Current Affair 1:

 

News:

Profitability of banks improved for the sixth consecutive year in 2023-24. Both PSBs and PVBs exhibited an increase in return on assets (RoA) in 2023-24.

Gains profitability of SCBs continued in H1:2024-25 with RoA at 1.4 per cent and RoE at 14.6 per cent.

Return on assets (RoA) A financial ratio that measures how well a company generates profit from its assets. It's calculated by dividing a company's net income by its total assets.   Return on equity (RoE) A financial ratio that measures how well a company generates profit from the capital invested by its shareholders. It's calculated by dividing a company's net income by its shareholder's equity.

 

The RBI earns money in a variety of ways. Open market operations, wherein a central bank purchases or sells bonds in the open market to regulate money supply in the economy, are a major source of income for the RBI.

Apart from the interest received from these bonds, the RBI may also profit from favourable changes in bond prices. Dealings in the foreign exchange market that the RBI engages in may also contribute to the bank’s profits.

The RBI, for instance, may buy dollars cheaply and sell them dear in the future to pocket profits. It should be noted, however, that unlike commercial banks, the primary mandate of the RBI is not to earn profits but to preserve the value of the rupee. Profit and loss are thus merely a side effect of its regular operations to shape monetary policy.

The surplus is the net income derived from the total income (sources of income) minus total expenditure (expenses). Out of the surplus of RBI, risk provisioning is made for monetary and financial stability risks, and credit and operational risks.

The RBI transfers its surplus to the government in terms of Section 47 of the RBI Act, 1934.

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