Central Banks and Commercial Banks
Central bank is a National Government owned apex financial institution which controls and supervises the entire monetary system of a country.
Central Bank assists, directs and regulates the activities of other financial institutions to make them comply with government monetary and economic policies.
Commercial bank, on the other hand may be defined as a financial institution which carries out retail banking services, set up for keeping and lending money to people, owned by organisations, individual or governments, for the purpose of making profits.
What are the Differences Between Central Bank and Commercial Bank
- A Central Bank is owned by the Central government while a Commercial Bank is owned by Shareholders. The government may be a shareholder.
- A Central Bank is not a profit oriented business organization, while the Commercial Bank is profit making.
- A Central Bank is the only authority that issues currency while the Commercial Bank is not authorized to do so.
- A Central Bank manages the national debt while a Commercial Bank does not.
- A Central Bank does not accept money deposits or values from the public, but the public can deposit money or valuables with Commercial Banks.
- A Central Bank formulates and implements government monetary policies while Commercial Banks help to implement such policies as directed by the Central Bank.