Do you consider a commercial bank ‘creator of money’ in the economy?
Yes, commercial banks are considered creators of money in the economy. They accept deposits from the public and lend out part of these funds to those who want to borrow. When banks lend to any person, a new deposit is opened in that person's name. Thus, money supply increases to old deposits plus new deposit (plus currency).
Banks can create money because they do not expect all the depositors to withdraw what they have deposited at the same time. This allows them to lend and create credit. However, there is a limit to credit creation by banks, which is determined by the Central Bank (RBI) through the Cash Reserve Ratio (CRR). This is the percentage of deposits which a bank must keep as cash reserves, ensuring that no bank is 'over lending'.
Explanation
The textbook context clearly establishes that commercial banks are part of the money-creating system of the economy. The key points are: (1) Banks accept deposits and lend part of these funds, (2) When banks lend, new deposits are created, increasing money supply, (3) Banks can do this because they don't expect all depositors to withdraw simultaneously, and (4) The Central Bank limits this creation through CRR. This is a direct answer to whether banks create money.