V) Bank money/credit money

credit instruement which transfers this deposit. Only the deposit itself is money. Therefore demand deposit is customary money and it has no legal status like currency notes.

Most transactions today are carried on with the help of cheques and and only a small amount of transactions are managed through currency money, remaining with currency and with coins of baser metals.

Since cheques are not money but a claim to money or a ticket or a title and they perform some functions similar to money it is also known as near money.  Cheques are voluntarily accepted by people and hence also known as optional money.

It is the most superior and reliable mode of payment in the modern world as it is easy to carry, convenient for making exact payments, for providing receipts in the form of counterfoils, and on account of being safe against being stolen or misplaced.

Cheques are now conventionally accepted as a mode of payment by the business community in general.

90% of business transactions in advanced nations are completed by the use of cheques. This money has

been responsible for the tremendous growth of trade industry and commerce.

Therefore today bank money, currency and coins of baser metals constitutes the total money supply in circulation.

Credit has become the life blood for every type of business, trade and commerce. Therefore the modern economic system is called the credit system.

Advantages of bank money-

1)  Substitutes for cash money.

2) Safe, convenient and an ideal means of payment.

3) There is no need for counting and accounting of receipts and payments as these functions are,performed by banks free of charge.

4) Exact payment is possible.

5) It has promoted credit transactions.

6) Banking system has contributed to a large extent to the development of trade and commerce both in the internal as well as international market.

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