Main Article Content

Abstract

The most important function of a commercial bank is the creation of credit money—a function which overshadows all other banking functions. Before understanding credit creation it is better to understand money. Money is something which is generally accepted as a medium of exchange. Before money came into existence, exchange took place into barter system. Barter occur when people directly exchange their goods for someone else’s goods. The barter system reduces the complexity of modern system. There is no problem of over/under production, concentration of economic power, foreign exchange crises, adverse BoP. In simple term anything that is generally acceptable as mean of exchange and at the same time acts as a measure and store of value is called money.  

Article Details