Differences Between Central Bank And Commercial Bank

Differences Between Central Bank And Commercial Bank

Banking is the bedrock of every economy, no economy in the world can survive without it. In this article, we are going to discuss about the differences between central bank and commercial bank. A bank is a place where we keep our money, valuable documents and properties e.g gold, jewelries, etc for safety purpose. 

The following are some of the differences a central bank and a commercial bank

1. The central bank does not accept deposit from the general public while the commercial bank accepts deposit from the public. Infact, accepting deposit is one of the the core functions of a commercial bank.

2. Central bank formulates and executes monetary policies on behalf of the government of a country while commercial bank do not formulates monetary policies.

3. The central bank is owned and runned by the government, example; Central Bank of India, Central Bank of Nigeria, etc while commercial banks are usually owned by individuals, groups or shareholders.

4. Central Bank of a country is accountable to the government of that country while commercial banks are accountable to shareholders and owner(s).

5. Central bank is saddled with the responsibilities of managing the debt of the nation it represents while commercial banks do not manage national debt.

6. The central bank has the power to print and issue currency while commercial banks can't print currency, they only accept it as deposit from customers.

7. In a country, there can only be one central bank while a country can have as many commercial banks as possible.

8. The main motive of establishing a central bank is not to make profit, but to render essential services while commercial banks are profit oriented, they are established to make profit.

9. Central bank serves as banker's bank and also government bank while commercial banks serves as bankers to individuals and institutions

10. While the central bank is established by an act of parliament, commercial banks are established by incorporation.

In conclusion, both the central bank and commercial banks are very important to the economy of a particular country in their unique ways, they play very vital roles in the development of a Nation.
Next Post Previous Post
No Comment
Add Comment
comment url