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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Narmada Bank reports in Form B: interest earned Rs 1,200 crore, other income Rs 300 crore, interest expended Rs 700 crore, operating expenses Rs 350 crore, and provisions and contingencies Rs 90 crore. In the format, what are the operating profit before provisions and the net profit for the year (ignoring any brought-forward amount)?

Operating profit is Rs 450 crore (income of Rs 1,500 crore less interest and operating expenses of Rs 1,050 crore), and after deducting provisions and contingencies of Rs 90 crore, net profit is Rs 360 crore.

  1. AOperating profit Rs 450 crore; net profit Rs 360 croreCorrect
  2. BOperating profit Rs 360 crore; net profit Rs 450 crore
  3. COperating profit Rs 450 crore; net profit Rs 540 crore
  4. DOperating profit Rs 500 crore; net profit Rs 410 crore

Explanation

Total income = 1,200 + 300 = 1,500. Total expenditure before provisions = 700 + 350 = 1,050. Operating profit = 450. Deducting provisions of 90 gives net profit 360. Reversing the figures or adding provisions gives wrong options.

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