VeritasKarishma mam
GMATNinja sir
Kindly explain whether the second "by" is mandatory to be used here and why is Option D incorrect. Also isn't the ellipsis rule applicable here wherein there is no need to repeat the preposition

What is problem with D? Consider a simpler example:

By eating healthy and sleeping plenty, I improved my health.

Is the preposition by required before the second gerund as well?

To answer this question, let us recollect the Once in twice out rule:

The parallel structure here is X and Y: If we consider the preposition by inside the parallel structure, we must use by two times. In such case by should be used both in X and in Y.

However we could also consider that the preposition by is outside the parallel structure. In such case we would use by only once. It would cover both X and Y.

This ambiguity often occurs with AND structure because we cannot determine where the parallelism starts, whether the preposition is inside or outside. However, for two-part structures such as NOT ONLY.... BUT ALSO, it is easy to determine whether the preposition is outside or inside and such ambiguity does not occur.

The correct option gives us the following sentence:

By providing such services as (mortgages, home improvement loans, automobile loans, and financial advice) and by staying within the metropolitan areas, Acme Bank has become one of the most profitable savings banks in the nation.

You're right in saying that the second by is not necessary, but it helps show that we are looking at the second item of the main list. Otherwise, the reader could read the sentence like this:
By providing such services as X and Y... (where X is a list of 4 items)

You'll face this problem in any long sentence, or in any sentence in which there are elements that could confuse the reader. You should err on the side of caution and prefer any option that clarifies what the parallel elements are.

AjiteshArun

If we use "by" again, is this not another interpretation -
By providing such services as X and By Y, Acme Bank....

shouldn't option(E) has a comma before "and by staying" since the statement forms an independent clause?

shouldn't option(E) has a comma before "and by staying" since the statement forms an independent clause?

I struck between D and E. whether GMAT tests for punctuation?
Because (D) "and financial advice, and staying" comma separates sentence but in (E) "and financial advice and by staying" after "financial advice" immediately comes "and".