What is bank lending? Back to list

Member SinceSep 14, 2022

Posts 27


Sep 23, 2022 a 03:24
When a customer deposits money in a bank, the bank must keep a portion of it (the reserve requirement), but the rest is free to lend to other customers. Customers can spend the money, and it will eventually be deposited in another bank.

Because of the reserve requirement, a portion of the new deposit will be reserved by the new bank, while the remainder will be loaned. This process will continue until the entire initial deposit is deposited in banks. The initial deposit has been multiplied and used several times as a result of this process.

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