Limitation of Credit Creation साख बनाने की सीमा

Limitation of Credit Creation Limitation of Bank Activity

There are lots of activities which help the bank for credit creation. Also there are lots of things which affect the credit creation. A bank has lots of roles and responsibilities towards the public & industries. Here, we are discussing some of issue which are the  Limitation of Credit Creation (साख बनाने की सीमा) –

Limitation of Credit Creation साख बनाने की सीमा 

ü Cash in Hand – a bank is able to make a credit creation with the amount which he has. If a bank has more amounts for loan or credit creation than after he give more loans and make a credit. Other side also, if there is a less amount in hands, a bank should not able to make a more credit creation.

ü Public habits towards banking - if people are using banking system aggressively than a bank able to make more credit creation. If people not using cheques then a bank is not able to make more credit creation.

ü Liquid Ration – a ratio which define the parameter of a bank have the cash for day to day uses. If the ratio is high then a bank has left a little amount for loan. Other side, if there is a low liquid ratio then a bank has more amount to loan or credit creation.

ü Leakages – there are lot of leakages in the bank system or in credit creation. For example if any person take a loan or not summit the cash in another bank or hold the entire amount in cash in hand. These things become the limitation of the credit creation.

ü Clearance of different cheque – there is one assumption in the process that there are quick services for clearance of different cheque. But there are lots of problem in the settlement.

ü Banking Behaviour – banking behaviour also influence the credit creation. For example if the bank is not giving the loan according to the requirement or equal to the excess amounts then also we are not able to make a healthy credit creation.

ü Central bank policy – if our central bank adopts a credit control policy than also our bank not able to make a health credit because central bank is the supreme of the entire bank and policy maker for the entire bank. Our environment also helps us to make a credit creation. If there is a positive environment for growth then public or industries take more loans for investment and there is a negative environment then public avoids the investment plan.

Credit creation साख का निर्माण

Creation of Credit Credit creation

Banking is a comprehensive wide term in which different types of financial activity take places. In other words – a system or place where we put our money or valuable things for safety purpose and take back or withdrawal according to our need or requirement. Bank system deal in money, it takes money from depositor on a low rate and gives it to industries on other/higher rates according to their needs. if bank have more amount or deposit than after he is able to create more credits. Creation of Credit (साख का निर्माण ) is only done by the commercial bank.

When a bank deals with the industry or give loan to the some-one, it does create credit (साख बनाना).It is an important part of banking system. It means a bank give loan to some, it takes an interest from them and also it is the main resources of a bank income. A loan system or credit creation is depending upon a bank deposit or minimum liquidity ratio. For any bank, it is not possible to give all its money to some-one on interest or as loan because when some-one want to withdrawn its amount, who can any bank pay to public. 

So bank create credit after a liquidity ratio, bank always put some amount in case so that he is able to pay on demand. There is a difference in the interest rates which bank give to public and when a bank give a loan to some-one or create credit, this difference is the main income sources of bank. Every bank is able to give a loan or create credit to the equal to its excess reserves. All banks also give loan or create credit equal to multiple to the total excess amount.

Credit creation साख का निर्माण 

For example, if there are three banks like X, Y, Z and every-one have a minimum liquid ratio is 10% & total bank amount is Rs 100. So first bank give a loan of Rs 90 (100 – 10) then this loan deposit to the bank (Y) by the person. This bank also holds a reserve of 10% and gives rest of the money on loan 9 (90-9). Then third bank (Z) also do the same thing & reserve the 10% and give rest the money on loan or create credit.   

Forms of wealth wealth संपति संपति के प्रकार

Forms of wealth or types of wealth

Wealth is the total assets of a person have on a point of time. It includes all the consumption or income from different thing. It is also known as income from capitalized. We also know that income is a fulltime or permanent income which we receive whole life. Mostly we divide all the wealth into five different parts like – money, equities, bond, physical goods or human capital etc

 wealth संपति

ü Money - a word which has a wide area or a deep meaning. It’s not only to help full to make such a trade or exchange but it’s also helpful to accumulate & also have a value or unit of accounting. In it we include the entire thing from which we receive an interest or income like – different types of saving in bank. This thing gives it owner a social security’s or different types of facilities.

