Question

A commercial bank can create credit on the basis of primary deposit. (State with reasons whether you agree or disagree with the given statements)

Answer 1

Answer:

When the borrower withdraws money from his loan account by a cheque, it is deposited by the payee in some other bank. Other banks again create credit on the basis of fresh deposits received after keeping the required reserves.

Explanation:

Answer 2

Answer:

"Correct

This is true that a commercial bank can give credit on the basis of primary deposits made by the person and as we know primary deposits are known as cash deposits. People deposits cash in the bank and they can withdraw it anytime. Bank keeps a small part of their primary deposits to fulfill the demand for cash of the depositor.

"

Explanation: