what are the limitation of credit creation
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The total amount of cash, available to the banking system limits the volume of credit that can be created. Credit is based on cash. The banks must keep a certain percentage of cash reserve.
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credit creation power of banks depends upon the amount of cash they possess. ADVERTISEMENTS: The larger the cash, the larger the amount of credit that can be created by banks. Thus, the bank's power of creating credit is limited by the cash it possesses.
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