Estimation of Undesirable Outputs: an Operations Research Approach

The commercial banking sector in India is constituted by public, private and foreign sector banks. Public sector banks operate at a larger scale than private and foreign sector banks. Before nationalization of Banks they played the role of financial intermediaries whose objectives were deposit collection and lending. Though the Public and Private sector banks are regulated by RBI and Govt. of India, these two sectors are different in their objectives and activities. The public sector banks supply huge credit to priority sectors below the market rate of credit. Therefore, it is desirable to compare the production efficiency of the two sectors of banks. The parameters of comparison are input over all, pure, scale, allocative and cost efficiencies. In several cases actual prices are not known, in some other cases it is required to find potential (minimum) prices and the extent of deviation of actual prices from potential prices. One can also find the prices that can make the producer allocatively efficient. In this book We concentrate on the prices that induce the production unit allocatively efficient and we call them as our shadow prices.