Question

State five differences between the Central Bank and a Commercial Bank.

Answer 1

Central Bank:1.) The central bank is governs by the government (apex monetary institution:reserve bank of India)so,it act as a banker to government .2.) In central bank they don't accept any deposit from the public directly. 3.) The Central Bank provides loans(repo rate) to scheduled banks(eg:- SBI,canara bank).4.)Central banks manage the monetary policy which set interest rates and regulate .5.)central bank is not set up for profit perspective, its a agenda of government to reach and provide financial services to common people(peasant). Commercial Bank:1.) The commercial Bank can be owned by private(may be NRI or MNC institution) or by government.2.)The Commercial banks receive their deposits directly from the client(corporate or individual customers ), in the form of checking, savings and certificates of deposit.3.)The Commercial banks lend out the money they take in deposits so,there is no lending money from government apex,but central bank hold some of the reserved ratio money of the commercial bank .4.) The commercial bank gets guide lines for interest rate from central bank so,don't have monetary policy.5.)In commercial Bank profit earning as their primary objective.