Transfer Price Mechanism

Transfer Price Mechanism

Every business organisation main aim is to earn a profit

Earning Profit is very important for the survival of the organization. Its the only factor to know the efficiency of the business

In the banking sector to know the efficiency of the branch one concept is used Transfer Price Mechanism

The basic function of a bank branch is to accept deposits for lending

In this context, every branch is expected to serve as a profit centre

Practically it may not be possible as certain Branches

Being resource centres can only mobilize deposits and their share of the business concentrates on deposits

Each branch can not be a profit centre on its own

Depending upon the segment and location some branches can mobilise more deposits than advances.

In such cases, the cost of deposits will be more than the yield on advances

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