Liabilities for any firm are its debt/what it owes to others. Contrary to that, for a bank __________ are the main liability.
(Choose the correct option to fill in the blank)
Liabilities for any firm are its debt/what it owes to others. Contrary to that, for a bank __________ are the main liability.
(Choose the correct option to fill in the blank)
Show Hint
- loans
- reserves
- deposits
- assets
The Correct Option is C
Solution and Explanation
A liability is what a firm owes to others. For a bank, the depositors hold claims on it.
A bank takes deposits and must pay them back on demand or on maturity.
Step 2: Key Approach:
Sort the four items into assets (what the bank owns or is owed) and liabilities (what it owes).
Step 3: Detailed Explanation:
(A) Loans: borrowers owe this money to the bank. It is an asset and also the main source of bank income. So (A) is wrong.
(B) Reserves: cash kept with the bank and the RBI. It belongs to the bank and is an asset. So (B) is wrong.
(C) Deposits: money the bank must return to the public. This is a liability and the largest one. So (C) is correct.
(D) Assets: this is the opposite category of liabilities. So (D) is wrong.
Final Answer:
Deposits are the main liability of a bank. This is option (C).
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