Consider the following statements regarding the balance sheet of a bank: 1. Assets are recorded on the left-hand side and liabilities on the right-hand side. 2. Deposits held by the public in the bank are considered assets for the bank. 3. Reserves kept with the Central Bank are considered assets for the commercial bank. Which of the statements given above is/are correct?

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).

NCERT Class 12 Economics — Chapter 5: Money and Banking

mcqmedium

Consider the following statements regarding the balance sheet of a bank:

Assets are recorded on the left-hand side and liabilities on the right-hand side.
Deposits held by the public in the bank are considered assets for the bank.
Reserves kept with the Central Bank are considered assets for the commercial bank.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 3 only
B1 and 2 only
C2 only
D1, 2 and 3

Did you get this right?

Solution

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).

Your note

More from Chapter 5: Money and Banking

If the Reserve Bank of India increases the Bank Rate, what is the likely impact on the economy?

medium

The 'Currency Deposit Ratio' in the banking system is primarily determined by:

medium

Consider the following statements regarding the functions of money: 1. Economic exchanges without money are referred to as liquidity exchanges. 2. The principal role of money is to facilitate exchanges by acting as a medium of exchange. 3. In a barter system, the search costs increase as the number of individuals in the economy increases. Which of the statements given above is/are correct?

medium

With reference to the 'Unit of Account' function of money, consider the following statements: 1. If there is a general increase in the price level, the value of money in terms of commodities increases. 2. It allows the value of all goods and services to be expressed in monetary units. 3. It prevents the calculation of relative prices of different commodities. Which of the statements given above is/are correct?

medium

Consider the following statements regarding money as a 'Store of Value': 1. Money is an asset that can act as a store of value. 2. The value of money is irrelevant for it to perform the function of a store of value. 3. Storage costs of money are considerably lower compared to perishable commodities like rice. Which of the statements given above is/are correct?

medium

Keep practising Chapter 5: Money and Banking

Work through every question from this NCERT chapter.

Browse all NCERT Class 12 Economics chapters

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).