Difference between Central Bank & Commercial Bank.

Objectives

Central Bank: Public interest as it sets monetary policy and financial system stability.

Commercial Bank: Private interest as it maximizes profits while serving

Issuing of Currency

Central Bank: Sole authority

Commercial Bank: Does not issue currency

Customers

Central Bank: Government, commercial banks, and sometimes foreign central banks.

Commercial Bank: General public, businesses, NGOs, government (as a customer).

Functions

Central Bank: Formulates monetary policy, banker to government, regulator & supervisor, lender of last resort, custodian of foreign reserves.

Commercial Bank: Accepts deposits, grants loans, facilitates payments, provides trade finance, foreign exchange services, lockers.

Control over credit

Central Bank: Uses monetary tools (OMO, discount rate, reserve ratios) to control money supply.

Commercial Bank: Mobilizes savings and creates credit through lending (subject to central bank rules).

Ownership and profit

Central Bank: Usually owned/controlled by the state; not profit-driven (focus on stability).

Commercial Bank: Usually privately owned (or publicly listed); profit-oriented.

Relationship to government

Central Bank: Acts as adviser and banker to the government; manages government debt.

Commercial Bank: May hold government accounts; acts as agent for government services but does not manage national policy.

Regulatory Powers

Central Bank: Has legal authority to regulate, inspect and penalize banks.

Commercial Bank: Subject to regulation and supervision by the central bank.

Examples of operation

Central Bank: Open market operations, standing facilities, foreign reserve management.

Commercial Bank: Accepting deposits, issuing loans, overdrafts, letters of credit, ATMs, internet banking.