Question map
Which of the following is not included in the assets of a commercial bank in India?
Explanation
The correct answer is option B - Deposits.
Loans and advances given by banks are 'assets' for them[1], making option A incorrect. For a bank, Assets = Reserves + Loans[2], which confirms that advances (loans) are assets. Banks' assets include money at call and short notice, investments, advances, fixed assets[3] and other assets, which eliminates options A, C, and D.
However, deposits are liabilities for banks, not assets. Deposits of Public[4] appear on the liability side of a bank's balance sheet. When customers deposit money in a bank, the bank owes that money back to the depositors, making it a liability. Conversely, deposits we keep with banks are our assets, they can be withdrawn by us[2] - meaning deposits are assets for the depositor but liabilities for the bank.
Therefore, deposits are not included in the assets of a commercial bank; they are liabilities.
Sources- [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.6 Categorization of Loans > p. 134
- [2] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > 3.3 MONEY CREATION BY BANKING SYSTEM > p. 39
- [3] https://upload.indiacode.nic.in/schedulefile?aid=AC_CEN_2_11_00002_194910_1517807317779&rid=731
- [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.11 Money Circulation > p. 55
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Sitter' testing fundamental banking concepts found in NCERT Class XII. The question relies on the basic accounting equation: Sources of Funds (Liabilities) vs. Uses of Funds (Assets). If you know a bank 'owes' you your deposit back, the answer is immediate, regardless of how technical the other options look.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: Are advances included in the assets of a commercial bank in India?
- Statement 2: Are deposits included in the assets of a commercial bank in India?
- Statement 3: Are investments included in the assets of a commercial bank in India?
- Statement 4: Is money at call and short notice included in the assets of a commercial bank in India?
- Explicitly states: 'Loans and advances given by banks are "assets" for them.'
- Notes the loan document kept by the bank is treated as an asset, linking advances to bank asset records.
- Refers to MCLR guidelines aimed at determining interest rates on advances, treating advances as interest-bearing items of banking activity.
- Implied linkage: banks set rates on advances because advances are on the balance sheet (revenue-generating), consistent with asset treatment.
- Defines reserves as deposits that commercial banks keep with the RBI.
- Explicitly treats those reserves (deposits with RBI) as bank assets and gives Assets = Reserves + Loans.
- Shows Deposits of Public recorded on the bank's balance sheet as a liability (Deposits of Public = Rs. 300).
- Contrasts bank assets and liabilities, placing public deposits on the liability side.
- Example transaction where an individual's deposit becomes 'Deposits of Public' on the commercial bank side.
- Labels that entry as a bank liability in the illustrative accounting representation.
- Defines bank assets as 'Assets = Reserves + Loans', making reserves a component of total assets
- Explains reserves are held partly as financial instruments (bonds and treasury bills) issued by the RBI
- Thus financial instruments (a form of investments) are held within the reserves component of bank assets
- Refers to 'external financial assets and liabilities of commercial banks', confirming banks hold financial assets externally
- Implies banks maintain financial assets beyond loans, consistent with investments being bank assets
- This RBI balance-sheet table lists 'Balances with banks and money at call and short notice' under the assets section.
- Numeric asset values are shown against that line, indicating it is treated as an asset item on bank balance sheets.
- The schedule heading explicitly names 'Balances with banks and money at call and short notice' as a balance-sheet item.
- It further breaks down 'Money at call and short notice' into subitems (with banks / with other institutions), consistent with an asset classification.
- The listing groups 'Banks and money at call and short notice' together with other asset headings like Investments and Advances.
- Placement in this list indicates it is part of the bank's assets.
This source reproduces a previous-years exam question that explicitly lists 'Money at call and short notice' as one of the options when asking which item is NOT included in a commercial bank's assets, showing the item is treated as a distinct balance-sheet category in exam/test contexts.
A student could use this to suspect the item is a recognized category and then check official bank balance-sheet classifications (or RBI publications) to see whether it appears under assets or liabilities.
Defines 'Call money' as short-term interbank finance, identifying it as a lending/borrowing instrument used by banks.
Knowing it is interbank lending, a student could reason that when a bank lends in the call market the lent amount would show up as an asset (a short-term claim) on its balance sheet and verify with standard bank accounting practice or RBI balance-sheet templates.
Explains the call/notice money market and distinguishes durations (1 day = call money; 2–14 days = notice money), clarifying this is a short-term money-market instrument among banks.
Using the duration and interbank nature, a student could map this to standard asset classes (short-term loans/advances) on a bank's asset side and then check whether Indian banks classify such interbank placements as assets.
Gives a simple decomposition 'Assets = Reserves + Loans' for banks, illustrating that banks record claims (like loans) as assets.
A student can extend this rule to consider whether money lent/placed at call or on short notice would be treated as a short-term loan/reserve-like claim and thus fall under assets, then confirm via RBI/bank balance-sheet headings.
