Explain the process by which the banking system creates money

What will be an ideal response?

When a bank gains excess reserves, it uses the excess reserves to make a loan. The person or a business receiving the loan receives a deposit—money! The borrower then generally spends the loan and it ends up as a deposit—money—in another company's account. That company's bank then gains some excess reserves, which it loans, and so more money is created. Thus the banking system creates money by making loans.