efficiency analysis of tose’e ta’avon bank branches of iran in 5 years considering undesirable outputs-a dea based approach

In order to survive and compete with other financial institutions, banks, and financial institutions are required always to evaluate the efficiency of their branches. in this paper, we evaluate and analyze the efficiency of bank branches in the five last years (from 2018 to 2022). to calculate and present the branch efficiency score, we have considered an undesirable component called nonperforming loans (npl) as an undesirable output in evaluating the efficiency of tose’e ta’avon bank branches. due to the high inflation in iran, the increase in the npl of loans causes a decrease in the banks’ deposits and profitability, and ultimately, it causes a considerable decrease in inefficiency. in addition, in extreme cases, it may even cause the bank to go bankrupt. therefore, to calculate the efficiency of the tose’e ta’avon bank branches using the data envelopment analysis method, we have considered operating costs and non-operating costs as two inputs, total deposits, total loans, and also two categories of revenue (revenue from jointly funded assets and fee-based incomes as four desirable outputs and based on islamic banking methods with nonperforming loans as an undesirable output. in this paper, to deal with undesirable output issues, we use a direct approach that is more suitable to deal with npls since it is more convenient and evident to incorporate undesirable outputs directly into the dea model. we used the dynamic cross-efficiency technique of dea with undesirable outputs (dea-uo) to obtain the efficiency of the branches over five years.