ü Equities – there are lot of company which is listed in our stock market. These company issue share or equities to public & raise money from the market. Any share and security represent an ownership interest. Also an equity holder earns income in the form of interest or dividend or capital gain by change in interest rates etc.

ü Bond – the Bonds also issue by the company or government for a time frame with fixed or variables interest rates. Every Bond has a contract with the interest rate or coupon rates that will be paid on time and the loaned amount or funds must be returned after a due date.

ü Physical Goods or Stock - we include all the inventories of consumable things or durable productive things in it. These things affected by tge expected change in price.

ü Human Capital - Any skills or capacity of the human being which is helpful for production.

Money functions money activity money work मुद्रा मुद्रा के कार्य

Money – its functions (activity or work)

There is lots of activity which is performed by the money. There is a time when we exchange the commodities with each other but know in current time frame, money become a essential or important thing in our life and we are unable to do a single thing without it. Ever where we see a trade and no trade will be complete without the money payment or other settlement. Domestic trade or international trades both become easy with the help of money.

Money functions

Different types of activity performed by the money –

ü Medium of Exchange – money become a main medium of exchange. It’s become very easy for every-one to make any payment and also it is better than a commodities exchange. It’s made easy our settlement and also makes difference in multiple exchanges. It’s save our time and valuable relationship.

ü Standard of transfer or payment – money make a standard for transfer of such value or also make easy for loan system. In previous time frame, we have a loan against the commodities or our animals. So money make easy to take a loan & easy to pay any deferred payments.

ü Accumulation of value – money has a value & if we accumulate it for future, it’s not decrease its value or none of other destroy its value. Money has a unit and we measure different rate and value in it similar like meters or dozens or kilograms.

ü Money is the most liquid form among all the liquidities. It is accepted by every-one so any one make a settlement with it like – bond or shares or government securities or DD or other thing which is easy to convert into money.

ü Money also develops a credit system of any country. All the bank credibility to finance all its related payment like loan or DD or bill payments.

ü  It’s also helping us to calculate the National income. In previous time when there is a commodities exchange, we are unable to calculate our national income but with the money we are able to measure our NI and different sector output.

                                                   

Money मुद्रा मुद्रा के प्रकार विभिन्न प्रकार की मुद्रा पैसा पैसे

Money मुद्रा मुद्रा के प्रकार विभिन्न प्रकार की मुद्रा पैसा पैसे

  

Money – a word which has a wide area or a deep meaning. It’s not only to help full to make such a trade or exchange but it’s also helpful to accumulate & also have a value or unit of accounting. There are no set patterns to define the money because its cover a wide area & also have a lot of use like – units of accounting, mode of payment or accumulation of value.

In simple words, we can say that money is a unit of accounting or having a valuation or off payment or medium of exchange which is generally accepted by the public. Money is also defines by its function like money is what types of activity money done. Anything which is used for payment or exchange or value of accumulation is called the money.

Types of money – we have three different modes which are used for as money like – metallic, paper money & acceptable money: -

Metallic Money – there are lot of metals which is also used for exchange or use as money because they have a unique value as well as like to money like – gold or silver or copper etc. we have three different parts in it like - 

Metallic Money 

  

ü  Standard Money – if a coin has the same value in the form of money or same in the form of metals.

ü  Token Money – if a coin has the more face value against in the form of metals.

ü  Subsidiary – all the coin which provide help to Token money and also support the mode of payment.

Paper Money – all those money which is made by the paper and issued by the central bank or the Central Government - 

Paper Money

    

ü  Representative Paper Money – money which is issued against the full value-coin or gold or bullion stock.

