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प्रश्न
Answer in detail:
Explain the process of credit creation.
उत्तर
Commercial banks play an important role in ‘credit creation’ in the economy. They have the capacity to generate credit through demand deposits. These demand deposits make more credit than the initial deposits. The process of money creation can be explained by taking an example of a bank XYZ. A depositor deposits Rs 10,000 in his savings account, which will become the demand deposit of the bank. Based on the assumption that not all customers will turn up the same day to withdraw their deposits, the bank maintains a minimum cash reserve of 10 % of the demand deposits i.e. maintains a reserve of Rs.1000. It lends the remaining amount of Rs 9000 in the form of credit to other customers. This further creates deposits for the bank XYZ. Keeping the minimum cash deposits, the banks again lent the remaining and so on. With the cash reserve of Rs.1000, the credit creation is worth Rs.10, 000. This is given by the credit multiplier as: Credit multiplier = 1/ CRR = 1/ 10% = 10 The money supply in the economy will increase by the amount (times) of credit multiplier.
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संबंधित प्रश्न
Accepting deposits from the public is the................................. function of Commercial Bank.
(secondary / general / primary / incidental)
Providing safe deposit vault facility is the only general function of commercial banks.
Explain the process of credit creation by commercial banks.
A bank is an institution which deals in money and _____________
(commodity money/credit/barter/standard money)
Explain the various types of deposits.
How do commercial banks create deposits? Explain.
Explain the process of money creation by the commercial banks with the help of a numerical example.
State whether the following statement is true or false:
Central bank also performs commercial banking business.
Distinguish between the following :
Quantitative and Qualitative measures of credit control.
Write short Answer for the following question:
Explain various types of Bank Deposits ?
Write explanatory note.
Primary functions of commercial bank.
State whether the following statements are TRUE or FALSE:
Commercial banks play an important role in economic development.
Explain the following concepts or give definitions.
Savings deposits
Define or Explain the concept
Current deposit
State whether the following statements are True or False with reason:
Interest rate is more for fixed deposits.
Fill in the blank with appropriate alternatives given below
Deposits from __________ account can be withdrawn without any notice.
Fill in the blank with appropriate alternatives given below
Facility of E-banking is provided through __________
Match the following:
| Group A | Group B |
| 1. D-mat account | a. Current account |
| 2. Over draft facility | b. Agency function |
| 3. ATM facility | c. Share brokers |
| 4. Commercial bank | d. General function |
| 5. Credit creation | e. Recurring account |
| f. Profit making | |
| g. Central bank | |
| h. Commercial bank |
State whether the following statement is True or False.
Commercial banks are the backbone of modern economy.
State whether the following statement is True or False.
There is no difference between primary deposit and secondary deposit of a commercial bank.
Define explain the following concept.
Cash credit
Define explain the following concept.
Discounting of bills
Give reason or explain the following statement:
Commercial banks provide agency functions to earn profits.
Give reason or explain the following statement:
Overdraft facility is provided to current account holders.
Write short note on:
Derivative deposit
Write short note on:
Long term loans
Answer the following question:
Explain various types of deposits.
Answer the following question:
What are the different types of loans provided by commercial banks?
Define Commercial banks.
State any two components of ‘Net Factor Income from Abroad’.
Which of the following points states that the open market operation helps in controlling credit creation?
Which of the following are the functions of a commercial bank?
Which of the following are the other functions of a commercial bank?
Which of the following are the agency functions of commercial banks?
M3 and M4 are known as ______ money.
If reserve ratio is 10% and primary deposit is ₹1,250 crores, the total deposit created by commercial banks will be ______
High Powered Money includes ______
The word 'net' implies that ______ is to be included in the money supply.
Consider the following statements:
- M1 is a broad concept of money.
- M2 is a narrow concept of money.
- M3 includes both M1 and lime deposit of public with the bank.
Which of the following is true with respect to the concept of supply of money?
Saving deposit in the Post office is a part of ______
In the case of Gross Domestic Capital Formation, which one will be the part of it?
Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.
Agricultural Developmental Bank of Pakistan uses the production function approach for measuring bank outputs and costs. A translog cost function is estimated to provide an assessment of the bank's scale and scope efficiency, and to quantify the extent to which its production costs are sensitive to the size and output mix. Results show that the bank enjoys both overall and product-specific economies of scale and, therefore, there exists scope for the bank to expand its operations at a declining average cost. Even though bank branches in all size categories enjoy economies of scale, the extent of such economies is larger for branches operating at a smaller scale of production. This implies that as the bank branches grow larger in size in terms of both loan and deposit accounts, they move closer to attaining increasing returns to a factor. It is also shown that the marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger in size in terms of either the number of loans or the number of deposits. This confirms that branches operating at a larger scale of production have attained greater cost-efficiency in terms of servicing the loan and deposit accounts.
The increasing returns to scale in larger branches is due to ______
Identify the correctly matched pair of the items in Column A to that of Column B
| Column A | Column B | ||
| 1 | Money | (a) | Supply of Money |
| 2 | Commercial Bank | (b) | Store of Value |
| 3 | Central Bank | (c) | Credit Control |
| 4 | M4 | (d) | Circulation of Money |
M3 = ______
Which of the following statements is not true?
The Narrow concept of money includes ______
It takes Rohan 30 minutes to do an economics assignment and one hour to do a finance assignment. What is the opportunity cost of you doing two economics assignments?
Ms. lqra Ansari, a teacher, was explaining in her class about various types of deposits with the commercial banks. She quoted that - "These deposits form a part of M1 measure of money supply and are payable on demand by the commercial banks."
Identify the type of deposits she was explaining about and choose the correct alternative:
- Demand Deposits
- Time Deposits
- Post Office Deposits
