Technically, M1 also includes travelers' checks and NOW accounts. Note that this category of Ms serves as the medium of exchange . Note that this category adds the store of value function to our money supply. Interbank cooperation to accept each other's checks requires a means for check clearing and collection. Banks lend money.
Depositors are lenders of money to banks.
When a bank receives new reserves, it can lend out part of those reserves to borrowers in the form of cash or deposits. Once it does, deposits expand. But these borrowers eventually spend this money, which at some point is deposited in another bank. That bank can in turn lend out its new XR associated with its new deposits, which increases the level of deposits further, etc. Eventually, deposits expand by a multiple of the original increase in reserves.