Question

Mention two ways in which commercial banks differ from the central bank​

Answer 1

Definition of Commercial Bank-

The entities that provide banking and financial services to a large number of people are known as Commercial Banks. They act as a mediator between the borrowers and savers. The Commercial Banks receive deposits from the general public and lends it on high interest to the individuals and organizations. In this way, the mobilization of savings takes place, and the economic cycle goes.

Definition of Central Bank

Central Bank is the supreme financial institution that regulates the banking and monetary system of the country. It is formed to bring monetary stability, issue notes and maintain the value of a country’s currency in the international market. It administers the currency and credit system of the nation.

Answer 2

The bank, which monitors, regulates and controls the financial system of the economy is known as Central Bank. Central Bank is the banker to banks, government, and financial institution, whereas Commercial Bank is the banker to the citizens.