What is the Difference Between Central Bank and Commercial Bank?

The main difference between a central bank and a commercial bank lies in their functions, ownership, and the services they provide. Here are the key differences between the two types of banks:

1. Function: Central banks are responsible for formulating and implementing monetary policies, regulating the money supply, and overseeing the banking system of a country. Commercial banks, on the other hand, provide banking and financial services to individuals and businesses, such as accepting deposits and granting loans.
2. Ownership: Central banks are typically owned by the government of the country in which they are located. Commercial banks can be either publicly or privately owned.
3. Services: Central banks do not deal directly with customers and instead offer their products and services to the country's government and other commercial banks. Commercial banks offer banking products and services to individuals and businesses, such as deposit and credit facilities.
4. Profit Motive: The basic aim of a commercial bank is to maximize profits. In contrast, central banks do not have a profit motive and work in the public interest.
5. Regulation: Central banks are the regulatory bodies for all commercial banks in a country. They set rules, regulations, and policies and ensure that commercial banks follow these guidelines.
6. Number: There is only one central bank in a country. There can be many commercial banks in a country.

In summary, central banks are responsible for overseeing the banking system and implementing monetary policies, while commercial banks provide financial services to individuals and businesses. Central banks are owned by the government and do not have a profit motive, whereas commercial banks can be publicly or privately owned and aim to maximize profits.

Comparative Table: Central Bank vs Commercial Bank

Here is a table comparing the differences between central banks and commercial banks:

Central banks are responsible for formulating monetary policy, controlling the money supply, and regulating interest rates, while commercial banks provide financial services to individuals and businesses, such as accepting deposits and granting loans.