ABSTRACT
This chapter explores the developments in commercial banks’ deposits and credit generation. It examines the following areas: developments in the deposit liabilities of the commercial banks, developments in the ratio of loans and advances to deposits, developments in the ratio of demand deposits to money supply; and developments in the credit allocations to the various sectors of the economy. The ability of commercial banks to create credit money in a free enterprise economy will depend on a number of factors, such as: the eligible assets of the commercial banks, the excess reserves of the banks, and political factors. The growth of deposit liabilities depends to a large extent on the behaviour of the nonbank public, the prevailing lendings and deposit rates, the propensities to consume and to save in the economy, the degree of speculative or productive business, the nature of inflation, the degree of political stability, government spending in the economy and other factors.
