Question

Identify whether Ravi's deposit is primary or derivative.

Answer 1

Ravi’s deposit is primary. In the banking system, a primary deposit is the initial deposit made by an individual (Ravi, in this case) into the bank. This is the first stage of money creation, where the money is placed into the banking system. A derivative deposit, on the other hand, is the money created as a result of the lending activities that follow the initial deposit. These are the deposits made by the borrowers who received loans from the bank. Since Ravi is the original depositor and the first person to introduce the money into the system, his deposit is classified as a primary deposit.