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प्रश्न
Explain the process of credit creation by commercial banks.
Explain the credit creation role of commercial banks with the help of a numerical example.
उत्तर १
A process of credit creation by commercial banks:- Commercial banks create money even though they cannot print money. Bank deposits form the basis for credit creation. They accept deposits from the public by opening a deposit account known as the primary deposit. Banks do not hold the money in the account itself, and the entire amount is not withdrawn from the account at the same time. So, they advance loans to business persons and retain only a small portion of the total deposits in the bank. The Central Bank decides the amount to be held in the form of cash and the remaining amount is advanced as loans to business persons only against collateral securities. The bank will not give cash but open a derivative account in the name of the individual or institution. Here, the loans create a derivative deposit which is called a secondary deposit or derivative deposit. This secondary deposit is called the creation of credit. Hence, the banks are able to provide financial assistance to traders and industrialists. Their cheques and drafts are useful for trading on a large scale. It also provides concessional loans to the priority sectors such as agriculture, small-scale industry, retail trade and export. Thus, the production activity increases the overall development of the nation.
उत्तर २
A process of credit creation by commercial banks:- Commercial banks create money even though they cannot print money. Bank deposits form the basis for credit creation. They accept deposits from the public by opening a deposit account known as the primary deposit. Banks do not hold the money in the account itself, and the entire amount is not withdrawn from the account at the same time. So, they advance loans to business persons and retain only a small portion of the total deposits in the bank. The Central Bank decides the amount to be held in the form of cash and the remaining amount is advanced as loans to business persons only against collateral securities. The bank will not give cash but open a derivative account in the name of the individual or institution. Here, the loans create a derivative deposit which is called a secondary deposit or derivative deposit. This secondary deposit is called the creation of credit. Hence, the banks are able to provide financial assistance to traders and industrialists. Their cheques and drafts are useful for trading on a large scale. It also provides concessional loans to the priority sectors such as agriculture, small-scale industry, retail trade and export. Thus, the production activity increases the overall development of the nation.
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संबंधित प्रश्न
Explain the primary functions of commercial banks.
Explain, with reason, whether you Agree or Disagree with the following statement.
Commercial banks provide many general utility services.
State whether the following statement is true or false :
Credit control is the function of commercial banks.
Answer the following question :
What are the different types of loans provided by commercial banks ?
State whether the following statement is True or False with reason:
Commercial Banks cannot give interest on deposits.
Fill in the blank with appropriate alternatives given in the bracket :
Commercial banks create __________.
State whether the following statements are TRUE or FALSE:
Commercial banks play an important role in economic development.
State whether the following statement is True or False.
The saving bank deposit can be opened with a small amount.
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.
Discounting of bills
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.
Give reason or explain the following statement:
Rate of interest on fixed deposit is high.
Write short note on:
E-banking facility
Write short note on:
D-mat account
State with reason whether you 'agree' or 'disagree' with the following statement.
Credit creation of commercial banks is based on primary deposits.
What is credit creation?
Which of the following are the functions of a commercial bank?
_________ is an institution that accept deposits for lending purposes.