ü  Convertible Paper Money – money which have not supported by the gold or bullion stock but this paper money will be exchangeable in gold or bullion on demand of paper money holder.

ü  Inconvertible Paper Money – that paper money which is not supported by the gold or bullion and also not able to exchange with gold or bullion.

ü  Fiat Money – money which is issued by the Government order.

Acceptable Money – money which is accepted by all the different parties. We divided it in two forms like – legal Money or Non-Legal Money-

ü  Legal Tender Money – money which is accepted by the public or government and also used for exchange or payment. In Limited Legal Tender Money, we only make a limited payment like not more than Rs 25 in the form of .25p to 1 rupee coin. In Unlimited Legal Tender Money, there is no limit for paper note or such coins like 1, 2, 5, 10.

ü   Non-legal Money – money which is not supported by the law or Central Bank or Central Government.

                                                                                                                          

Invest Investment निवेश निवेश करना विभिन्न प्रकार के निवेश

Investment

Investment – it is a word which covers a wide area or has a very deep meaning. It is not only related with bond or shares or SIP or any things but also related with making some things new. Shares or bond are only a shift of assets from one person to another. But this is not a real investment. 

Real investment is an investment which is related with making some things new or increase in our current capital goods or assets. It totally related with increase in the capital like for example – making new house or factory or plant etc. New dam or road or company issue or increase in inventory also include in the investment.

Different types of investment –

Induced investment- this types of investment totally motivated by the profit or income. But it is also affected by price, salary, interest rates or demand. When there is a increase in income – there is a increase in demand then there is a motivated or induced investment. 

Induced investment

It has a positive co-relation with income I = f(y) where I – investment or y – income. If income increases from y – y1 then we have a investment level of ‘A’ or next when there is a increase in the income from y1 – y2 then we have a investment of ‘B’. We have an extra investment like ‘B – C’.

Autonomous investment – this types of investment related with innovation or population or R&D or social change or from a new low or any war etc. for example – building, school, dam, canal or hospital etc. in a long run all our investment become a autonomous investment.

Autonomous investment

Private investment– an investment which is done by a private person like TATA or Reliance or Birla or any other person. This type of investment affected by rate of interest or Marginal productivity of Capital.

Public investment – an investment which is done by the Government like building, school, hospital, roads, telephone or other public interested investment.

Intended or unintended investment – when there is a planned investment for any particular site that is an Intended investment. When there is a change in demand and then we have some increase in inventory then we have an Unintended investment.

Importance of Saving बचत का महत्व

Importance of Saving

ü  Saving is a precaution for future requirement or need like any accident, illness or any other emergency.

ü  To increase their living-standard

ü  Farsightedness for future

ü  Increase their future income by investment

ü  Saving for family members

ü  To become a Enterprises

ü  To stand independently in the society

ü  To increase their social status

 

Importance of Saving  

There are lots of things which give us a power or boost us to save like –

ü  If we have a high level of National Income, it shows a positive sign for more saving due to high level of personal income.

ü  Internal or external trades also show a positive for personal income & saving prospectus.

ü  If any countries have a high level of Natural Resources then it’s able to increase the national income or then its increase the saving.

ü  Our industrial growth or development also represents the level of income & saving. If there is a high level of industrial growth or development then there is a high level of national income or personal income.

ü  If any countries have a high level of trained or good quality labor then they are able to receive the high level of income & high possibility to save.

ü  If any countries have a high level of Agricultural production & development then there is a possibility for high level of income and saving.

A facilities and secure environment always lead to save, if any country have these types of environment then the people of that country have more motivated for saving –

ü  If there is a high level of banking facilities and safety of assets is available then there is a high level of saving.

ü  Good Tax policy is always motivated for saving.

ü  If countries have peace & secure environment then these things always motivate for more saving.

ü  If any countries have a high level of opportunity for investment then than these things increase the jobs level, these things lead to a high level of income & saving.

