explain credit creation . (6m)
Dear Student
Commercial banks are power houses of credit . They give out more money in the form of loans than the money they get as deposits . Process of credit creation is initiated by commercial banks which provides finance to all sectors of economy . These banks make loans and advances to their customers . Bank deposits also arises when loans are given . This power of banks to increase deposits through loans , advances etc is called credit creation . Credit Creation by banks helps to accelerate the economy . More deposits would mean more investment which will again lead to more deposits .
Regards .
Commercial banks are power houses of credit . They give out more money in the form of loans than the money they get as deposits . Process of credit creation is initiated by commercial banks which provides finance to all sectors of economy . These banks make loans and advances to their customers . Bank deposits also arises when loans are given . This power of banks to increase deposits through loans , advances etc is called credit creation . Credit Creation by banks helps to accelerate the economy . More deposits would mean more investment which will again lead to more deposits .
Regards .