Banks are an important part of the economy of a nation. They are the most critical institutions that help regulate the overall economic development of a nation.
Banks help mobilise the money in an economy and act as a connecting link between the government and the general population. Banks act as facilitators of credit in the economy, which is an important component that drives the growth of an economy.
There are two types of banks based on the authority, these are central banks and commercial banks. Central bank can be called the apex bank, which is responsible for formulating the monetary policy of an economy.
Commercial banks, on the other hand, are those banks that help in the flow of money in an economy by providing deposit and credit facilities. Commercial banks provide financial services to the individuals and businesses.
Let us look at some of the points of difference between the central bank and commercial banks.
Central bank is the apex financial institution of the country that is concerned with formation of monetary policies and the way money should be regulated in the economy | It is a type of financial institution that is concerned with providing banking services to the general public and businesses by facilitating deposit, offering loan facilities |
Central bank is always having public ownership | Commercial banks can be either public or private in their ownership |
There is only one central bank in a country | There can be many commercial banks in a country |
Central bank does not operate for making profit | Commercial banks operate with the motive of earning profit |
Commercial banks and the government | Individuals and businesses |
Central banks create monetary policy to regulate interest rates in an economy | Commercial banks do not create any policies that are essential for the functioning of an economy |
Central banks are the source of money supply in an economy | Commercial banks run on the deposits obtained from the individuals and hence they perform no such function |
This article was all about the topic of difference between Central Bank and Commercial Bank, which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.
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