Open In App

Difference between Commercial Bank and Central Bank

Last Updated : 28 Feb, 2024
Improve
Improve
Like Article
Like
Save
Share
Report

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.

Difference between Commercial Bank and 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. 

Previous Article
Next Article

Similar Reads

Difference between Commercial and Non-commercial Sources of Energy
Energy is a key component for most of the consumption activities and production activities and hence plays a vital role in a country’s economic growth and development. It is essential for industries and is now widely utilised in agriculture and related fields such as the manufacture and delivery of fertilisers, insecticides, and farm equipment. It
3 min read
Functions of Commercial Bank : Primary and Secondary Functions
An institution that provides its customers with services like accepting deposits, providing loans, and making investments, with the objective of earning profits is known as a Commercial Bank. The two main characteristics of commercial banks are lending and borrowing. They make money from a variety of fees and by earning interest income from loans.
8 min read
Difference between Commercial and Cooperative Banks
Commercial Banks and Cooperative banks are two types of financial institutions that offer a range of financial services to their customers. Commercial Banks works for profit motive whereas Cooperative banks are established based on the principles of cooperation. What are Commercial Banks?Commercial Banks are financial institutions that provide a ra
4 min read
Difference between Investment Banking and Commercial Banking
Investment Banking and Commercial Banking are two different sectors within the broader financial services industry. Investment Banking refers to the financial activities and services provided by banks or financial institutions specializing in facilitating capital-raising for businesses, governments, and other entities. Commercial Banking refers to
4 min read
Functions of Central Bank
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 in a country. Every financially developed country has its own central bank. For example, the central bank of the UK i
12 min read
Difference between Bank Statement and Bank Reconciliation Statement
A Bank Statement and a Bank Reconciliation Statement are often considered as same. But there are differences between them. A Bank Pass Book is the true copy of the account of the customer in the books of the bank, whereas a Bank Reconciliation Statement is a statement prepared mainly to reconcile the differences between the 'Bank Balance' shown by
3 min read
Advantages and Disadvantages of Commercial Paper
What is a Commercial Paper? A Commercial Paper (CP) is a short-period 90 to 364 day, unsecured promissory note that is issued by a company to raise funds (usually for the inventories, finance, and temporary liabilities). It is issued by one organization (Primary Dealers (PD) and All-India Financial Institutions (FIs) in India) to another organisati
2 min read
Commercial Paper : Features and Types
What is Commercial Paper?A Commercial Paper (CP) is a short-period 90 to 364 day, unsecured promissory note that is issued by a company to raise funds (usually for the inventories, finance, and temporary liabilities). It is issued by one organization (Primary Dealers (PD) and All-India Financial Institutions (FIs) in India) to another organisation,
4 min read
Polymers of Commercial Importance
Polymer word is made up of two terms, "poly" which means many, and "mer" which means entities or groups. So polymers mean giant molecules which consist of a large number of small molecules. The molecular mass of these giant molecules is quite high as these are formed by repeating small entities which are called monomers. The structure of monomers i
9 min read
Commercial Banks : Features, Advantages & Disadvantages
What are Commercial Banks?A commercial bank is a financial institution that provides services like accepting deposits, granting loans, bank overdrafts, offering certificates of deposits, and savings accounts to individuals and businesses. Commercial banks are considered to be an important component of the banking system. These are the banks that pe
6 min read