UPSC Prelims 2019 Question:

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

Explanation:

• As defined under Section 42 of the Reserve Bank of India Act, 1934, liabilities of a bank may be towards the banking system or towards others in the form of demand and time deposits or borrowings or other miscellaneous items of liabilities. The RBI has been authorized in terms of Section 42 (1C) of the RBI Act, 1934 to classify any particular liability.
  
  
• Banks in India can be broadly classified under two heads - Commercial banks and Cooperative banks. Commercial Banks are financial institutions whose purpose is to accept deposits from people and provide loans and other facilities. They provide basic services to their customers and small to medium-sized businesses. They (nationalized banks, State Bank groups, private sector banks, foreign banks, and regional rural banks) account for an overwhelming share of the banking business.
  
  
• Deposits made by people in commercial banks are the liabilities of the banks (It is assets of the depositor). It does not come under the assets because the banks borrow money from the people in the form of deposits and use that money for further lending purposes. The bank is liable to pay back that deposited money along with interest on maturity.
  
  

Therefore, option (2) is the correct answer.

Subject: Economics | Money and Banking