What is credit creation

Credit creation separates a bank from other financial institutions. In simple terms, credit creation is that the expansion of deposits. And, banks can expand their demand deposits as a multiple of their cash reserves because demand deposits function the principal medium of exchange.Demand deposits are a crucial constituent of cash supply and therefore the expansion of demand deposits means the expansion of cash supply. the whole structure of banking is predicated on credit. Credit basically means getting the purchasing power now and promising to pay at a while within the future. Bank credit means bank loans and advances.