Difference between a Central Bank and a Commercial Bank


Central banks differ from a commercial bank in respects of various things. The important points of difference are as follows:

1. Profit Motive:

A central bank is not a profit making institution whereas the main objective of a commercial bank is to earn profits.


2. General Banking Functions:

A central bank is refrained from performing general banking functions like accepting deposits and advancing loans whereas these are main functions of a commercial bank.

3. Regulation of Banking Activities:

A central bank is statutorily empowered to control and regulate banking activities of commercial banks. In short, a central bank is an apex institution of bank­ing set-up of a country. Hence, a commercial bank is sub-servant to a central bank.


4. Area of Operation:

A central bank is banker to the government as well as to the banks whereas commercial banks are bankers to the public. A central bank does not have any dealing with the public.

5. Functions:

There are certain functions which are exclusively performed either by a central bank or by a commercial bank. For example, credit is controlled by a central bank and credit is created by a commercial bank.


6. Ownership:

A central bank is an organ of the government whereas commercial banks are generally owned by private firms or units.


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