Credit creation capacity of commercial banks is determined by:begin{enumerate}item Cash withdrawls from the banking system by the publicitem Cash reserve ratio to be maintained by Commercial banksitem Supply of currency notes by the central bankitem Willingness of the borrowers to take loans from commercial banks.end{enumerate}

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Credit creation capacity of commercial banks is determined by:

A	1, 3 and 4
B	2, 3 and 4
C	1, 2 and 4
D	1, 2 and 3

Explanation:

Detailed explanation-1: -The higher the amount of deposits made by the public, the higher credit creation from the commercial banks can be seen. However, there is a certain limit on the amount of cash that can be held by the banks at a time.

Detailed explanation-2: -Answer: Credit creation is the expansion of deposits where the banks expand their demand deposits as a multiple of their cash reserves.

Detailed explanation-3: -Fiscal Policy limits the power of credit creation by Commercial Banks.

Detailed explanation-4: -In open market operation, the central bank sells government securities to public through banks. This results in transfer of part of commercial bank deposits to central bank and reduces credit creation capacity of commercial banks.

There is 1 question to complete.