Technical Efficiency and Productivity of Private Commercial Banks in Bangladesh through DEA Approach

The present study examines the efficiency and productivity of 18 private commercial banks in Bangladesh by using a Malmquist Productivity Index (an extension of Data Envelopment Analysis) with a balanced panel data over the years 2013 to 2017. The empirical findings suggest that Bangladeshi private commercial banks have decreased their average annual productivity by 3.0% mainly owing to technical efficiency and technological change. However, technical efficiency decline is due to lack of management effectiveness rather than scale efficiency of the sample banks. The results of the study also indicate that only Eastern Bank Ltd. and Al-Arafah Islami Bank Ltd are found technically efficient during the study period, while remaining sample banks are categorized as inefficient. In the course of examining the productivity changes of the sample banks, this study found only 3 among the 19 banks used in this paper showed total progress in productivity, whereas sixteen banks displayed total decrease in productivity. The major policy implications are further discussed.