Relative Operational Cost Advantage in Commercial Banking Sector -A Comparative Study of Public Sector Banks and Private Sector Banks in India

Abstract

Operational cost advantage provides astrategic edge to an organisation over its competitors. If an organisation hasan operational cost advantage, it possesses an enduring strength that may be used as a strategic shield against its competitors.It is an established fact that the organizations having operational cost advantage are much likely to perform better, this applies to commercial banks also, therefore commercial banks having operational cost advantage has much chance of survival and growth.In the last threedecades business environment for the banking business has changed drastically in India, with the financial sector reforms, especially with the entry deregulation for the foreign banks and private sector banks,moreover, with the latest entry of digitally-focused financial companies, the completion has become stiffer. Banking institutions areanindispensable part of the financial system as these help in the flow of funds from savors to productive activities of the economy. Higher cost-efficiency of their operation leads to higher profitability, which is a must to survive in a turbulent and highly competitive environment.This paper analyses and comparesthe operational costs of the public sector banks and private sector banks in India, using a set of parametric and non –parametric techniques, from 2009-10 to 2018-19.