Q. With reference to Banks assets and liabilities, consider the following statements;
1.Generally, bank’s assets have a short maturity.
2.Bank’s liabilities have a long maturity.
Which of the statements given above is/are correct?
Savers always want access to at least some part of their savings for unexpected use; this is also called the need for liquidity. They want the ability to pull out money when they need it.
Borrowers need the money for a much longer time. Borrowers cannot function if the money can be demanded back at short notice.
So, the bank’s assets have a long maturity, because it promises borrowers that they will not need to pay back their loans early. On the other hand, the bank’s liabilities have a short maturity; depositors can access their money whenever they want.
Source: Indian Express