Question

How does a commercial bank create
credit ? Explain with example​

Answer 1

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. However, commercial banks cannot use the entire amount of public deposits for lending purposes. ... The cash reserve requirement of the central bank is 10%.

Answer 2

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.

Hope it helps...