Is current account a liability or an asset for banks?

Posted on Wednesday, January 11th, 2023 | By IndusInd Bank

All businesses, banks and individuals have two main components in their balance sheet – assets and liabilities. Even you have your own assets and liabilities. Your assets are anything you may own outright – such as a car, a house, or cash in a bank account. Your liabilities are considered to be anything that you make payments on – such as rent, a mortgage, a car payment, or utilities.

Bank assets and liabilities are somewhat the same as individual assets and liabilities. Bank assets are considered anything that the bank owns, whereas bank liabilities are anything that the bank owes to someone else. In a nutshell, if a bank owns the building it operates in, then the building will fall in the asset category as it can be sold for cash value. However, if the bank doesn’t own the building it operates in, then the bank must make payments (rent) to a creditor (owner). Hence, the building becomes a liability.

Bank Assets

Banks have general assets just like businesses and individuals. These assets make money for the bank. For instance, cash, interest-earning loan accounts, government securities, etc. Loans are important assets for banks because they generate revenue from the interest that the customer pays on these loans.

The three most common bank assets are:

1. Loans given to bank customers
2. Deposits made to the central bank
3. Trading assets

Bank Liabilities

Liability for a bank is anything that it owes to the outsiders. Examples of liabilities for a bank include distribution payments to customers from stock, interest paid to customers for savings and fixed deposits.

The most common bank liabilities are:

1. Loans taken from the central bank
2. Deposits made by the bank customers
3. Trading liabilities

Is current account a liability or an asset for the bank?

Current accounts are held by businesses/individuals who carry a significantly higher number of transactions with banks. These accounts deal mostly with liquid deposits and offer several customized options for instant and seamless financial dealings. Further, current accounts do not have any limits on daily transactions and cash deposits/withdrawals.

Whenever a customer deposits money into his/her account, the bank views it as liability. This is because the bank owes these deposits to its customer, and is obligated to return the funds when the customer wishes to withdraw their money by any means (ATM withdrawal, cheque deposit).

Similarly, a current account is also a liability for a bank because whatever funds you hold in a current account is something the bank has to return. Additionally, current accounts are heavily operated accounts as they are mainly held by businesses, merchants and enterprises for large and frequent transactions. Banks incur a huge operational cost on current accounts due to this.

Which bank is the preferred choice for opening a current account?

IndusInd Bank is known for instant current account opening with minimum paperwork. You can even open a digital current account from the comfort of your home with video KYC. Select from a range of industry specific accounts by IndusInd Bank (like Agro, IT, Telecom, BPO, Manufacturing) to meet your unique banking needs. We also give you the freedom to choose your account number! Be it your birth date, or your lucky number – get an account number of your choice with ‘My Account, My Number.’

IndusInd Bank also offers pre-approved loans with quick disbursal for immediate capital requirements. Premium doorstep banking services like cheque pickups, cash pickups, secure NEFT/RTGS/IMPS transactions, instant SMS alerts, simple mobile banking & smooth internet banking interface make us the preferred bank for opening a current account.

How to open a current account with IndusInd Bank?

You can empower your business with an IndusInd Bank current account in minutes! To apply digitally without any branch visits, click here. Next, enter your details and pick an account number of your choice. Click on ‘Apply Now.’ Once your account is open, you can download the easy-to-use Indus Merchant Solutions App to complete your video KYC anywhere, anytime. Using the All-In-One mobile banking app, you can send & collect funds instantly, avail pre-approved loans, enjoy paperless banking and do much more!

We are the right banking partner for your business. Click here to open current account instantly with IndusInd Bank!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.