The liabilities of banking company are quite different from that of normal public or private sector companies and that is the reason why one should be aware of these liabilities as majority of people know liabilities of normal companies but are unaware about banking liabilities. Let’s look at some of the liabilities of a bank –
- Share Capital – These include the paid up capital of the bank, hence equity share capital and preference share capital would come under this category.
- Reserve and Surplus – These include all the profits which the bank has earned and out of that profit the reserves which the bank has created over the years.
- Deposits – This constitute as main liability of the bank because its business is depend on this, there are basically 3 types of deposits one is term deposit which is for long period of time ranging from 1 year to 5 years, next is saving deposit which is for short period of time and these type of deposits can be withdrawn anytime by the customer and last is current deposit which is made by the businessman for business purpose and usually this has zero balance or overdraft balance.
- Borrowings – Bank also need funds and when there is shortage of funds for the bank they either borrow it from central bank or from other banks by paying interest rate to the financial institution from which it has borrowed the money.
- Miscellaneous Liabilities – Miscellaneous liabilities would include liabilities like guarantee given by the bank, letter of credit, provision made for bad debts or loans and other such liabilities would come under this head.