What do you mean by credit creation by commercial banks?a)It is the process of total withdrawal creationb)It is the process of total deposit creationc)It is the process of loan creationd)It is the process of creation of foreign exchangeCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Credit creation is the most significant function of the commercial banks. Commercial banks accept deposits and lend loans and advances. In this process they create two types of deposits, namely primary deposits and derivative or active deposits. The former refers to the cash deposited by a customer in a bank or deposit a cheque with the bank for collection. The banker merely accepts cash am converts it into a deposit. Hence, this is merely a passive role performed by the banks. These primary deposits do not add to the money stock in the economy. From their experience and observation the banks know that not all the customers will withdraw their deposits on any single day. Hence, after providing for some reserve to meet the cash requirement of the depositors, the banks lend the balance to the borrow. The amount of reserve to be maintained by the banks is Cash Reserve Ratio which is determined by the central bank.

Answer

CREDIT CREATION By COMMERCIAL BANKS.
... The CREATION of CREDIT or deposits is one of the most vital operations of the COMMERCIAL BANKS.
... Similar to other corporations, banks aim at earnings profits.
....For this intention, they accept cash in demand deposits and advance loans on credit to customers.

Answer

C is the answer
because the commercial banks are giving or providing to us

Answer

Credit creation by commercial banks refers to the process of creating deposits and extending loans by the banks. When a customer deposits money in a bank, the bank is able to lend a certain portion of that deposit to another borrower. This process of lending is also known as credit creation. The banks are able to create credit by accepting deposits and giving out loans to borrowers.

Process of Total Deposit Creation:

The banks create credit in the form of deposits. When a bank receives deposits from its customers, it is able to lend out a certain portion of that deposit to other borrowers. This creates a new deposit for the borrower, which in turn can be used for further lending. Thus, the process of deposit creation continues, leading to an increase in the total deposits in the banking system.

Factors influencing Credit Creation:

The amount of credit created by a bank is influenced by various factors such as Reserve Ratio, Cash Reserve Ratio, Statutory Liquidity Ratio etc.

Loan Creation:

The banks create credit by extending loans to borrowers. When a bank gives out a loan, it creates a new deposit for the borrower, which the borrower can use for various purposes. This process of loan creation leads to an increase in the money supply in the economy.

Importance of Credit Creation:

Credit creation is an important process for the economy as it helps in the growth and development of various sectors. It facilitates investment and consumption, which in turn creates employment opportunities and increases the overall economic growth.

In conclusion, credit creation by commercial banks is the process of creating deposits and extending loans by the banks. This process is important for the growth and development of the economy.

Answer

We all know that the meaning of credit in banks is deposits in your accounts. Which reflect that the after the necessary formalities the banks create the credit means deposits. At the time of authentical numerical when we make 1st round the final remaining money is called the deposit. Accordingly other round's money after all adjustment will be same deposits.

Answer

C answer is correct because total deposit money processing loan by commercial Bank

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Credit means to deposit your money at the banks

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Its the process of loan creation with the help of demand deposits from the bankers

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B because it need to think about total deposit held by commercial bank to perform daily function

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It's correct option is (b).

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It's is the process of loan

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Because it's gives free asses to withdraw

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It is the process of loan creation

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It is the process of total withdrawal creation

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(b) It is the process of total deposit creation

Answer

B

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