TPM ensures fair assessment. A branch collecting deposits "lends" them to the HO and gets paid interest (Transfer Price). A branch giving loans "borrows" from HO and pays interest. The net margin determines branch profit.

CASA (Current and Savings Account) deposits have the lowest cost of funds. Increasing CASA reduces interest expense. Fee-based income (Cross-selling insurance, MF) adds revenue without using capital. This combination maximizes profit.

Operating Profit reflects the core earnings from business operations. It deducts all expenses (cost of funds, salaries, rent, etc.) from all income sources, but BEFORE deducting provisions for bad debts or taxes.

CASA (Current Account Savings Account) deposits pay very low or no interest. A high proportion of CASA means the bank pays less interest overall, reducing its Cost of Funds.

Operating Profit is profit before provisions and taxes. To calculate the final Net Profit, the branch must account for credit costs (provisions for bad loans) and taxation.

A deposit-heavy branch collects more funds than it lends locally. It transfers the surplus to the Head Office and earns interest (Transfer Price) on it, which becomes its major income source.

Current Accounts typically carry 0% interest. Therefore, they are the cheapest source of funds for a bank. Savings accounts carry low interest (2.7%-3%), while Term Deposits carry high interest.

This approach holds branch managers accountable for the bottom line. They must generate enough income (interest + fee) to cover their operating costs (staff, rent, etc.) and generate a surplus.

Since the bank does not use its own funds to create an asset but acts as an agent earning commission, this is Non-Interest Income. It is crucial for boosting Return on Assets (RoA).

Branch managers monitor the Break-even point to know the minimum business volume required to cover fixed and variable costs.

Cost-to-Income ratio measures operating expenses as a percentage of operating income. A lower ratio means the bank is spending less to generate each rupee of income, indicating high operational efficiency.

ABM analyzes the costs of specific activities (e.g., processing a cheque) to see if they add value. If not, processes are re-engineered or automated to save costs.

NII is the difference between the interest income a bank earns from lending and the interest it pays to depositors. It is the primary source of profit for a retail bank.

Direct costs are those that can be directly attributed to the branch's operations. HO expenses and IT costs are typically indirect or allocated costs.

This method is more accurate as it recognizes that long-term funds have a different cost/value than short-term funds, aligning internal pricing with market realities.

NPAs are a double blow: the bank loses interest income (income leakage) and must also set aside funds as provisions from its profits (expense), directly hitting the bottom line.