Interest

I’m not an expert in the mechanics but I think there is also a way for private credit creation to run as a separate operation, similar to how loans were originated in the sub prime mortgage crisis and then immediately sold on. I’m not recommending that happen, but a similar system would allow private credit creation without the loan issuers being the primary deposit taking institution.

But yes private banks could also operate term deposits and pay interest to attract deposits to satisfy net flows of funds with other institutions.

I can't edit my above comment anymore but going back to the original lecture in which I saw this he does specifically say that loans should be held to maturity by the issuer:

https://youtu.be/gI86w6bSmS0?t=445

Presumably to avoid exactly what happened in the sub-prime mortgage crisis :)

That would be nice. Presently, most private banks pay less interest to depositors than the Fed funds overnight rate.

Presumably you would get at least T-bill equivalent interest rates in a postal saving system, but that still leaves room for higher interest alternatives.