Inside the temple, it turns into a Mouldy banana if left on the ground too long and becomes useless at this point. Everywhere else it just appears on the ground and acts like a normal banana. If you drop the banana while a NPC or player is standing on it, you don't see it, as it acts like an NPC (which also has yellow name when right-clicked). This is only when in the area where you have to distract the monkey guard (everywhere else it behaves normally like an item).