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Chapter 3- Money creation by banking system
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This lesson deals with the discussion on money creation in a banking system, by the example of a balance sheet of a fictional bank.

Arpita Prakash
NCERTs series initiator at Unacademy 'Educator of the Month' for Feb'19 CBSE 0.1% Merit Certificate holder in Mathematics

Unacademy user
There should be a Correction, In a Balance-sheet all the liabilities and capitals are recorded in Left hand side and all the assets and properties in Right hand side mam..
  1. MONEY CREATION BY BANKING SYSTEM o Balance sheet- record of assets( recorded left hand side) and liabilities( recorded right hand side) of any firm o Both sides of balance sheet must be equal as per accounting rules o Assets- things owned by a firm or what a firm can claim from others o Assets in Bank's case- loans given to public and Reserves o Reserves- deposits which commercial banks keep with RBl and it's cash Kept partially as cash and partly in form of financial instruments( bonds and T-bills) issued by RBI " Eg: Deposits kept by commercial banks like SBl with RBl Assets- Reserves Loans o Liabilities- debts of firms or what they owe to others . For bank- main liability is the deposits which people keep with it . Liabilities Deposits o Net worth- Assets- liabilities (recorded on right side)

  2. Babana shuult o a ficthanalb Bask