The correct option is 1 and 3 only.
Explanation
A bank's balance sheet is a financial statement that summarizes its assets, liabilities, and equity at a specific point in time.
- Assets: Items of value owned by the bank or money owed to the bank (e.g., loans given, reserves, investments).
- Liabilities: Financial obligations the bank owes to others (e.g., deposits from the public).
Statement-wise Analysis
- Statement 1 is Correct.
In standard economic analysis, a simplified T-account balance sheet records Assets on the left-hand side and Liabilities on the right-hand side. While statutory formats for Indian banks (under the Banking Regulation Act) are now vertical, the theoretical convention used in economic examinations follows the Assets-Left, Liabilities-Right structure.
- Statement 2 is Incorrect.
Deposits held by the public (Savings, Current, Fixed Deposits) are liabilities for the bank. This is because the bank owes this money to the depositors and is obligated to return it upon demand or maturity.
- Statement 3 is Correct.
Reserves kept with the Central Bank (such as the Cash Reserve Ratio or CRR) are considered assets for the commercial bank. These funds belong to the commercial bank but are held in custody by the Central Bank; they represent a claim the bank has on the Central Bank.
Key Takeaway
Deposits are the primary
liability of a bank (since they must be repaid), whereas
Loans and
Reserves are the primary
assets (since they generate income or represent owned funds).