First Part(credit creation)
Bank A and Bank B each have 1000 customers. Each of these customers borrows £1000. Bank A and Bank B credit their 2000 customer accounts with £1000 each, in total £2,000,000.
Second Part(credit transaction)
Bank A customers spend a total of £999,990 with Bank B customers.(using electronic payment)
Bank B customers spend £1,000,000 with bank A customers.(using electronic payment)
Bank A and Bank B settle and balance their accounts at the end of the working day.
£1,000,000 – £999,990 = £10
Bank B contacts the central bank and moves £10 of bank B cash reserves to bank A cash reserves.
The two banks have created £1,999,990 of bank credit with £10 cash reserves.
If borrowers withdraw their loans in cash and spend with cash banks cannot create credit.
I hope this explains the myth of fractional reserve banking.
If not look at these diagrams.