The objectives of this retrospective study were to assess the economic impact that the practice of 'family replacement donor system' has on the operational costs of a rural blood bank and to rationalize efficient blood screening protocols with a view to minimizing blood screening costs without compromising blood safety. Prevalence of transfusion-transmissible infections such as HIV, hepatitis B and syphilis were ascertained from records of 870 potential donors screened over a period of 6 months. Costs of screening tests were approximated by summing up costs of materials used per test. Overhead and labour costs were not factored in. Average and marginal costs of a fully-screened blood unit were calculated using different blood screening protocols. The average and marginal costs of a fully-screened blood unit vary greatly depending on the order in which screening tests are conducted. Although the variation in average costs per blood unit among different protocols is narrow, US$ 29.44 to US$ 33, the variation in marginal costs is significantly wider ranging from US$ 22.79 to US$ 51.85. Overall, 78 (9%) of the potential donors had HIV infection while 25 (3.2%) had hepatitis B infections and nine (1.2%) donors had syphilis. Co-infection rate was very low at 1.4%. The study shows that it is possible to prioritize blood screening tests for the selection of safe blood donors simply and cost-effectively in a developing country hospital. In the face of rapid rises in health-care spending, it is very important that essential health services such as blood screening are safely delivered with as little expenditure of financial resources as possible. To make sound economic decisions, average cost is not what matters but marginal cost, the cost of one more test.