5. Cost Efficiency and Productivity

It is important to analyse the cost efficiency and productivity of public sector banks for the period from 1991–1992 to 2014–2015. It studied cost structure, economies and diseconomies and total factor productivity change. All the banks were operating at a scale reaping economies of scale in most of the years. Both the bank groups did not show diseconomies with respect to total cost even though there are diseconomies in other individual cost items. The minimum efficient size (MES) was attained by all the public sector banks at much small size in each of the years selected. Majority of the public sector banks found to have positive growth in total factor productivity, and half of them recorded productivity change by 1.26–1.50 score values and 2 banks even recorded a change of more than 1.50 during 1991–1992 to 2014–2015. Hence, cost efficiency gains were supported by record of total factor productivity change by public sector banks.