The Relationship between " Technical Efficiency" and " Ranking" the Branches of Commercial Banks Using the Data Envelopment Analysis (DEA)

Performance evaluation and ranking domestic commercial banks are currently carried out using the volume of banks transactions and activities as well as the absorbed resources. However, inputs such as the space, facilities, human force and the environment are not taken into account. This is a shortcoming of the method currently in use. In this paper and in order to have a more realistic approach, the method of DEA is used within the framework and implementation of a software system to derive the efficiency of bank branches, which constitute a criterion based on input-output of branches. In addition, the method which is currently used for ranking the bank branches is the taxonomy or simple weighing which is imprecise and based upon personal value judgments. This paper presents a method by using the DEA technique which does not suffer from the shortcomings and problems of the common methods in ranking bank branches, hence the results are closer to the reality. This paper attempts to introduce a new and appropriate method for measuring the two different concepts of “ranking” and “ordering”, which is currently used synonymously in Iranian banking network.