Question

Look at the given picture carefully and infer the income of the bank.

Choose the correct option from the following.

• A. The difference between the amount deposited and borrowed by the bank to Reserve Bank of India.
• B. The difference of amount of interest between what is charged from borrowers and what is paid to depositors.
• C. The difference of interest rate between what is charged from borrowers and what is charged from depositor.
• D. The difference between the amount deposited by the depositor and borrowed by the borrower.

Answer 1

The Correct Option is B

A bank's revenue mainly comes from the interest rate spread, calculated as the difference between:
1. Interest rates applied to borrowers (loans).
2. Interest rates offered to depositors (savings and fixed deposits).
This spread is the bank's profit and significantly impacts its financial performance.
Incorrect options include:
- (a): Excludes interest, the primary income source.
- (c): Focuses on rates, not the amounts, critical for understanding earnings.
- (d): Deals with principal sums, not the interest rates that generate income.