Question

how do commercial banks create credit?Explain with the help of a numerical example

Answer 1

answer: please mark me as brain least .

explanation: commercial Bank create credit by advancing loan and purchasing security .they lend by individual or business out of deposit accepted from the public.however commercial Bank cannot use the entire amount of public deposit for landing proposes.

step by step explanation: commercial bank accept deposit and lend money to the needy borrower. through this process Bank create two types of deposit 1) primary deposit.2) derivative or active deposit

Answer 2

Answer:

Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public. ... They are required to keep a certain amount as reserve with the central bank for serving the cash requirements of depositors.