BANKING AFFAIRS

Detailed explanation-1: -Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.

Detailed explanation-2: -Using demand deposits, commercial banks create money.

Detailed explanation-3: -Answer: 1. Derivative deposits also known as secondary deposits are the deposits in excess of the minimum cash reserves to be held by the banks. These deposits are used to grant loans to the borrowers. In this way, derivative deposits form the basis of credit creation by the commercial banks.

Detailed explanation-4: -“When banks extend loans to their customers, they create money by crediting their customers’ accounts.”