Last Updated : 28 Feb, 2024
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Banks are the backbone of any economy. Commercial Bank and Central Bank are two types of banks with various differences. Commercial Banks are responsible for accepting deposits and granting loans whereas Central Bank works as a regulatory body for all the commercial banks and monetary system.
Table of Content
- What is Commercial Bank?
- What is Central Bank?
- Commercial Bank v/s Central Bank
What is Commercial Bank?
An institution that performs different functions like accepting deposits, making investments with the motive of earning profits, and granting loans is known as a Commercial Bank. For example, different commercial banks in India are the State Bank of India, Punjab National Bank, Canara Bank, Union Bank, etc.
What is Central Bank?
An apex body that controls, operates, regulates, and directs a country’s banking and monetary structure is known as a Central Bank. As the functions of a central bank are peculiar, there is only one central bank of a country. For example, the central bank of India is the Reserve Bank of India (RBI). Different functions of a Central Bank include currency authority, banker to the government, banker’s bank and supervisor, controller of money supply and credit, and custodian of foreign exchange reserves.
Commercial Bank v/s Central Bank
Basis | Commercial Bank | Central Bank |
|---|---|---|
| Meaning | An institution that performs different functions like accepting deposits, making investments with the motive of earning profits, and granting loans. | An apex body that controls, operates, regulates, and directs a country’s banking and monetary structure. |
| Ownership | A commercial bank can be owned and governed by the private sector or government sector. | The central bank is usually owned and governed by the government. |
| Status | A commercial bank is just a unit of a country’s banking structure that operates under the control of the Central Bank. | The central bank is an apex institution in the money market. |
| Issue of Currency | A commercial bank does not have the power to issue currency. | The central bank has a sole monopoly on issue of currency. |
| Objective | The basic aim of a commercial bank is maximisation of profits. | The central bank does not have a profit motive and works in the public interest. |
| Public Dealing | A commercial bank directly deals with the public. | The central bank does not directly deal with the public. |
| Number of Banks | There are a huge number of commercial banks in a country. For example, different commercial banks in India are the State Bank of India, Canara Bank, Punjab National Bank, etc. | There is only one central bank in a country. For example, the central bank of India is the Reserve Bank of India. |
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