Question

What is credit? How does a bank create credit?

Answer 1

Answer:

hello mate !!

Explanation:

Hope u will get ur answer!!!

Answer 2

Answer:

The money which is circulated through the commercial banks is called credit. The banks create credit by issuing loans and securities.

Explanation:

Credit is the sole basis of a bank’s existence. Credit is the term used to denote the money circulating. This credit is acquired by giving out loans. Banks have an elaborate process of giving out these loans.

First they accept deposits from people willing to store their money. Then they start issuing loans. The money used to give out in these loans is used from the deposits in the bank. However the entire deposit amount isn’t used and some of it is kept to return to the depositors in the form of interest. The rest is used to issue loans.