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Explain the process of credit creation …

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Explain the process of credit creation by commercial bank with an example?

Posted by Ramiz Rahman 7 years, 2 months ago

CBSE > Class 12 > Economics

1 answers

Mahesh Gowda 7 years, 2 months ago

when a commercial bank receives deposit its keep a part of it with the central bank and a part with itself .these are called legal reserve the money lent comes back to it as deposits. again it keeps a part of it with the central bank a part of with itself and lendsthe rest. the process of continuous. in this way banks give loan with is many a times the original deposit. the total credit creation will be 1/ LRR..

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