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प्रश्न
Write the mechanism of credit creation by commercial banks.
उत्तर
Mechanism / Technique of Credit Creation by Commercial Banks:
- Bank credit refers to bank loans and advances.
- Money is said to be created when the banks, through their lending activities, make a net addition to the total supply of money in the economy.
- Money is said to be destroyed when the loans are repaid by the borrowers to the banks and consequently, the credit already created by the banks is wiped out in the process.
- Banks have the power to expand or contract demand deposits and they exercise this power through granting more or less loans and advances and acquiring other assets.
- This power of commercial bank to create deposits through expanding their loans and advances is known as credit creation.
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संबंधित प्रश्न
Explain the components of Legal reserve Ratio.
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Answer the following question:
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Answer the following question:
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A commercial bank create credit on the basis of primary deposit.
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Loans given by banks for a period of less than five years is known as long - term loan.
Which of the following points states that the open market operation helps in controlling credit creation?
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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 |
