Which institution performs the activity of credit creation ........

Which institution performs the activity of credit creation:-

Commercial Banks

Central bank

Both a) and b)

Neither a) nor b)

- Commercial Banks

- Commercial banks play a crucial role in credit creation.

- They accept deposits from the public and provide loans.

- By lending more than the actual deposits, they create credit in the economy.

- Thus, they are key players in multiplying money supply through the banking system.

- Central Bank

- The central bank controls monetary policy and regulates commercial banks.

- It does not directly engage in credit creation like commercial banks.

- Both Option a) and b)

- The central bank and commercial banks have different roles.

- Hence, both together do not perform credit creation.

- Neither Option a) nor b)

- This option is incorrect because commercial banks do perform credit creation.

Answer: Option 1, Commercial Banks

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