In your two-stage DEA model for assessing bank efficiency, the selection of input and output variables suggests you are utilizing a hybrid approach that primarily aligns with the intermediation and production perspectives. In the first stage, using inputs like the number of employees, total fixed assets, and total operating expenses indicates a focus on resources and operational capacity, characteristic of the intermediation approach, which views banks as financial intermediaries transforming inputs into outputs. The outputs of Stage 1, namely total deposits and total loans, serve as the transition to Stage 2, where you evaluate the performance metrics of interest income, non-interest income, and non-performing loans. This aligns with the production approach as you assess how effectively the bank is generating income from its intermediary services. When framing this in your research, you could discuss how the intermediation approach emphasizes the operational inputs and outputs inherent in banking while the production approach focuses on the efficiency of converting these outputs into financial performance metrics. Moreover, you might highlight the rationale behind choosing these specific variables, illustrating how they collectively capture the multifaceted nature of banking efficiency across both stages, thus providing a comprehensive assessment of the banks' performance.

Sharif Ahamed Thank you for your recommendation :)