Banking · Product Portfolio Management
A bank is reviewing its Product Lines for a quarter. The data shows: - Current Account Deposits (a low-cost Deposit Product) increased by 12%. - Personal Loans (a high-margin Credit Product) decreased by 8%. - Distribution of third-party products (mutual funds) resulted in a commission of Rs 2 crore, which is 15% of the bank's total fee income for the quarter. Which statement best reflects the strategic implications of this data for the bank's Product Management?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank should immediately discontinue its Other Fee-Based Services to focus on core lending.
- 2The increase in Current Accounts is detrimental to profitability as they are non-interest-bearing.
- 3The reduction in personal loans is compensated for by the growth in fee income and the lower Cost of Funds from current accounts.✓
- 4The bank has completely failed in its core function as a financial intermediary.
Correct answer
The reduction in personal loans is compensated for by the growth in fee income and the lower Cost of Funds from current accounts.
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