Question

Write a story of an gold Smith lala on the process of deposit and loan creation by commercial bank

Answer 1

Story of Gold Smith lala on the process of deposits-

Once upon a time there was a gold Smith named lala in a village . Peoples which are lived in village , used gold and other precious metal for buying the goods.

We can also say that in other words in here metals act as a money for buying some goods . People that lived in village , giving their gold to lala for safe keeping . Because they trust lala.

In place for keeping their good , lala take the paper receipts and charged a small fee for them . After some time the paper receipts issued by lala began to circulate as money .

This means instead of giving gold for purchasing wheat and other items someone would pay for wheat and shoes in place of paper receipts.

Then after sometime paper receipts acts as a money then people will understand that receipts act as a money . Since everyone in the village accepted these as a medium of exhange.

Loan creation by commercial bank -

the creation of credit or depositsis one of the most important operation of the commercial bank. The main aim of bank is to earning profits .

For this they accept cash in deposits and give advance loans to customers . Through his bank and customers are mutually benefitted as bank earn their profit and customers get their loan It is most important activity of commercial bank.

The together commercial banking system is one unit is called BANK. The deposits held by banks are used to giving loan to customers.

In many ways banks fulfill customers need . In other bank get their profit.