Development Banks and Commercial Banks
Development bank may be defined as a financial institution set up purposely to offer long term loans meant for development projects while commercial bank 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.
Development Bank vs Commercial Bank: Differences & Similarities
The two types of banks differ in many aspects. They include:
- Development banks are usually government owned while commercial banks are usually owned by shareholders. The government may be a shareholder:
- Development banks provide long-term loans while commercial banks provide mainly shortterm loans.
- Development banks usually provide finance for investors in specific sectors while commercial banks service many sectors.
- Development banks do not deal in foreign exchange while commercial banks do.
- Development banks do not perform the role of trustees and executors while commercial banks perform these functions.
- Development banks do not keep customers’ valuables such as expensive jewellery, etc. while commercial banks perform these functions.