The profitability of public-sector banks is low due to:

The correct answer is: A. Over-cautions approach to lending

Public sector banks are government-owned banks that are subject to a number of regulations that private sector banks are not. These regulations can make it more difficult for public sector banks to lend money, which can lead to lower profits. Additionally, public sector banks are often required to lend to social sectors, such as agriculture and small businesses, which can also lead to lower profits.

Here is a brief explanation of each option:

• A. Over-cautions approach to lending: Public sector banks are often more cautious than private sector banks when it comes to lending money. This is because they are subject to more regulations and they are also more likely to be bailed out by the government if they run into financial trouble. This can make it more difficult for public sector banks to find profitable lending opportunities, which can lead to lower profits.
• B. Reserve Bank Policies: The Reserve Bank of India (RBI) is the central bank of India and it sets the monetary policy for the country. The RBI’s policies can have a significant impact on the profitability of banks. For example, the RBI’s policy on interest rates can affect the cost of borrowing money for banks, which can in turn affect their profits.
• C. High Overhead Costs: Public sector banks often have higher overhead costs than private sector banks. This is because they have a larger number of employees and they are also required to maintain a larger branch network. These higher costs can eat into their profits.
• D. Social-sector lending: Public sector banks are often required to lend money to social sectors, such as agriculture and small businesses. This can be a good thing, as it can help to promote economic development. However, it can also lead to lower profits, as these sectors are often less profitable than other sectors.