Demand and Time Liabilities (DTL) & Net Demand and Time Liabilities (NDTL)

Demand and Time Liabilities (DTL) and The Net Demand and Time Liabilities (NDTL) are two terms openly pop up in connection with monetary review policy of RBI and liquidity in market. Banks are in the business of accepting deposits and deploying these funds by way of lending and thereby earning profit in the process. The resources mobilesd by the bank for lending are its liabilities. Liabilities of a bank can be classified broadly into three categories; demand liabilities, time liabilities and other demand and time liabilities (ODTL). Demand and time deposits from public form the largest share of bank’s liabilities.

Liabilities of a bank are defined under Section 42 of the RBI Act, 1934. As per this definition, liabilities of a bank may be towards the banking system or towards others in the form of demand and time deposits or borrowings or other miscellaneous items of liabilities. Further, Section 42(1C) of the RBI Act, 1934, empowers Reserve Bank of India (RBI) to specify whether any transaction or class of transactions would be regarded as a liability of banks in India.

Demand Liabilities (DL)

The demand liabilities for a bank include all those liabilities which are payable on demand.

Components of Demand Liabilities

Demand liabilities of a bank include:
1.    Current deposits,
2.    Demand liabilities portion of savings bank deposits,
3.    Margins held against letters of credit/guarantees,
4.    Balances in overdue fixed deposits, cash certificates and cumulative/recurring deposits payable on demand
5.    Outstanding Telegraphic Transfers (TTs), Mail Transfers (MTs), Demand Drafts (DDs) and unclaimed deposits,
6.    Credit balances in the Cash Credit account and
7.    Deposits held as security for advances which are payable on demand.

Money at Call and Short Notice from outside the banking system, Loans/borrowings from abroad by banks in India, upper Tier II instruments raised and maintained abroad, and the amount received by a bank from the client remaining unpaid and draft received from a remitter bank under remittance facilities scheme and remaining unpaid are to be treated as liability to others. 

Time Liabilities (TL)

Time liabilities of a bank are those liabilities of a bank which are payable otherwise on demand.

Components of Time Liabilities

Time Liabilities of a bank include:
1.    Fixed deposits, cash certificates, cumulative and recurring deposits,
2.    Portion of savings bank deposits, staff security deposits, margin held against letters of credit, if not payable on demand,
3.    Deposits held as securities for advances which are not payable on demand and
4.    Gold deposits.

Demand and Time Liabilities (DTL) is the sum of Demand Liabilities and Term Liabilities

Other Demand and Time Liabilities (ODTL)

Other Demand and Time Liabilities include all those miscellaneous liabilities which are not covered under demand liabilities and time liabilities.

Components of Other Demand and Time Liabilities

Other Demand and Time Liabilities include:
1.    Interest accrued on deposits,
2.    Bills payable
3.    Unpaid dividend,
4.    Net credit balances in branch adjustment account,
5.    Balance in suspense account relating to the amount due to other banks or public, any amounts due to the banking system which are not in the nature of deposits or borrowing
6.    participation certificates issued to other banks,
7.    cash collaterals,
8.    the margin money on bills purchased / discounted
9.    Gold borrowed by banks from abroad etc

Assets with the Banking System

Assets with the banking system of a bank include:
1.    Balances with banks in current account,
2.    Balances with banks and notified financial institutions in other accounts,
3.    Funds made available to banking system by way of loans or deposits repayable at call or short notice of a fortnight or less and
4.    Loans other than money at call and short notice made available to the banking system.
5.    Any other amounts due from the banking system which cannot be classified under any of the above items

Sums placed by banks issuing drafts/interest/dividend warrants under remittance arrangement are to be treated as ‘Assets with banking system’ in their books and can be netted off from their inter-bank liabilities.

Net Demand and Time Liabilities (NDTL)

Net Demand and Time Liabilities (NDTL) = (Demand Liabilities +Time Liabilities + Other Demand and Time Liabilities + Liability to Others)  –  Assets with the Banking System

Net Demand and Time Liability is used by banks for computation of Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Liquidity Adjustment Facility (LAF)