The Review of Finance and Banking

19-29

Authors: Nidhi Grover, Nitin Arora

The study is an attempt to evaluate the effect of initiating bancassurance on technical efficiency performance of Indian commercial banks. The technique of Data Envelopment Analysis (DEA) has been used to calculate technical efficiency scores for 20 major commercial banks offering bancassurance services over the period of 2009-10 to 2011-12. The major outcomes of the analysis are: i) introduction of bancassurance increases average overall technical efficiency (OTE) levels; ii) some banks are the gainers, while, some are the looser on OTE front after introducing the bancassurance; iii) the initiation of bancassurance has improved managerial efficiency of Indian commercial banks, while, a dismal performance observed on scale efficiency (SE) front; iv) the SE gains are constrained due to the existence of increasing returns-to-scale; and v) private sector banks following agency model have noticed higher efficiency gains because of bancassurance. In sum, the banks need to improve upon SE to universalize the efficiency gains from bancassurance. Given the existence of increasing returns-to-scale, there exists ample scope for Indian commercial banks to improve upon SE levels via exploiting the economies of scale through enlarging the magnitude of output(s).