ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The bank’s main liabilities are its capital (including cash reserves and, often, subordinated debt) and deposits. The latter may be from domestic or foreign sources (corporations and firms, private individuals, other banks, and even governments).

Detailed explanation-2: -A commercial bank’s primary liabilities are deposits and primary assets are loans and bonds. As per the U.S. Banking Act of 1971, the “commercial bank” is an institution that offers demand deposits and originates loans.” Therefore, a money market mutual fund is not a commercial bank as it does not originate loans.

Detailed explanation-3: -Total Deposit Liabilities refer to the total amount of deposits held by financial institutions (from depositors). It is the sum of savings deposit, demand deposit, time certificates of deposit, long-term negotiable certificates of deposit, and negotiable order of withdrawal (NOW) accounts.

Detailed explanation-4: -Commercial banks accept various types of deposits from the public especially from its clients, including saving account deposits, recurring account deposits, and fixed deposits. These deposits are returned whenever the customer demands it or after a certain time period.

Detailed explanation-5: -The deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited. When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank.