Question 64
AOptions
BSolution
In the context of banking, assets are what a bank owns or what is owed to it, while liabilities are what a bank owes to others. Let's examine the options:
- A) Advances: These are loans and credits extended by the bank to its customers. When a bank gives out a loan, it expects to receive it back with interest, making advances an asset for the bank.
- B) Deposits: These represent money deposited by customers into their accounts with the bank. The bank is obligated to return these funds to the depositors on demand or after a specified period. Therefore, deposits are a liability for the bank, not an asset.
- C) Investments: Banks invest in various instruments like government securities, bonds, shares, etc., to earn returns and manage liquidity. These investments are owned by the bank and generate income, making them assets.
- D) Money at call and short notice: This refers to short-term loans given by a bank to other banks or financial institutions, which can be recalled on demand or with very short notice. These are liquid assets for the lending bank.
Hence, out of the given options, Deposits are not an asset of a commercial bank; they are a liability.
CStrategy
For questions on banking fundamentals, understand the basic balance sheet concepts: what constitutes an asset (something the bank owns or is owed to it) versus a liability (something the bank owes to others). Clearly distinguish between the bank's perspective and the customer's perspective.
DSyllabus Analysis
This question falls under the Indian Economy section of the UPSC Prelims syllabus, specifically focusing on the fundamentals of the banking sector and commercial bank operations.
EQuestion Analysis
Easy. This is a basic conceptual question about banking terms, fundamental to understanding how commercial banks operate.