Given below are two statements:
Statement I: Reserves are similar to the deposits we keep with banks: commercial banks keep their deposits with the RBI, and these are called reserves.
Statement II: For a commercial bank, loans given to the public are its liabilities.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is true but Statement II is false.
Statement I: Reserves are similar to the deposits we keep with banks: commercial banks keep their deposits with the RBI, and these are called reserves. — True. We keep deposits with banks. In the same way, banks keep deposits with the RBI, called reserves.
Statement II: For a commercial bank, loans given to the public are its liabilities. — False. A loan is the bank’s claim on the borrower, so it is an asset. The main liability of a bank is its deposits.
NCERT (2026-27): “3.3 Money Creation by Banking System … Balance sheet is a record of assets and liabilities of any firm. Conventionally, the assets of the firm are recorded on the left hand side and liabilities on the right hand side. Accounting rules say that both sides of the balance sheet must be equal or total assets must be equal to the total liabilities. Assets are things a firm owns or what a firm can claim from others. In case of a bank, apart from buildings, furniture, etc., its assets are loans given to public. When the bank gives out loan of Rs 100 to a person, this is the bank’s claim on that person for Rs 100. … Reserves are similar to deposits we keep with banks. We keep deposits and these deposits are our assets, they can be withdrawn by us. Similarly, commercial banks like State Bank of India (SBI) keep their deposits with RBI and these are called Reserves. … For a bank, the main liability is the deposits which people keep with it.” |