Difference between Central Bank and Commercial Bank

Difference between Central Bank and Commercial Bank

Central bank is a bank which leads all banks and control money supply in the money market. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks. A commercial bank is a financial bank which takes money from the people as a deposit and gives money to the other people as a loan. This bank gives minimum interest to depositors and demand maximum interest from the borrower.

In many ways, a central bank differs from a commercial bank. The differences between central bank and commercial are as follow:

Central Bank

  1. Formation – Central bank is formed by the ordinance which is passed by the president or parliament.
  2. Ownership – Govt. is only the owner of the central bank.
  3. Objective – The main objective of the central bank is to control the money market and other banks.
  4. A number of banks – There is only one central bank in every country.
  5. Control – Central bank is controlled by the govt.
  6. Giving loan – Central bank gives the loan to the govt. and listed bank.
  7. Relationship with the money market – Central bank is the controller of the money market.
  8. Credit control – Central bank is the controller of the money market.
  9. Currencies or notes – It also issue notes and currencies
  10. Dignity – The dignity of the central bank is the top of the country.
  11. Advising – It acts as an advisor of govt. and financial institution.
  12. Responsibility – The main and essential duty of a central bank is to maintain the stability of the money standard.
  13. Durability – Durability is more.
  14. Branches – Few branches around the country.
  15. Clearance house – Central bank gives the facilities as a clearinghouse to scheduled banks.

Commercial Bank

  1. Formation – Commercial bank is formed by the company and banking activities.
  2. Ownership – Commercial bank can be public or private.
  3. Objective – The main objective of the commercial bank is to make a profit.
  4. A number of banks – There are many commercial banks in every country.
  5. Control – Commercial bank is controlled by the central bank.
  6. Giving loan – Commercial bank gives a loan to the people and many organizations.
  7. Relationship with the money market – Commercial bank is a member of the money market.
  8. Credit control – It is a bank which helps the central bank to perform the activities.
  9. Currencies or notes – Commercial bank does not enjoy the right of note issue.
  10. Dignity – The dignity of a commercial bank is following the central bank.
  11. Advising – It acts as the advisor of their clients or other business firms.
  12. Responsibility – The main duty of a commercial bank is to collect savings and credit capital.
  13. Durability – Comparatively less durable.
  14. Branches – A lot of branches inside and outside the country.
  15. Clearance house – Commercial banks get facilities of settlement from the central bank.

These are the main differences between the central bank and a commercial bank. There are also more differences between the central bank and a commercial bank. These how the central bank differs from a commercial bank.

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