Demand Liabilities and Time Liabilities

Banks have various kinds of liabilities that can be broadly categorized into two main types – demand liabilities and time liabilities.

Demand Liabilities

Demand liabilities refer to those liabilities which are payable by the bank on demand, without any prior notice. Some examples include:

  • Current Account Deposits– The balance in a customer’s current account is payable on demand. If a customer wishes to withdraw funds from their current account, the bank has to pay it immediately.
  • Savings Account Deposits– The demand liability portion of savings bank deposits also needs to be paid by the bank on demand. Customers can withdraw a certain amount from their savings account without prior notice.
  • Outstanding Payment Instruments– Payment instruments like demand drafts, telegraphic transfers, mail transfers etc. issued by a bank also constitute demand liabilities. The bank has to honor these instruments and make the payment as and when they are presented.
  • Unclaimed Deposits– Deposits that have remained unclaimed or inactive for a long time are also considered demand liabilities. Banks have to return these to the customers whenever demanded.
  • Cash Credit Accounts– The balance in cash credit accounts given to businesses is a demand liability for the bank. The overdraft facility can be withdrawn by the customer anytime.

Time Liabilities

Time liabilities are those liabilities which are repayable after a specific time period. Some examples are:

  • Fixed Deposits– The maturity amount of fixed deposits is payable only after the completion of the fixed tenure chosen by the customer.
  • Recurring Deposits– Banks need to pay recurring deposits only on maturity after the specified installment amounts have been deposited every month.
  • Savings Account Deposits– The time liability portion of savings accounts which is not meant for withdrawal on demand is payable after a notice period.
  • Term Loans– The principal amount of term loans or retail loans like home loans, auto loans etc. is payable as per the repayment schedule and not on demand.
  • Certificates of Deposit– Certificates of deposit issued to customers have a fixed maturity date after which the amount is paid by the bank.

By segregating liabilities into demand and time liabilities, banks are able to manage liquidity in a better manner. This categorization helps banks match their liabilities with assets of similar maturity profiles.



  1. Anonymous

    October 20, 2010 at 11:51 am


  2. Anonymous

    March 17, 2011 at 2:32 am


  3. raj

    July 5, 2014 at 8:03 am


  4. kiran

    February 12, 2015 at 10:38 am

    well explained

  5. Mait

    May 21, 2015 at 1:06 am

    This was very helpful, easy to understand. Thank you

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