s) data the TFP of „RRB‟s in regard to „financial efficiency‟ and „financial inclusion‟ across the period of their amalgamation were estimated using the data envelopment analysis (DEA) technique based FEAR programme in R. The findings of the study reveal that the impact on the RRB amalgamation on TFP has been largely indifferent in regard to financial efficiency and financial inclusion among the sample RRBs of Karnataka and Undivided AP. That such indifference could be attributed to the frequent, wavering state policy revisions over the 2000s in the norms pertaining to bank-intermediation in general, and priority sector lending in particular. Such revisions had virtually vitiated the prospects of sustainable branch-level lending for RRBs as evidenced from the negative correlations between technical efficiency (TE) scores in regard to financial efficiency and inclusion for certain years only in the post-amalgamation period as in case of Karnataka RRBs