Notes RBI regulation over 'liquidity of assets' of commercial banks, implying classification of liquid short-term placements (call/notice) matters for regulated liquidity ratios.
A student could use this to check RBI norms (e.g., liquidity requirements or SLR/CRR guidance) to see how interbank call/notice positions are treated for regulatory asset/liquidity calculations.
- [THE VERDICT]: Sitter. Directly solvable from NCERT Macroeconomics (Class XII) Chapter 3 or Vivek Singh Chapter 2. No current affairs required.
- [THE CONCEPTUAL TRIGGER]: The Commercial Bank Balance Sheet. Distinguishing between what a bank 'owns' (Assets) and what it 'owes' (Liabilities).
- [THE HORIZONTAL EXPANSION]: Memorize the T-Format Balance Sheet. (1) Liabilities: Capital, Reserves, Deposits (Demand/Term), Borrowings (from RBI/Inter-bank), Other Liabilities. (2) Assets: Cash (Vault), Balances with RBI, Money at Call & Short Notice, Investments (G-Secs/SLR), Advances (Loans), Fixed Assets.
- [THE STRATEGIC METACOGNITION]: Adopt the 'Banker's Perspective' rather than a customer's. Ask: 'Do I pay interest on this, or do I earn interest on this?' - Pay Interest = Liability (Deposits, Borrowings). - Earn Interest = Asset (Advances, Investments, Call Money).
Banks record loans and advances as assets; the loan document itself is an asset on the bank's books.
High-yield for banking questions: knowing that advances are assets clarifies balance-sheet items, NPAs classification and bank profitability analysis. Connects to topics on credit risk, asset quality and bank accounting; enables answering questions on what appears on the asset side of a bank's balance sheet.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.6 Categorization of Loans > p. 134
Bank items such as deposits are liabilities while loans/advances and investments appear as assets on the balance sheet.
Essential for questions on money supply, bank operations and RBI regulation; helps distinguish what the public's deposits represent versus the bank's uses of funds. Mastery aids in tackling questions on liquidity, reserve requirements and balance-sheet impacts of policy changes.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.11 Money Circulation > p. 55
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.6 Categorization of Loans > p. 134
MCLR guidelines govern how banks determine interest rates charged on advances, linking regulatory policy to bank lending.
Important for questions on monetary policy transmission and credit cost: understanding MCLR ties bank lending behaviour to RBI guidelines and borrower impact. Useful for questions about transparency in bank pricing and how regulatory measures affect credit availability.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.31 Previous Years Questions > p. 118
Deposits that commercial banks hold with the RBI (reserves) are recorded as assets on the bank's balance sheet.
High-yield for understanding bank balance-sheet composition, central bank operations and how reserves affect liquidity and money creation; helps answer questions on asset-side items and reserve requirements.
- Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > 3.3 MONEY CREATION BY BANKING SYSTEM > p. 39
Deposits accepted from the public are treated as liabilities of commercial banks, not as their assets.
Crucial for interpreting bank liabilities, capital adequacy and deposit-related regulations; connects to topics on banking regulation, financial stability and the composition of money supply.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.11 Money Circulation > p. 55
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.11 Money Circulation > p. 57
Demand deposits and current/savings balances of the public form part of monetary aggregates such as M1.
Useful for questions on money supply, RBI policy and macroeconomic indicators; links banking-sector items to broader macro concepts and monetary policy effects.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.10 Money Supply > p. 54
- Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > THE SUPPLY OF MONEY : VARIOUS MEASURES > p. 47
Commercial bank assets are principally represented by reserves and loans, forming the accounting basis for what counts as a bank asset.
High-yield for banking questions: understanding asset composition helps answer queries on balance-sheet items, liquidity management and policy impacts. Connects to topics on money supply, reserve requirements and bank stability; useful for MCQs and short-answer questions on bank accounting.
- Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > 3.3 MONEY CREATION BY BANKING SYSTEM > p. 39
Off-Balance Sheet Items (Contingent Liabilities). Since UPSC has tested standard Assets/Liabilities, the next logical step is items that carry risk but aren't on the main sheet: Bank Guarantees, Letters of Credit (LoC), Acceptances, and Derivatives.
The 'Who Cries?' Test. Imagine the bank shuts down permanently today.
- If the Bank cries because it can't collect money owed to it -> It's an Asset (Advances, Investments).
- If the Public cries because they lost their savings -> It's a Liability (Deposits).
The question asks what is NOT an asset. Find the item where the Public cries. Answer: Deposits.
Mains GS-3 (Banking Sector): The quality of these 'Assets' (specifically Advances) is the root of the NPA crisis. Link this to the 'Twin Balance Sheet Problem'—where stressed corporate balance sheets lead to stressed bank assets, choking credit flow and economic growth.