Public sector banks beat private rivals in efficiency parameter: SBI study

Mumbai, June 19: Public sector banks in India record a higher level of "efficiency" compared to their private sector counterparts, according to a study conducted by the State Bank of India (SBI).

The study evaluates efficiency by examining how effectively banks utilise their resources.

“The results show that contrary to popular perceptions, the performance of PSBs are much better than private and foreign banks,” said Soumya Kanti Ghosh, SBI’s Group Chief Economic Advisor.

It also found that efforts by the government and the Reserve Bank of India (RBI) to bring efficiency and productivity to the banking sector have been successful.

The study revealed that public sector banks have generally been more efficient than private banks, except during FY19-23. This is likely due to mergers and the rationalisation of businesses, branches, and employees.

Despite undergoing numerous structural changes, PSBs have maintained an efficiency level of 82.8 per cent, outperforming all scheduled commercial banks at 81.2 per cent, private banks at 79.6 per cent, and foreign banks at 78.2 per cent.

In the last 10 years, the Indian banking sector showed heightened resilience and survived several challenges in the domestic and global economies, the report added.

However, the takeover of certain weaker banks as part of the restructuring of public sector banks has impacted the efficiency and productivity of the acquiring banks.