What are the Differences Between the Central Bank and Commercial Bank?

Central Bank

  1. Enjoys supreme monetary authority with wide powers.
  2. It does not exist to make profits for its for owners.
  3. It is the ultimate source of money supply to the economy.
  4. It acts as a banker to the government.
  5. It is the lender of last resort and hence never fails.
  6. It neither does accept deposits from public, nor lends money to the public.
  7. It is generally subordinate to the state, i.e. state owned and state managed.
  8. It issues paper notes in fact it enjoys the monopoly power in this matter.
  9. The basis of cash money issued is gold and foreign reserve.

Commercial Bank

  1. No authority, hence no such power is enjoyed.
  2. It exists and is organized for profits their owners.
  3. No such function is performed by it.
  4. It acts as a banker to private industries and institutions.
  5. It often undertakes risky business activities and sometimes may fail.
  6. Accepting deposits and lending money to the public are the most important functions of commercial banks.
  7. It is mostly privately owned and privately managed.
  8. Its nature operation is credit creation and cannot issue paper notes.
  9. The basis of credit money generated is cash deposit.

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