                                                          

Save Saving बचत बचत करना बचत का महत्व

Save or Saving

Saving is a word which is related with income and investment point. Saving is the total amount which left from our salary after consumption. Every one aware about the function of saving and its important. We save a part of our salary for our future requirement & uncertainty. Saving is totally related with our income level and with high income we are able to save more amounts. We also represent saving like S = Y – C. S for saving or Y for income or C for consumption.

Save  - बचत  

If we have zero income, in that situation, we also buy and carry our basic needs. But after some time when we have income then we start increasing our consumption and buy more things. In these situations, we have no saving. But after some time, when we have continued increasing our income, then we are able to save some amount after consumption. These savings helpful for future requirements and uncertainty. Saving also related with our investment point, if we have more saving then we are able to invest more amount in infra, capital goods or other things which is important for our future.

But saving and consumption have a relationship like if we start save more & more amount then we a lot of extra production and our future investment become unprofitable and people starts to come out from production and its start a shut-down then we have a lack of jobs and this situation decrease our income or increase in unemployment. So, income or consumption or saving have a close relationship with each other and it’s become a economic cycle. 

foreign market foreign relation foreign trade foreign

Open market foreign market foreign relation foreign trade foreign

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income. This is a close market because all the thing or business happens in a country between different – 2 sector like House-hold, Business sector, Government, Capital market or Bank etc. In current time frame, all the market in the world is open for trade and our different - 2 sectors make a trade with out-side according to the requirement. 

Foreign Relationship – in current situation, all economic are open for trade and make a business with each other because no one market is complete in all aspects so that to complete our basic need, they go for the foreign trade or foreign business or international trade. For example –

 foreign market foreign relation foreign trade

ü  House-hold demand lot of thing & buy some things from foreign market,

ü  A business men also do business with foreign company & also support each other,

ü  Capital market also opens their branch in different country & also makes an easy trade. They also help in foreign payment & money transfer.

ü  Government also make a relationship with other country like food supply, technology improvement, R&D, space and any natural disaster or other types of help.

So, we can say that in current time frame, Every economic have the capability and capacity to produce the different things but no economic will be able to produce all the things so it’s become necessity to go for a international trade or foreign trade. 

Government participate in Circulation of Money Government involvement

Government participate in Circulation of Money

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure

Government involvement –

In these types of economic, we divide the economic in four sectors like House-hold, Business, Capital Market (Saving or Investment) and Government:- 

Government participate in Circulation of Money

House-hold –

This side of the economic holds the entire production factor like land, capital or man power etc. House hold sales there services in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Before any consumption, house-hold must pay Government Tax and Government Returns this amount in terms of social welfare like school, pension, hospital and police etc. Then start saving and we make a new involvement in flow of money like Bank (Capital Market). House-hold always prefers to save a part of his total income for future and rest is spending on consumption.

Business –

These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. On this income, business man must pay Government tax and Government buy many product from the market, also Government spend money on infra project to support the industry.

So, we can say that Government involvement in the Circulation Flow of Money or in the market is really important and it is the Government responsibility to implement the welfare scheme for society and make such policies which support the industry & its growth.

Saving Investment in Circulation of Money

Saving & Investment in Circulation of Money

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure. 

Saving & Investment in Circulation of Money –

In these types of economic, we divide the economic in three sector like House-hold, Business and Capital Market (Saving or Investment) :-

Saving Investment in Circulation of Money

House-hold –

This side of the economic holds the entire production factor like land, capital or man power etc. House hold sales these production factors in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Also, this sector start saving and we make a new involvement in flow of money like Bank (Capital Market). House-hold always prefers to save a part of his total income for future and rest is spending on consumption.

Business –

These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. We can say that the house-hold is the entire market for business sector. They buy the entire production factor from house hold and pay them (rent, interest, wages or salaries) for this. A business man also starts saving for future investment and also for R&D. A business man also uses capital market for saving & investment point.