Operational Performance of Banks: Frontier-Based Data Envelopment Analysis with Undesirable Output.

This article focuses on evaluating the operational performance of Indian banks by developing a non-radial, non-oriented Data Envelopment Analysis (DEA) model that incorporates non-performing loans (NPLs) as an undesirable output. Using data from 39 Indian banks (20 public sector and 19 private sector) over 2015–2019, the study applies the slack-based measure (SBM) DEA framework to identify inefficiencies and their sources within banks, highlighting that private sector banks generally outperform public sector banks in operational efficiency. The analysis emphasizes the importance of controlling NPLs to improve bank performance and provides managerial insights for targeted operational improvements. The study's findings are specific to the Indian banking context and suggest avenues for further research including the inclusion of foreign banks and additional efficiency dimensions.