Which of the following is not included in the assets of a commercial bank in India?
Contents9
- AAdvances
- BDeposits
- CInvestments
- DMoney at call and short notice
Show answer
Answer: (B) Deposits
The correct answer is (B) — Deposits.
This is a classic banking concept.
Deposits are money that customers put INTO the bank — so they are the bank's LIABILITIES (the bank owes this money back to customers).
Assets are what the bank OWNS or is owed, like:
- loans given out (advances)
- investments
- money at call
- cash reserves
Tip: Remember — deposits = liability (bank owes depositors), loans/advances = asset (borrowers owe the bank).
Deposits are liabilities for banks because the bank owes this money back to customers, while advances are assets because borrowers owe money to the bank.
This tests the fundamental banking balance sheet concept that separates what banks own (assets) from what they owe (liabilities).
Commercial Bank Balance Sheet
Indian Economy assets deposits advances investments commercial bank
Commercial Bank Balance Sheet: Assets vs Liabilities
Deposits are bank's liabilities — money owed to customers
Advances/Loans are bank's assets — money customers owe to bank
Investments in bonds/securities are bank assets
Money at call (short-term lending) is bank asset
The Banking Logic
A commercial bank's balance sheet follows the fundamental accounting equation: Assets = Liabilities + Capital. The key insight: deposits are money customers give TO the bank, making them the bank's liabilities (obligations). Everything the bank owns or is owed becomes its assets.
Bank Assets vs Liabilities
Category | Assets | Liabilities |
|---|---|---|
Customer Money | Advances (loans given) | Deposits (money received) |
Investments | Government bonds, securities | Borrowings from RBI/other banks |
Inter-bank | Money at call (lent short-term) | Money at call (borrowed short-term) |
Cash Holdings | Cash reserves, vault cash | Capital & reserves (shareholders) |
Key Banking Assets
Advances: All types of loans — personal, home, corporate credit
Investments: Government securities, corporate bonds, mutual funds
Money at call and short notice: Ultra-short loans to other banks (1-14 days)
Cash and bank balances: Vault cash, current account with RBI
Fixed assets: Bank premises, equipment, ATM infrastructure
Question Connection
This PYQ tests the core banking concept that students often reverse. Deposits appear in option B as the trap — many students think 'deposits = money in bank = asset' but forget that deposits are money the bank owes back to customers, making them liabilities.
Trap: Deposits seem like bank assets because money 'sits in the bank' — but deposits are liabilities (bank owes customers)
Memory aid: Deposits = Debt (both start with D) — bank is in debt to depositors
Confusion: Money at call sounds like liability — but it's money lent out, so it's an asset
Reversal trap: Advances/loans feel like giving away money — but they're assets because borrowers owe the bank
Banking Terminology & Operations
Indian Economy advances money at call short notice
Key Banking Terms: Advances & Money Market Operations
Advances = all loans and credit facilities given by banks
Money at call = overnight loans between banks
Short notice = 2-14 days inter-bank lending
Types of Bank Advances
Type | Duration | Purpose | Examples |
|---|---|---|---|
Demand loans | Payable on demand | Working capital | Cash credit, overdraft |
Term loans | Fixed period | Capital expenditure | Home loans, car loans |
Bills discounting | Until bill maturity | Trade finance | Commercial bills, export bills |
Cash credit | Revolving facility | Business operations | Against inventory, receivables |
Money at Call & Short Notice
Term | Duration | Participants | Purpose |
|---|---|---|---|
Money at call | 1 day (overnight) | Banks, financial institutions | Manage daily liquidity |
Short notice | 2-14 days | Banks, mutual funds, corporates | Bridge short-term gaps |
Term money | 15+ days | All market participants | Planned funding needs |
Inter-bank Market Features
Unsecured lending: Based on creditworthiness, no collateral required
Rate determination: Market-driven rates, influenced by RBI policy rates
Settlement: Through RTGS system, same-day settlement
Regulation: RBI monitors but doesn't directly control call money rates
Term confusion: 'Money at call' doesn't mean calling customers — it means callable loans between banks
Duration mix-up: Call money = 1 day, short notice = 2-14 days, term money = 15+ days
Asset confusion: Money at call appears on lender's asset side, borrower's liability side