Question 52 from UPSC CSE 2019 - Economics

Question

Which of the following is not included in the assets of a commercial bank in India?

Accepted Answer

Correct Option: B. Deposits

Strategy: Focus on the distinction between assets and liabilities in a bank's balance sheet. Advances, investments, and money at call and short notice are typical avenues where banks allocate funds to earn income—these are classic assets. Deposits, however, are funds owed by the bank to its customers, making them liabilities, not assets. Identifying this clear dichotomy leads directly to the answer.

Key Info: In the context of commercial banks in India, assets are resources owned or controlled by the bank that are expected to generate income. Major assets on a bank's balance sheet include:

- Advances: Loans and credit extended to customers such as term loans, cash credits, and overdrafts, forming a major part of a bank's income-generating assets.
- Investments: Securities such as government bonds and approved securities in which the bank invests surplus funds.
- Money at call and short notice: Highly liquid assets lent to other banks or institutions for very short periods, usually up to 15 days, to manage liquidity.
- Cash and balances with Reserve Bank of India: Funds maintained to comply with statutory reserve requirements.

Deposits, conversely, are funds collected from the public or other banks and form the core of a bank's liabilities. They represent amounts owed by the bank to account holders and include both demand deposits (current and savings accounts) and time deposits (fixed and recurring deposits). A bank's borrowings from other institutions also appear under liabilities.

The liabilities and assets sides of the balance sheet must balance, with assets invested or lent out to maximize income and ensure liquidity. Banking Regulation Act, 1949 and RBI guidelines prescribe asset classification and management for safe banking operations.

Answer

Option A: Advances

Answer

Option C: Investments

Answer

Option D: Money at call and short notice