Ownership, Competition and Bank Productivity: An Analysis of Indian Banking in the Post-Reform Period

This paper analyzes differences in productivity across bank types since the 1991 reforms. We investigate the effect of ownership and competition on bank productivity while controlling for size and structure of the bank. We find that Indian private banks dominate the public and foreign banks, both in terms of productivity levels and productivity growth and that competition affects banks differently depending on ownership. Public banks productivity shows little growth over the post reform period, and the new Indian private banks seemed to have led the change in productivity enhancement. However, the results differ in the pre and post-1998 period. The latter period shows a much higher productivity gap between the Indian private banks, and public and foreign banks. This is due to the faster productivity growth of Indian private banks in the post-1998 period. New Indian private banks are hurt by competition, whereas foreign banks thrive under it in the post-1998 period.