Empirical analysis of banks in India using DBA and DEA

Abstract

The aim of this paper is to evaluate the performance of the banks in India using the Distance Based Analysis (DBA) and Data Envelopment Analysis (DEA), and compare the ranking of banks based on DBA and DEA. DBA uses the I-distance method to classify the banks according to their performance based on several indicators. As the indicators are weighted, this paper uses the discriminatory capacity of the indicators to calculate the Idistance. Correspondingly, the profit model of DEA has been used to measure the performance of the banks. The ranking of banks based on DBA and DEA suggests that, in general, there is an agreement in the ranking provided by these two approaches. The variation in the rankings of banks is either because of closeness to the reference unit or due to sub-optimal level of utilizing the inputs.