Get the answer of: Can Banks Create Credit? Commercial banks perform a number of functions in modern times. These are as follows: 1. Commercial banks collect the savings of the community. These are provided as loans to the various sectors of the economy. 2. Banks make loans and investment. Bank lend money to traders, industrialists and other persons for various [...]
The following points highlight the top two methods of creating credits through deposits. The methods are: 1. Primary or Passive Deposits 2. Derivative or Active Deposits. Method # 1. Primary or Passive Deposits: The banks create passive deposits when they open deposit accounts in the name of the customers who bring cash or cheques to be credited to their accounts. [...]
The following points highlight the top seven weapons used by Reserve Bank of India to control the credit. The weapons are: 1. Bank Rate 2. Open Market Operations 3. Varying Cash Reserve Ratio 4. Cash Rationing 5. Direct Action 6. Moral Suasion 7. Publicity. Weapon # 1. Bank Rate: Bank rate is the rate at which the Reserve Bank is [...]