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11.03 - 16:37
Digital Rupee | Will commercial banks still be needed for credit creation?
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moneycontrol.comThe naïve articulation of commercial banks as intermediaries that lend deposits has long been dispelled with. Instead, banks must be understood as creators of credit money.
A deposit (money) is created when a bank gives a loan. In other words, loans create deposits.
However, a bank must have positive balances in its reserve account at the central bank for interbank settlements. Theoretically speaking, central banks will always provide commercial banks with reserves.
It is the price at which these...
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