What is the difference between Central Banking and Commercial Banking?

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The Central Bank and commercial banks are similar in certain aspects such as dealing in money, creation of credit, dealing in foreign exchange, etc. Yet their objectives may be different. But, they are fundamentally different in various respects. Such differences can be summarized as follows:

Central Banking vs. Commercial Banking

1. Position of the Bank It is the apex bank in the banking system of It is part of the banking system, the country.

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2. Ownership it is Government owned bank. Commercial Banks include public sector banks. Also foreign owned banks.

3. Basic Motive it aims at economic growth and price sat- They aim at maximization of profit, ability and have no profit motive.

4. Dealing with the Public Central Bank does not deal directly with the deal directly with the general public, the public.

5. Competition Central Bank does not compete with com- Commercial Bank compete among them- metrical banks. Selves.

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6. Relationship

The relationship between the Central Bank Commercial Banks are functioning at the and commercial banks is unique. The Can- same level. They cannot exercise control trail Bank has power to exercise control over others except on their subsidiaries, other banks.

7. Government Transactions

Central Bank usually acts as Advisor to the Public Sector Banks partially undertakes Government and also conducts Govern- government transactions. However, other mint transactions. Commercial Banks are precluded tromp such functions.

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