how does a commercial bank create money
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Banks create deposits via lending. Instead of giving loans in cash, banks issue cheque against the name of the borrowers. ... The people who receive the cheque deposit them in another bank. However, the bankers know that the amount of money that the depositors withdraw soon returns to the bank.
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Explanation:
Banks create deposits via lending. Instead of giving loans in cash, banks issue cheque against the name of the borrowers. ... The people who receive the cheque deposit them in another bank. However, the bankers know that the amount of money that the depositors withdraw soon returns to the bank.
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