A bank keeps part of a deposit and lends the rest

A bank must hold a fraction of its deposits as required reserves and is free to loan out the rest. Where the reserve requirement is ten per cent, a bank taking in a ten million pound deposit holds one million and can lend the other nine million. That nine million leaves the bank as a loan.

The loan comes back as somebody else's deposit

The borrower does not sit on the cash. He deposits the loan in his own account at another bank, so deposits there rise by nine million and that bank's reserves rise by nine million too. The same pounds are now counted twice over: once as the original deposit, and once as the new one.