EVALUATING OPERATIONAL EFFICIENCY: A STUDY OF PUBLIC SECTOR AND PRIVATE SECTOR BANKS AT IIFL

Abstract

The banking sector plays a crucial role in the economic development of a country by facilitating financial intermediation, mobilizing savings, and providing credit to various sectors. Operational efficiency is an important indicator of a bank's ability to utilize its resources effectively while maintaining profitability and customer satisfaction. This study evaluates the operational efficiency of Public Sector Banks (PSBs) and Private Sector Banks in India, with a focus on comparative performance analysis through financial and operational parameters. The research examines key efficiency indicators such as profitability ratios, cost-to-income ratio, business per employee, profit per employee, net interest margin, and asset quality. Data for the study are collected from annual reports, financial statements, and published records of selected public and private sector banks. The analysis highlights the strengths and weaknesses of both categories of banks in terms of operational performance, service quality, technological adoption, and resource utilization. The findings reveal that private sector banks generally demonstrate higher operational efficiency due to advanced technology adoption, better risk management practices, and customer-centric approaches. Public sector banks, while maintaining a broader outreach and social banking responsibilities, face challenges related to higher operating costs and lower productivity levels. However, recent reforms, digital transformation initiatives, and improved governance practices have contributed to enhancing the efficiency of public sector banks. The study concludes that continuous technological innovation, effective cost management, employee productivity enhancement, and customer-focused services are essential for improving operational efficiency in both public and private sector banks.