Credit multiplier measures the amount of money that the banks are able to create in the form of deposits with every initial deposits. The credit creation of the commercial bank depends on credit mutiplier as it is inversly related to LRR. Higher the credit multiplier, higher will be the total credit created and vice versa.

Numerical example- Suppose the amount of initial deposit is ₹ 1000 and LRR is 10%. The banks will keep 10% i.e. ₹100 as reserve and lend the remaining ₹900 to borrowers. The borrowers will spend this money. It is assumed that ₹900 comes back to the banks. Bank again keep 10% ₹900, i.e. ₹90 as reserve and lend ₹810. This will further raise, the amount of deposits with the banks. In this way, deposits go on increasing number of times and the total deposit will be determined by the money multiplier.
Money multiplier =‌

1

LRR

=‌

1

0.10

=10
The total deposit will be = Initial deposit × money multiplier
‌=1000×10
‌=₹10,000