Profitability and Ratios
Exercise No:01
Question: Exercise on understanding Transfer Price Mechanism
From the following information, compute the transfer price the branch will receive/pay for the year
ending March 2024:
Under Transfer Price Mechanism, incentives / dis-incentives are at the following rates :
6.02 % on Current Account
2.75 % on Savings Account
0.85 % on Time Deposits
9.10 % on excess cash balance above retention limit of Rs.18,00,000
Average:
Particulars Amount
Average Balances in CA 18,59,65,250
Average Balances in SA 29,91,81,380
Average Time Deposits 45,64,81,600
Average Cash in Hand 35,74,695
(*Recovery is done in TPM for the surplus balances over and above the limits kept by the branches)
Exercise No: 02
Cochin Branch of ICICI bank has the following deposit values on 31 March 2024. Calculate the branch
profitability if the Loan Interest collected is Rs 21,45,000,Fee Income is Rs 55,31,000 and Other
Income is Rs 9,51,700,operating expense of the branch is Rs 42,50,000 and net NPA is Rs 11,25,000.
Under Transfer Price Mechanism, incentives / dis-incentives are at the following rates :
6.15 % on Current Account
2.50 % on Savings Account
0.95 % on Time Deposits
7.10% on excess cash balance above retention limit of Rs.15,00,000
From the following information pertaining to a branch, compute the transfer price the branch will
receive/pay for the year ending March 2016:
Particulars Amount (Rs)
Average CA 21,55,98,350
Average SA 45,75,38,921
Average Time Deposits 85,45,48,550
Average Cash in Hand 43,55,651
Exercise No: 03
With the given data, calculate the answers.
Sl. Particulars Total (Rs in lakhs)
No.
1 CA 1,000
2 SA 2,000
3 TD 3,000
4 Advances 4,000
6 Interest paid on SA 78
7 Interest paid on TD 240
8 Interest received on Advances 580
Sl. Calculate
No.
1 CASA
2 CASA %
3 Cost of SA (%)
4 Cost of TD (%)
5 Cost of Deposits (%)
6 Yield on advances (%)
7 Net interest income (NII) Rs
8 Interest spread %
9 Total Deposits
10 Total Business (Rs)
Exercise No: 04
Mention whether the following statements are true or false:
No Statement True / False
1 Increase in cash holding at the Branch will improve
the profitability of the branch
2 Increase in CA will have more impact on profitability
than increase in SA
3 Maintaining large Balances in CA with local Banks will
increase profitability of the Branch
4 Locker Rent is example of Non-interest income
5 The level of achievement in LI business will not have
any impact on the profitability of the Branch
6 Transfer Pricing is normally computed at Branch level.
7 Incentive to the Branch in Transfer pricing is more in
CA than SA
8 In the absence of proper transfer pricing mechanism
many of the liability branches may show losses
9 The principle involved in Transfer Pricing are uniform
across the Banks since the pricing mechanism is
regulated by RBI
10 Interest paid on SA is an interest expense
11 Higher the share of FDs in a branch, higher will be the
profit since these deposits are not withdrawn before
due dates.
12 Processing fee collected on home loans is part of
interest income
13 Incentive on FD Deposits is less than the incentive on
CASA Deposits
14 Branches with Huge Liability Portfolio will have less
incentives than the Branches with less liability
portfolio
15 Branches with More housing loans will have more
incentive under Transfer price mechanism
