BANKING AFFAIRS

Detailed explanation-1: -Credit creation is the expansion of deposits, banks can expand their demand deposits as a multiple of their cash reserves because demand deposits serve as the principal medium of exchange. Hence the power of the commercial banks to expand deposits through expanding their loans and advances is known as credit creation.

Detailed explanation-2: -Answer: Commercial banks can expand the deposits they receive through loans, resulting in an expansion of the monetary base of a country. This is credit creation.

Detailed explanation-3: -Answer: Credit creation is the expansion of deposits where the banks expand their demand deposits as a multiple of their cash reserves.

Detailed explanation-4: -Commercial banks provide short-term and medium-term loans in the form of cash credit, discounting of bills, overdraft facilities, etc.

Detailed explanation-5: -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.