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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
Explain the primary functions of commercial banks.
Explain different types of loans and advances provided by commercial banks.
Providing safe deposit vault facility is the only general function of commercial banks.
Explain the components of Legal reserve Ratio.
Explain the process of credit creation by commercial banks.
Explain the agency function of commercial banks.
Explain the process of money creation by the commercial banks with the help of a numerical example.
State with reason. Whether you ‘agree’ or ‘disagree’ with the following statement:
Commercial bank can credit on the basis of primary deposit.
State whether the following statement is true or false.
The Cash Reserve Ratio does not affect the lending capacity of the commercial banks.
Explain with reason, whether you agree or disagree with the following statement:
Commercial banks perform agency functions to earn profit.
Fill in the blank using proper alternatives given in the bracket:
.................consumption cannot be zero.
Write short Answer for the following question:
Explain various types of Bank Deposits ?
State whether the following statements are TRUE or FALSE:
Commercial banks play an important role in economic development.
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 __________
State whether the following statement is True or False.
Credit money is created by the central bank of a country.
Define explain the following concept.
Safe deposit vault
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.
Give reason or explain the following statement:
Saving account deposits are usually opened by salaried class.
Distinguish between:
Cash credit and overdraft facility
Write short note on:
E-banking facility
Answer the following question:
Explain various types of deposits.
What are the primary functions of commercial banks?
Answer in detail:
What are the secondary functions of commercial banks?
Define Commercial banks.
What is credit creation?
What is the effect of a rise in the rate of SLR on the creation of credit?
______ is the total liability of the monetary authority of the country.
Which of the following are the functions of a commercial bank?
Which of the following are the other functions of a commercial bank?
How Public debt imposes a burden on the economy as a whole?
If reserve ratio is 10% and primary deposit is ₹1,250 crores, the total deposit created by commercial banks will be ______
Demand deposits include ______
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?
Kalpana said that Commercial Bank is the controller of credit. Geeta said that the Central Bank is the controller of credit. Bobby said that both the commercial bank and the Central Bank are the controller of credit. Who among them is not correct?
In the case of Gross Domestic Capital Formation, which one will be the part of it?
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 = ______
_________ is an institution that accept deposits for lending purposes.
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
Explain the functions of commercial bank.
