A Data Envelopment Analysis of Banks Performance in Iran

ABSTRACT: This study applies Data Envelopment Analysis(DEA) under the input oriented CCR, BCC model, constant returns to scale(CRS) and variable returns to scale(VRS) assumptions to measure the Relative efficiency, Pure technical efficiency, Scale inefficiency and analysis of reference groups for 11 Iranian banks over the period of 4 years. Fixed assets and total deposits were used as the input variables while total loans and net income were used as the output variables. Empirical results shown that Sanat & Madan Bank was the most effective bank in its industry with CRS assumption. The analysis also revealed that Eghtesad novin, Parsian, Pasargad, Sina, Saderat, Mellat, Melli, Post bank and Sanat & Madan had Pure Technical Efficiency with VRS assumption. All banks except Sanat & Madan Bank had Scale inefficiency. This indicates that they did not have the optimal performance volume.