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

The income of a bank primarily comes from the spread, which is the difference between:
1. The interest rate charged to borrowers (loans).
2. The interest rate paid to depositors (savings or fixed deposits).
This spread represents the bank’s earnings and is a crucial component of its profitability.
Other options are incorrect:
- (a): Does not consider interest, which is the key source of income.
- (c): Refers to rates but not the amounts, which is crucial for understanding income.
- (d): Confuses principal amounts rather than focusing on interest.