Efficiency and productivity of banking sector: A critical analysis of literature and design of conceptual model

The purpose of this paper is to discuss a comprehensive literature survey of studies focusing on the efficiency and productivity of the banking sector using parametric and non‐parametric frontier techniques.

Critically reviewing 106 studies published across the world from 1994 to 2011, a conceptual framework is developed for the studies assessing the efficiency and productivity of the banking industry using non‐parametric DEA frontier approach.

Both the frontier approaches, parametric and non‐parametric, are gaining an edge over the traditional financial performance measures. In the non‐parametric approach, data envelopment analysis (DEA) is widely applied to measure a bank's efficiency and productivity. Studies conducted in developed countries such as the USA, the UK and Europe are now emerging with the new concepts of banking efficiency.

These findings are based only on the critical review of 106 studies. This study suggests the direction for future research and identifies the gap in existing literature with the development of a conceptual model.

This study is original in nature and included literature published in recent issues of 2011.